In every movie I have ever watched or book I have ever read, I have been the hero. I hid Anne Frank in my attic and valiantly battled the Germans during WWII. I fought for the Union Army. In fact, I enlisted. I have been every detective who ever caught the murderer and defended every child with my dying breath.
I was the firefighter at Ground Zero just after 9/11, searching the rubble for survivors. (This one is actually true, which makes picturing the others easier for me.)
I am never, ever, one of the dozen or so faceless flunkies who is gunned down by the action hero on his way toward delivering righteous justice to the evil mastermind. I am always James Bond, never Dr. No.
I suspect we all have the tendency to be the Walter Mitty-like heroes in the stories that are our lives. We do not watch a movie or read a book and view ourselves as perpetrators, villains, or fools. It never occurs to us that, perhaps, it might have been us reporting our neighbors to the Stasi in East Berlin during the Cold War or wearing a gray uniform during the Civil War. Statistics, however, say otherwise. Some of us, good though we may be, make what turn out in retrospect to be bad choices.
Do not misunderstand me, human beings are not statistics and hopefully we would have done what we know to be the right thing had we lived in those places during those times. I am certainly willing to believe that of all of us.
As a mental exercise, however, I think it is important to consider that we might have been on the wrong side of history had we been alive at an earlier time. The reason is that it can jar us out of our typical thought pattern and force us to consider things from alternate perspectives.
We have a good amount of historical information on the ups and downs inherent in investing in financial markets. We also have records on how people have behaved financially during those various periods as well.
Fidelity, the well-known mutual fund company, did a study on their most successful fund to date – it might be the most successful in history – the Magellan Fund. This fund averaged an astonishing 29% per year from 1979-1991. Perhaps the only thing more startling than the fund’s performance, is that fact that, according to Fidelity, the average investor lost money in the Magellan Fund over that time!
Fidelity found that when the fund was surging many people would invest and if the fund dipped, they would sell quickly. When I first learned this, I shook my head and smiled at the sheer foolishness of it. I never believed for an instant that I could easily have been one of those folks. This is not so much a critique of human nature as it is an honest acknowledgement of it. Logic, it turns out, is the servant of emotion.
Logic is a cold diesel engine. To get our sensible mind up and running, especially at times of high anxiety, requires a bit of doing. On the flip side, emotion can combust spontaneously at room temperature. Emotion beats logic to the punch every time. It is simply how we are built.
Thank goodness for humanity that is so. It would not have done our ancestors much good if our default setting had been to sit down and think while some beast of prey was looking to make us its lunch. Though, a saber-toothed tiger would have loved that. Out in the fields where we fought for our meals, we were also fighting to not become something else’s meal.
Our survival chances increased radically, precisely because we developed a move first and figure things out later response. Yet, what helps us in one area of our life, can be our demise in another area. I believe acknowledging this is the beginning of wisdom.
The way for us to remain heroes in our lives and to work to prevent our emotions from making us financial fools when tough times arrive, as they inevitably will, is to plan. We first plan the work; we then work the plan.
If you like, consider working with a financial planner who has earned your confidence. Together you can develop a plan before there is an event that might lead to decisions that seem right in the moment, but that we might end up regretting. In this way, you can work together to build wealth and protect your loved ones, with the goal being to live your dreams. People can live their dreams even in tough times. Take action to work toward making that so.
Scott R. McGimpsey November 30th, 2020
This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Neither Cetera Advisor Networks LLC nor Scott McGimpsey is engaged in rendering legal, accounting, or other professionally services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm. Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a Registered Investment Advisor. Summit and Cetera are affiliated and under separate ownership from any other named entity.