Investors Can't Fix Inside Problems With Outside Solutions

Solving Inside Investor Problems With

 Outside Solutions Just Doesn't Work

                                                                            By: Brendan Magee

People Magazine's July 2013 issue highlighted the struggle and triumph Matthew Perry (Chandler Bing on the hit sitcom, Friends) experienced in overcoming his 10 year addiction to drugs and alcohol. He spoke about the catharsis he had, that moment when he finally got on the road to recovery, and finally got what friends and professionals had been telling him for years. His story is one that investors can learn a lot from.

Like a lot of investors wanting to invest their way, Mathew Perry wanted to handle his recovery "his way." When life was getting out of control, Perry made changes, and with being paid $1 million per episode he could afford extravagant changes to his life. He bought houses and moved a lot. In his words, "If I just lived over there, I'd be fine." When investors aren't seeing the results they want, they often make changes to their portfolios. The Dalbar Study for 2012 showed that on average investors make a change to their portfolio within a three year period of time. As Perry puts it, "It was/is a classic case of trying to fix inside stuff (problems) with outside stuff."

Recovery for Perry didn't start until he had an inside revelation, and for most investors becoming a successful investor won't happen until they have a similar catharsis between their ears as well. His recovery coach, Earl Hightower a leading interventionist and addiction specialist, had been working with Perry for years preaching the same message with little results to show for it. Perry, one day saw it clear as day, the changes he wanted to achieve in his life weren't going to occur until he stopped trying to do things his way. From that point on, Perry said, " I was willing to do whatever Earl Asked me to do for the rest of my life."

By itself, here is an invaluable lesson to know if you have a coach you can have a life long relationship with or you are merely doing business with an advisor looking to sell you products. Does their message change or is it still basically the same. Over 500 times Hightower's message to Perry was the same. An investor coach's message will also stay consistent. "Own equities, diversify, buy low sell high and at no time engage in stock picking, market timing, or track record investing." Any deviation from this and you do not have a coach. You have someone who is going tell you what you want to hear to keep you as a customer, not make sure you hear what you need to hear in order to be a successful investor.

For Perry, being a huge television star, there was no shortage of opportunities to drink and do drugs and his life quickly spun out of control. For investors, there is no shortage of investment products that can quickly turn an unsuspecting, trying to the right thing, investor into a gambler and speculator. There are 27,000 mutual funds to choose from, there are internet trading web sites to log onto, as well as over 600,000 stock brokers trying to lure you to their services. Like drugs and alcohol they are not readily labeled as things that can ruin our life. Stock picking, market timing, and track record investing perpetuate the illusion that these are things that will enhance your life.  Drugs and alcohol abuse are two activities that will eventually, inevitably destroy a person. An investor who engages in or can't tell the difference between prudent investing and gambling and speculation will eventually see their financial security destroyed. 

As it was for Perry, the days of going to work painfully hung over and seeing personal relationships destroyed are problems in and of themselves, but in reality they were merely the symptoms of a much bigger internal problem. As Perry found out if he didn't deal with the internal problem of addiction, the symptoms were going to get more severe and damaging. Investors need to take a similar actions.
They need to be able to identify and deal with the bigger problems not just symptoms.

Along with gambling and speculation, if you haven't defined your investment philosophy, if you haven't identified your true purpose for money, and you don't know exactly what you are doing when it comes to building your portfolio, yours is more of an internal problem than an external problem. Trying to find solutions by, solely, making changes to your portfolio, any success you experience will be temporary and the problems that led you to make those changes, disappointing returns, massive losses, no accounting for costs, confusion, anxiety, and worry will come back stronger and be that much more severe.

In dealing with the internal problem of addiction, Perry says he is in a  "good place" and really feeling "comfortable." When, as an investor, you focus your attention on yourself as an investor, and ask the questions you really need to start asking and getting the answers to, that's when you will begin to experience true peace of mind."

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions, comments, or suggestions, call 610-446-4322 or e-mail Brendan@coachgee.com.