Who Is That Investor Behind the Mask?
Issue #2032
- WEALTHY: How a personal identity crisis can devastate your investments (Andrew Gordon)
- HEALTHY: 7 reasons to cut calories (Dr. Al Sears)
- WISE: Shakespeare on self-knowledge
ALSO IN THIS ISSUE:
- Did you hear what Charlie said about Jon? (Michael Masterson)
- How a Bob Evans placemat can help you make sales (Dan Kennedy)
- It’s Fun to Know… about beer
- Add "raffish" to your vocabulary
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- Charlie Byrne
"This above all: To thine own self be true."
Shakespeare
Who Is That Investor Behind the Mask?
By Andrew Gordon
"Hi. I’m Andrew Gordon. And I’m an alcoholic."
I was in the car with Ed, my first wife’s father. I was going to my first AA meeting with him. He was driving, but he still managed to shoot me a quick, exasperated look.
"No, Andrew. I’m the alcoholic. I say it. You don’t have to. You just say you’re with me."
I knew that. I was just pulling his chain.
"You go to the same AA meetings with the same people and you still have to tell them every time that you’re an alkie?"
"No, I don’t have to tell them. I have to tell myself. I have to know who I am. That’s the first step. Nothing good can happen before that."
I’m enormously pleased to say that Ed will be celebrating his 20th year on the wagon later this summer. But that’s not the reason I’m telling you this little story. I want to make a point about you.
Not about your drinking habits - about your investment habits. Because, as an investor, knowing who you are is the first step. Nothing good can happen to your portfolio before that.
It’s likely that who you are is not the same as who you think you are. You probably think of yourself as a semi-knowledgeable dabbler in stocks and bonds… who may not always be right but makes reasonable decisions most of the time… and who is rational and serious about investing.
At least that’s how I thought of myself when I was much younger.
I had some money socked away in a retirement plan. I kept periodic track of it, and it was doing quite well. Of course, at the time, practically everybody’s investments were doing okay. We were in a strong bull market… and you know the old saying about a rising tide.
But then I read or heard that the bull may be ending. I was concerned. And so I called the two experts I trusted the most - my brother and sister.
My brother was a highly successful investment banker working in New York City. He told me to get out as fast as I could. The market could tank any day.
My sister got her MBA from the Chicago School of Business and was working for a prestigious investment consulting firm. She told me to hang in there. The market was just going through some temporary volatility.
I had no idea which one to believe. None whatsoever. They were equally convincing. Both spoke with confidence… and both were looking at the market from the inside.
But the problem wasn’t them (although I thought it was at the time). The problem was me. I had no idea who I was as an investor. I only had a vague definition of myself as a semi-knowledgeable dabbler. They were throwing advice at a blank slate. No wonder nothing was sticking.
I’d never stopped to think of such basics as my risk appetite, my timeframe, and my Big Objective (how much money I wanted in my bank account in 20 to 30 years).
Nor had I ever bothered to break down my knowledge - what, exactly, I knew about the stock market. If I had, maybe I would have been more sympathetic toward the bull argument… or the bear one.
And I’d never bothered to define myself emotionally. For example, was I an unusually nervous investor? When I was calling my brother and sister in a mild state of agitation because I’d heard the bull market might be ending, were others more - or less - nervous about the news? I didn’t know (or care) at the time.
But there’s one thing worse than being a blank slate - it’s being completely wrong about who you are. And the scary thing is, it happens all the time.
A few years back, my workaholic wife bounded into the kitchen and gleefully handed me a piece of paper. She had put together a schedule for her upcoming week - something she had never done before. And she had not only filled in her work hours, she had also set aside time for exercise, reading, TV, and shopping. "I’m starting a new life, starting tomorrow," she announced.
"Answer me one question," I said, "How do you feel about your work?"
"It’s the most important thing in my life," she said.
"I know," I said. "So throw away this schedule."
She ignored me - and for the first week, she followed her schedule to the letter. The second week, she had a couple of long working days and slipped a little. The week after that, she slipped a little more. By the end of the month, the schedule and her attempt to reinvent herself were history. She wasn’t true to the piece of paper because she remained true to the one thing she really cared about: her work.
