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Why investors fail (especially lawyers)

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  1. #1

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    Why investors fail (especially lawyers)

    This article hits home in quite a few ways.


    https://www.aesinternational.com/blo...cially-lawyers

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  2. #2

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    100%. especially on “a little learning is dangerous” and the endowment effect. it’s partly why i opened a market prediction thread a few weeks ago to try and see the strength of our actual ideas in advance as opposed to all the monday morning quarterbacking where everything is obvious after it happens. its too easy to be deluded to think we saw everything coming due to some inkling of a hunch that everyone has on most scenarios in fact, but rarely are they strong enough to actually act on.

    if the markets tank 30% again next week, many will be out in force to say it was obvious with corona and the market rally was clearly irrational and out of touch with reality. let’s not forget how many threads popped up of ppl wanting out of equities or switching to safer mpf options just before this 40% rally took off. so even if the crash you suspect does eventually happen, timing is paramount too.

    I think a lot of stress is taken out of investing when we accept how little we can predict. it is much less fun that way too tho!


  3. #3

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    Lawyer here- I use a financial advisor because I know this is not my field. A good lawyer hires a good expert (whether expert testimony, advice, etc.). The only investing I do on my own is real estate as that is a very personal decision- the places I have as rental places are places that I or family members have lived in so were purchased as other than pure "investment" properties. After the coming property crash (in about a year or two when foreclosures start coming) then I may buy some properties purely as rentals.


  4. #4

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    Quote Originally Posted by MABinPengChau:
    Lawyer here- I use a financial advisor because I know this is not my field. A good lawyer hires a good expert (whether expert testimony, advice, etc.). The only investing I do on my own is real estate as that is a very personal decision- the places I have as rental places are places that I or family members have lived in so were purchased as other than pure "investment" properties. After the coming property crash (in about a year or two when foreclosures start coming) then I may buy some properties purely as rentals.
    But isn't it the same point the article is making about lawyers that can be made about financial experts?

    I think there is advice financial advisors can give to maintain wealth, but in terms of investment, they have the same problems as all of us. Maybe with more information and data, but with no crystal ball.
    Last edited by UK/HKboy; 14-08-2020 at 11:13 AM. Reason: Just saw its a promotional article. So gonna take it with a pinch of salt, lol
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  5. #5

    While I agree with most of what was written in the article, there's nothing "new" there. It's a sales pitch targeted at lawyers (like myself) many of whom could benefit from some good financial advice (like myself).

    It's essentially a re-hash of what Thomas Stanley and William Danko said about doctors in The Millionaire Next Door combined with an high level summary of Daniel Kahneman's Thinking Fast and Slow and Jason Zweig's Your Money and Your Brain.(all of which I highly recommend).

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  6. #6

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    It's essentially a re-hash of what Thomas Stanley and William Danko said about doctors in The Millionaire Next Door combined with an high level summary of Daniel Kahneman's Thinking Fast and Slow and Jason Zweig's Your Money and Your Brain.(all of which I highly recommend).
    This.

    But it does make them sound like experts in finance because they can summarise a few behavior eco books.

    (I am sure they are good at what they do and all... But for me having read a couple of those books it was low on new information...)
    traineeinvestor likes this.

  7. #7
    Quote Originally Posted by shri:
    This.

    But for me having read a couple of those books it was low on new information...)
    So that makes you a financial expert too?

  8. #8

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    Quote Originally Posted by traineeinvestor:
    So that makes you a financial expert too?
    No, but I do know how to spot marketing copy.

  9. #9

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    I don't think lawyers/doctors are necessarily bad at investing - but they're probably just average. There are just more doctor/lawyer horror stories simply because they have more money to lose.

    Investing can be pretty easy if you buy the US market: don't touch your investment and let it grow. You won't generate alpha, but you'll be still better than most people. Greenblatt (basically the angry guy trying to get his money back from Michael Burry in the big short movie) had some great stats about how even if a fund makes money over a 3-5 year people, most investors often time lose money because they withdraw at the lows (they're scared or they need liquidity) and miss the highs. I can't find the video but I've always liked that stat.

    I think 99% of financial advisors don't know anything meaningful about investing that you couldn't learn in a short free web course. FAs are better for access to whatever reports/alerts the brokerage is putting out, perks, access to tax/legal professionals, etc.

    Probably off topic but lately I've been learning how to trade volatility from experienced vol traders (a few are PMs and other guys are retirees making income) and it is wildly different from what I expected. Being smart isn't sufficient - you need to be creative, you've got to do all the leg work yourself, and you need to build your own models and heuristics and then use them in the real world instead of arm chairing. Huge focus on programming and statistics - and it is very hard work and the mental aspect is very challenging.

    This experience has reinforced my belief that buy/hold is superior to most retail investors/traders. Trading is not investing, it's much more like a business and you need to run it properly to be successful. Conversely, people attempting to time the market with their purchases are acting like amateur traders (they face all the same mental challenges as traders but didn't put in any of the hard work that could overcome those challenges and also don't have the right tools and training to minimize losses) and will get slaughtered by actual traders/market noise. Just by avoid these types of day trading losses is what makes buy/hold superior I think.

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