INVESTING WITH CLARITY® BLOG

Mommy, Read Me A Bedtime Story

August 26, 2021 2:55:43 AM

Anyone who has raised children remembers one of the biggest struggles is trying to appease a toddler who suffers from nighttime anxiety. Once children get hooked, they beg their parents to keep reading and reading. This is key in that not only is it a way to appease children’s fears, but it also gets youngsters involved in reading at an early age. That is the good news. The not so good news is that although young children may ultimately give up their fear of the dark while going to sleep, this type of regressive behavior does not stop at adolescence but continues onward through adulthood. The same need for appeasement can be seen in adults who, because they don’t operate under sound judgement when it comes to the inner workings of their investment portfolios, latch on to nonsensical stories. 

A very good example of this is when adult investors need to have their own personal fear of market meltdowns soothed by reading and listening to forecasts and predictions by so-called market experts. Crash-proof Retirement and Preparing for the Coming Financial Meltdown are just a few topics that lure people into purchasing books and DVDs that draw unprepared investors into a state of daily dependency on such fodder. The irony and sad component to our thesis is that when adults are asked whether they truly believe that anyone can predict the future, they emphatically say no. 

Just as tough love is required in the raising of a child, adults need to have a trusted advisor walk them through a similar set of questions that get to the deep seeded reasons they fear drops in stock prices. We call this behavioral deficiency “Addiction to Prediction®”. We have developed three remedies that may sound a bit strong in our estimation but are the most effective ways in which to combat this form of self-degradation.  

  1. As soon as you hear a so-called expert in the field of Investments say “I believe” or “We feel” as it pertains to a future forecast, commit to yourself to turning off the station, stop reading the article or simply hanging-up the phone. 
  2. As soon as you hear an analyst reference their so-called “Black Box” or proprietary trading technique that they are willing to sell you that will make you a fortune (just like it made them), commit to turning around and walking the other way. Yes, this may appear to be extreme, but it is the only way in which you can truly protect yourself. 
  3. As soon as you hear some advertisement touting the guy who predicted the 1987 Crash or the 2008 Housing Bubble, consider writing them a note asking them if and when they ever got back into the market. We are always amazed when those who predicted the so-called crash never told us when to re-invest back into it. You want to know why? Because like anyone else, they can’t predict the future and should not even attempt to do so. The only way they will ever cease to stop what they are peddling is for you to stop listening to them. 

Just as monsters don’t live under the bed and teenagers no longer require Mommy to read them a bedtime story, so to should investors take a step towards maturity by recognizing that people can’t predict the future and that get-rich schemes don’t work. When a child grows into adulthood and is told by their parents how they needed to be tucked away on a nightly basis when they were younger, they laugh with amusement at their former childish and immature ways. In the same way, when an adult reaches a state of Clarity with their investment plan and they hear bedtime stories in the form of forecasts and predictions, they smile with amusement that they no longer need to fall prey to such petty nonsense and sensational storytelling. At Nepsis®, we believe that spending time and energy worrying about factors that we can’t control or latching on to predictions or get-rich-quick schemes is juvenile and futile. Understanding what you own and why you own the investments that are in your portfolio is time well spent and puts you on a path to greater maturity in your approach to investing. We call this process, the Road to Nepsis®… the Road to Clarity. Are you ready to join us in this endeavor? We are here to help be your guide.


Chuck Etzweiler

Chuck Etzweiler

MBA, CIMA®, CFP®, CMT, Chief Research Officer & Senior Vice President

With more than three decades of investment industry experience, Chuck directs the on-going research efforts of the firm, much of which help both advisors and clients understand the philosophy and strategy of Nepsis, Inc. in a deeper manner. A high percentage of the focus of the research is centered around money manager pitfalls, investor short-comings and repetitive behavioral biases that detract clients from earning optimal returns.

Prior to joining Nepsis, Chuck worked as Chief Market Strategist for True North Global Research and as an Investment Analyst with both Wells Fargo and the Bank of Hawaii. Additionally, Chuck has earned the CIMA® designation and is a Chartered Market Technician. Chuck is a graduate of Syracuse University and also has earned his MBA in Finance from the Crummer School of Management in Winter Park, FL.

Chuck is an active member of the Market Technician’s Association and the Investments & Wealth Institute.

Chuck was raised in Allentown, PA and now lives in San Diego, California with his wife and two adult sons.

Email: cetzweiler@investwithclarity.com

 

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