Have you ever faced a choice of investment options where you found it was really hard to choose between them?
Personally when faced with this situation myself, and in the absence of any good research or reference, I usually just go about asking people I think might know the answer. Often I end up more confused than where I left off. One might call this indecision the Lack of Confidence or Know how (or ‘L.O.C.K’) phenomena. This month I thought it would be worth tackling it head on with some workable solutions.
Usually this L.O.C.K phenomena manifests itself in two main ways:
Firstly, this L.O.C.K situation most often occurs between us as investors and our close friends and family, as these are the people who we most often ask opinions of, or confide in. The thing about any investment is that by us asking questions in an attempt to gain more confidence in our decision, this L.O.C.K phenomena then occurs to a greater or lesser degree. For example, a new investor goes to a parent or friend with an investment they have been researching for some time, just so they can add a little bit more peace of mind. Now the parent or friend usually has done no research on the particular investment and just listens to the new investor’s idea and understanding of it. After hearing the available facts, the parent or friend is asked what they think of the investment and should the person proceed? The response is usually something like:
‘Well have you thought about…..?’ or ‘I don’t trust that……’ or ‘Personally I find that when I am investing I have these criteria I go by….. you should try these’.
In actual fact all of these responses are just the parent or friend saying:
‘No, don’t do it on my advice, because if it’s not a good investment I really don’t want you blaming me for it if you lose!’ or ‘Get some confidence and make your own choices!’.
Seem familiar? Well it’s a very common approach.
From another angle, a ‘L.O.C.K’ situation can occur for new investors simply because of the myriad of choices available to them becoming intertwined and making it too hard to choose between them. Unfortunately, as far as investments are concerned, there are many ways to compare one option to another. This really can lead one to ask, how can one build enough confidence in any one option to actually invest in it?
The easiest solution is to find out which method of investment rings most true for us as individuals. Then once we have found a type of investment we are comfortable to put our money into, look for some basis or evidence to back up our approach. When we choose any investment it is essential that we approach it with a calm mind, otherwise it’s hard to enjoy the investment experience. Calmness and confidence can only be achieved by research and a depth of understanding of the basics of the investment. Once this understanding is reached, it could be termed Evidence Based Investment – a goal worth aiming for.
Evidence Based Investing can be difficult to apply in a fluctuating market, unless one is sure of their research. But once your evidence is clear, then it is time to systemise it so it can be repeated week after week, year after year.
It is notable that there are many systems that can be made to work for investing. Some of these investment approaches have a solid basis which can be scrutinised by rigorous research. For example, the fact that investment risk and return are related – this seems to be as true as gravity.
So what is the key to finding our own path with investments? Well first, by recognising and avoiding any L.O.C.K situations. We can achieve this by finding a workable system with which to select investments, one that is known and knowable by us.
Now a workable system may seem very daunting when you first start to look at it. As with all things, we start with fear of what we do not understand. So to avoid fear or concern over investments, simply keep accumulating more information and keep building knowledge until you feel comfortable.
Finally, it is essential if one wants to be the best, to be diligent in our study and research. The knowledge we pick up is with us forever. Additionally it’s important to recognise that many of the best things in life seem to happen on the edge of our comfort zones. With diligent study around investments, one can become a lot more effective at making money.
Clearly, if we want to invest, it might get uncomfortable for us at some point or another. Our friends and family may not have the same basis for their decisions as we do, and therefore will be more conservative. So we are left with a logical choice when investing. We need to either ‘take our own advice’ based on evidence, or ’employ a professional coach to work with us on our goal achievement’. Either way these are the key ways to avoid getting into a L.O.C.K situation (or to unlock it! ☺).
Investors Direct was founded in 2001 by Bill Zheng. In the time from then to now we have helped thousands of people to handle their L.O.C.K situations in finance, financial planning, super, insurance, investment in shares, property investment and property management. Our planners are each qualified in these areas and welcome the chance to work with you.
If you would like a no-obligation appointment to discuss how we can help you tidy up the L.O.C.K situations in your life, or to discuss any other investment related matter, let us know by replying to firstname.lastname@example.org
Until next month happy investing.