Mark Matson on Prudent Investing

The complexity of investing and the overwhelming tendency to perpetuate self-destructive investing behavior make it seem only natural to seek professional help. Many Americans turn to financial planners, brokers, or fee-based money managers. But are these professionals as a whole any better than Main Street investors when it comes to following the simple rules of investing and applying academically sound investment principles, or are they part of the problem? Are they true defenders and protectors of disciplined investing, or is it a classic case of the fox guarding the chicken coop? The average financial professional is not any more seasoned and prudent than the average investor.

That is why I have dedicated my life to only one part of the planning process —prudent investing.

Matson on Investor Courage

Trying to play God with the financial markets is highly destructive. So don’t try it. In the end, you will guess wrong. Instead, have the long-term courage to take the long view and stick to your plan. Know that courage doesn’t meant the absence of fear. Courage means feeling the fear and doing the right thing anyway.

Matson on Investor Emotions

You will often hear so-called investment experts say things like, “You have to eliminate feelings from the investment process.” There is only one problem with that: It is impossible. No one can completely eliminate feelings and emotions from the investing process, because everyone is human. Pretending otherwise and believing your emotions won’t come into play is a recipe for disaster.

Matson On Dysfunction Loves Secrecy

Most of us have been taught that investing is a solitary experience; that what we do is we go and meet with our financial planner or our financial advisor, and don’t talk about money with others, don’t share what is going on, and certainly don’t share your fear, or your apprehension, or your goals, or your feelings. We are led to believe that we should do this in isolation.

Instincts plus emotions plus perceptions are twisted and take over in isolation. But human beings are meant to live in community, in support of each other. It’s the fear of sharing our own emotions and failed behavior that keep us stuck. However, we gain strength by sharing our experiences, fears, and hopes. And we do that best in groups. To be successful as an investor is to take strength and hope from others, to share our experience, to know we are not alone when the market goes down 30 percent or when we see an advertisement for gold up 80 percent. It helps us to know that there are other people struggling with the same things that we’re struggling with and the same fears that we struggle with, where it’s the economy, struggles at home, the loss of a job, or health issues. All of these things can exacerbate the situation. When the market crashes or there are bad periods, and you combine that with health problems, or problems with children or problems with jobs, it magnifies the fear. It makes things worse. To be a successful investor, requires the support of a group. When we’re in a group, we understand ourselves when we share. You learn from other people’s experience, and then learn that you’re really not so different after all.

Wednesday Wisdom from Main Street Money

Matson On The Financial Media

They need readers and viewers to sell advertising. It is all about profits and the way to keep you watching and reading is to tap in your emotions, instincts, and perception biases. They magnify the urge to speculate and gamble. Many of them believe it is their job to help you forecast the future, a futile exercise. They believe the lies and perpetuate the myths. If it bleeds it leads, and if it is up 100 percent in the last year, everybody will be talking about it, no matter how imprudent it is. Think of this as financial pornography. Its job is to seduce and titillate.

Wednesday Wisdom from Main Street Money

Matson On Necessary Lie Syndrome

A necessary lie is a lie we tell ourselves just before we engage in unhealthy or dysfunctional behavior. For speculation masquerading as investing, it is, “This time is different. I really do know what is going to happen this time.” You can probably think of a time in your life when you have told yourself a lie just before you acted in a way that was self-destructive, and you may be able to identify times when you have done it while investing. This is the brutal type of self-assessment that is required to be a successful investor.

Wednesday Wisdom from Main Street Money

Matson On Market Bubbles

Losing money in bubbles is not just something that happens to “dumb” people or “other people.”  It can happen to the most brilliant of people, it can happen to you, and maybe it has in the past, and it can literally destroy your life savings. No one knows where the next bubble is going to be in advance, but you can protect yourself from them by following the three simple rules of investing. If it is highly popular and on the cover of every magazine, chances are it is not a prudent investment, but rather a bubble waiting to happen.

Matson On Wall Street Bullies

You should know that most larger financial organizations don’t want you to solve these problems (with investor behavior). It is simply not in their best interest. Your problems are their profits.

Excerpts from Main Street Money by Mark Matson

Wednesday Wisdom from Main Street Money

Matson On Facilitators

It’s my belief that financial advisors don’t want to upend the gravy boat, and thus tend to tell clients what they want to hear. Instead of helping you fight your instincts, emotions, and perception biases, they inadvertently use them against you. There is good news and bad news in that scenario. The bad news is that if you have the wrong advisor, one who’s not really a coach, you are in danger. The good news, as an investor, is that if you have the right coach, and the right support group, you’re probably going to do fine.

Excerpts from Main Street Money by Mark Matson

Elections Impact on the Market

Now that the election is over, investors are wondering what the future has in store for their portfolios. The reality is that while elections may have short term impacts on the markets, over the long run, the impact is minimal. A Free Market System is based on capitalism, which always finds a way to thrive. Our structured portfolios are based on a long-term investment philosophy and will be more efficient than active management if and when taxes increase. Our portfolio managers at Matson Money are prepared to rebalance if necessary to ensure you maintain your expected risk tolerance level.
So what should you, as an investor do now?

1. Stay positive. Nothing beneficial has ever come out of being negative.

2. Get educated to break the investor’s dilemma.

a. Fear of the future leads to trying to find someone who can predict the future.

b. Since nobody can predict the future accurately, investors look to track record investing, which academically has proven to be disastrous.

c. Trying to find the right answers leads to information overload, which leads to frustration and emotion-based decisions.

d. Since we as humans gravitate toward pleasure and retreat from pain, we break the rules of prudent investing and sell investments that are doing poorly and buy what’s increased in value.

e. This, in turn, leads to performance losses, which leads to more fear of the future. The investor’s dilemma starts all over again in a never-ending cycle.

We, as investor coaches, are here to help you break the investor’s dilemma and tune out all the media hype of doom and gloom. Every month we offer educational classes to help you understand what’s really important in investing. Our ultimate goal is to guide you along the road to true investing peace of mind.
Call us to find out when the next investor coaching session is and reserve your seat.

Words of Wisdom from Main Street Money

Becoming a Seasoned Investor

Seasoned in my mind, means several things, such as:

  • Being able to withstand physical hardship, strain, or exposure.
  • Being able to bear up under hard times.
  • to be competent with a skill or ability.
  • When you are seasoned, you can see the truth about a situation.  You are not naive.  Naive means deficient in worldly wisdom or infomed judgment, lacking in experience, or to learn from experience.

When you are seasoned, you become prudent.  But here’s the catch: Most investors are not mature or seasoned, nor are most advisors.  They repeat the same mistakes over and over again ad infinitum, without really learning.  Unseasoned investors chase markets.  Unseasoned investors also panic in down markets.  They stock-pick, they invest in track records, and they market-time like crazy.  That last type of investment behavior really ticks me off, and I see it all the time.

Excerpts from Main Street Money by Mark Matson