On this episode of Saving the American Dream, we’re talking about common sense and how uncommon it often is.
At first glance, each of these statements seems like basic common sense that everyone agrees with. But when we look at the way people actually behave with their money, it seems that common sense is actually a bit uncommon.
Buy low and sell high.
You won’t find a single person who disagrees with the theory behind this investing concept, but many people behave differently in practice. Why? The answer is emotion.
Logically, you want to buy low and sell high, but the problem is that a lot of people out there buy on emotion instead of logic.
People often want to sell when the markets go down, because they think it’s going to go lower. It’s basically market timing, which isn’t a good idea.
When things get bad and the market drops, everybody seems to have that emotional trigger that they just can’t take it anymore. It’s short-term thinking, and is not the right decision.
We often say that we don’t work with people who have balance sheet problems. We work with balance sheets that have people problems. The most important thing we do is coaching our clients around the behavioral issues of building a proper balance sheet.
Don’t pay more in taxes than you have to.
Nobody voluntarily signs up to pay extra taxes because they feel strongly about the federal government as a beacon of efficiency and virtue. But many people do pay more taxes than they have to.
They often focus only on tax preparation instead of tax planning. You need a well thought out understanding of your numbers.
Keep costs low.
It’s no secret that lower costs within your investments will let your money grow faster. But people still end up in instruments with high fees. Why? It’s due to hidden fees that they don’t realize they’re paying.
Listen to the full podcast or use the timestamps below to jump to a specific section.
Navigating the Show
[2:42] – Buy low, sell high
[6:20] – Don’t pay more in taxes than you have to
[8:56] – Keep costs low
[13:36] – Don’t put eggs in one basket
[16:39] – Marketing timing
[21:04] – Mailbag
“We want to make sure we’re staying focused on having a diversified portfolio, not stock picking and not market timing.”
– Michael Schulte