The pull back in the financial markets reminded me of the quote from Warren Buffett. He said that when markets pullback we can see who is swimming naked. After this week we can see many people who chose to swim without a suit. Our blog this week will look at some surprising naked swimmers and discuss what new bathing suits they should buy.
Markets are volatile and the last week of December reminded us of this reality. How should investors and advisors respond? The losses are comprable to the losses before the financial crisis. I panicked in 2009 and sold because I couldn’t take the pain and I made the eroneus projection that the capital markets and the world might be coming to an end. I was wrong as most emotional decisions turn out to be. Mr. Buffett has one of the best investment track records because he has not panicked and in fact he has bought from others like me me who panic and are skinny dipping. Maybe that is why he is one of the richest people in the world and I’m not. My smart High School friend provides a good calming reminder in his blog.
My first job in finnacial services was for “We Earn it” Smith Barney. I was trained and indoctrinated that Wall Street analysts could pick investments that would out perform the stock market and to get on the phone and tell anyone who would listen. I’m still trying to purge that belief from my mind. CPAs and attorneys that have joined the independent RIA community have adopted financial planning techniques that are based on market assumptions that are also flawed. Both Wall Street and RIA support firms are offering solutions that sound good but unfortunatley don’t deliver. We don’t relize this error until the markets go down and the assumptions show we are skinny dipping.
The tide has gone out revealing our dificiencies. Our next job is to accept that we are naked and choose some new bathing suits that will stay on when the next tide receeds. There are several suits we should consider. The first is Podcasts. Our favorites are Grant’s Current Yield, Michael Kitces’ Financial Advisor Success Podcast and Invest Like the Best. If you prefer to read our two favorites are Designing Your Life and This is Marketing. We also need to decide on what suits we need to remove. The suits that need to be put on Ebay are our AUM based fees and seminars sponsored by fund companies. What separates good advisors is their ability to sell.
I am too modest to skinny dip. Is it a poor body image or risk aversion? Let’s put on our new suits and jump in the market.