It’s hard to say this as a financial advisor but if someone tells you they know what they are doing when it comes to investing their own money then I can say for certain they are lying. That doesn’t mean there aren’t people out there who can help you beat the market. In fact, I find it hard to believe anyone can beat the market with their own money. Some may get lucky and I’d take being lucky over being skilled any day but the truth is that getting lucky in the stock market is probably as rare as winning the lottery.

How to beat the market

There a set of rules you need to follow to beat the market but no one should say they know what the market will do tomorrow or even the next six months.

So why would I jeopardize my career by saying all of this?

The answer is that just like with anything else you may own you have an emotional and irrational relationship with those things that make you overprotective or overconfident.

Know your biases

Everyone has biases when it comes to money. This stems from the experience you have in your life with money. For example, I entered the workforce right after the mortgage crisis crash in 2008. Jobs were hard to find and people were very skeptical of any investment. Within a year of employment in the finance industry there was another mini-crash. I got to hear the panic and paranoia from investors and other advisors like someone searching for a light switch in a dark room. There was always news being pushed about other financial issues such as the social security well drying up or there are bubbles we can’t see coming. These experiences had a profound impact on me. If I didn’t study behavioral finance I’d probably be buying precious metals or stashing cash under my mattress as you read this. Our money history creates our biases towards money and takes all rationality out of our decisions we need to make for our financial futures.

The value of getting financial advice

This is where having a financial advisor comes in. People think an advisors main job is to research investments all day and find an inside track. In reality, you’re paying them to select investments that fit your needs and to keep you accountable for investing decisions. Most of the benefit you get from an advisor is that they will keep your emotions in check when the going gets tough. They should encourage you to buy when the markets are down and to sell when you’ve had a good run. Both of these ideas are easy in theory but when it comes to practice they are nearly impossible. Even advisors like myself know that having someone else to help manage our money, even while paying fees, will give you a much greater chance of success. Vanguard did a very popular study back in 2019 that actually quantified the value of an advisor and it found that an advisor could add as much as 3% in value per year to a clients account net of fees.

Oddly enough this is probably because advisors don’t have the same connection that you do with your own money. Being a third party helps them be objective about the decisions that need to be made. Your biases will create blinders that they can see around especially in bear markets. I say this because most people can only see the negative and forget the positives when in a bear market. Think of your usual route to work. I bet there are days you hit every red light and you’ll say you’re never going that way again but in reality you never noticed how many green lights you’ve hit on other trips. Most likely you rarely hit red lights and the timing was off that day but your emotions told you to find another way(or sell that stock at the bottom of the market. Get it?). Your advisor will be your co-pilot who can remind you that staying the course will yield the best results. That is what we call advisor alpha.

Book a call with me and see what it’s like to have an accountability partner.

Fiduciary Mission

At Integritas Financial, we are committed to providing fee-only, fiduciary financial planning services that are tailored to the unique needs of young professionals, particularly millennials. Our experienced planners work with you to develop customized financial plans that address key areas such as estate planning, trusts and wills, retirement, workplace benefits, education funding, student debt, and buying a house.

We believe in transparent, client-focused service that puts your financial goals at the center of everything we do. As a fiduciary firm, we are dedicated to acting in your best interests, and we never sell products that charge commissions to clients.

Our goal is to help you achieve a stable and prosperous financial future by providing comprehensive financial planning services that are tailored to your individual needs. Whether you're just starting out in your career or you're already well-established, we can help you navigate the complexities of financial planning and create a roadmap for success.

Ryan@if-money.com