Investor Behavior Matters

“doing well with money has little to do with how smart you are and a lot do with how you behave. And behavior is hard to teach, even to really smart people.”

By Ben Dolan

I’m re-reading The Psychology of Money by Morgan Housel. Each year there are countless books published on the topic of personal finance, but Housel’s work, published in 2020, stands out from the rest. It’s a quick read and excludes perplexing financial jargon.

Housel begins with a basic premise: “doing well with money has little to do with how smart you are and a lot do with how you behave. And behavior is hard to teach, even to really smart people.”

He’s right about this. Our firm works with a lot of physicians (and we love our physician clients!). They are well-educated, highly intelligent individuals. For every excellent physician prospect we meet, there is one well-educated, highly intelligent physician we can’t help. The reason is simple: their behavior won’t allow them to accumulate wealth. They have too much debt, spend too much, and save too little. Unless they change their behavior, they’ll struggle to get ahead.

Below are a few insights from the book I think you’ll enjoy:

Compounding Returns – “good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.” Pg 53

Greed – “It gets dangerous when the taste of having more – more money, more power, more prestige – increases ambitions faster than satisfaction.” Pg 41

Financial Freedom – “Money’s greatest intrinsic value – and this can’t be overstated – is its ability to give you control over your time. To obtain, bit by bit, a level of independence and autonomy that comes from unspent assets that give you greater control over what you can do when you can do it.” Pg 84

Savings – “building wealth has little to do with your income or investment returns, and lots to do with your savings rate.” Pg 103

Some excellent lessons here. I highly recommend picking up a copy of The Psychology of Money and passing it around to family members. Also, contact us to learn more!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.

Nothing in this material should be construed as investment advice offered by Dolan Capital Advisors, Inc. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction, or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction, or investment strategy. You should speak with your own financial professional before making any investment decisions.

Past performance is not indicative of future results. Dolan Capital Advisors, Inc. does not guarantee any specific outcome or profit. These disclosures cannot and do not list every conceivable factor that may affect the results of any investment or investment strategy. Risks will arise, and an investor must be willing and able to accept those risks, including the loss of principal.

Certain statements contained herein are statements of future expectations and other forward-looking statements that are based on opinions and assumptions that involve known and unknown risks and uncertainties that would cause actual results, performance, or events to differ materially from those expressed or implied in such statements.

Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors a North Carolina state-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.

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