When finding your identity as an investor, do not make the same mistake. You can tell yourself that you’re a calm and rational investor - but if you’re not, writing it or saying it or (most important) believing it, can actually interfere with your ability to invest.
In his book Pit Bull: Lessons from Wall Street’s Champion Day Trader, Martin Schwartz mentions a professional investor who knows that he panics easily. So he took that into consideration when developing his investing strategy. He buys when he feels panicked and is dying to sell… and he sells when he’s giddy and absolutely wants to buy. He deliberately and consistently does the opposite of what his emotions tell him to do.
This is hard to do even when you have a strong self-identity. But without one, it’s impossible.
So let’s find out who you really are as an investor…
- Your tolerance for risk. Do you toss and turn at night, worrying about your investments? Do you panic when the market wobbles? How much risk are you comfortable with in your rational moments? How much of your savings can you afford (psychologically as well as financially) to put at more than minimum risk?
- Your ability to make informed investing decisions. Are you a professional investor who is capable of day-trading? Are you serious about investing, but can only do it part-time? Perhaps your interest in investing is only casual or occasional. Or perhaps you know nothing at all about it… and like it that way.
- Your Big Objective. Whether it’s to be filthy rich or simply to enjoy a comfortable retirement, you must have a clear goal in mind. It could mean the difference between being satisfied with municipal bonds or investing in growth microcaps.
You could be anybody from "Slam’n Sam Don’t Give a Damn" to "Conservative Kate Lovin’ Low-Interest Rates" to "Devil-in-the-Details Dick Can’t Make a Pick." Once you know your investment persona, you can begin to cobble together an investment approach and strategy that plays to your strengths and disarms your weaknesses.
If you don’t bother getting such an identity, you’ll be in the same situation I was when I got conflicting advice from my brother and sister. But you’ll be in it all the time… because contradictory information is a daily feature of our investing world.
Just today, I read articles on how well (and poorly) the market will do… how much the dollar should fall (and might rise)… and how good (and bad) banks are doing. And so it goes.
At one time, this mish-mash of information would have driven me crazy. But no longer… because I’ve come to grips with who I am as an investor.
Knowing who you are gives you a place and point of view, even if you’re a sniveling, ignorant Nervous Nellie. It’s sort of like being in a Harry Potter novel. Slitherens don’t mind being Slitherens. If that’s who you are, that’s who you are - and there are plenty of others like you.
Self-knowledge means that with every incoming shrapnel of news, you won’t be saying to yourself, "What fresh hell is this?" If you’re a Nervous Nellie and you know it, and that "fresh hell" has just made you very afraid, it may be time to buy.
Yup. The distance between hell and a buying opportunity is knowing who you are.
[Ed. Note: Andrew Gordon, ETR's financial expert, is the editor of INCOME. Each month, he uncovers income-generating stocks that promise safety (first and foremost), along with much-higher-than-average profit potential.]
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Don’t Fall Victim to Office Gossip
By Michael Masterson
Office gossip is like junk food: You can pretend you don’t like it. You can even publicly denounce it. Still, you can’t completely resist it.
But try. Like so many things in life, office gossip is a temporary indulgence with long-lasting, undesirable side effects. For one thing, it damages team spirit. This is no small cost if you are a leader and are concerned with and compensated by team productivity. For another thing, it demeans your stature. Even your co-conspirators will think less of you for doing what they themselves know they shouldn’t do. If you consider the kinds of activities you can engage in at work, this falls into the lowest category. It’s not only unproductive, it’s destructive.
Make yourself a promise today - a promise that you will gradually indulge less in this bad habit. Start by desisting from gossiping yourself. The next step is to maintain a neutral position when someone brings gossip to you - and to discreetly change the subject without seeming like a wet blanket.
If you find that you’re having trouble watching your tongue, try this: The next time someone attempts to get you to join him in badmouthing a colleague or fellow employee, imagine that your comments are being broadcast to the entire company on a loudspeaker. Speak as closely to the truth as you can, but try not to say anything that you wouldn’t say in front of everybody.
Once you remove yourself from the gossip pipeline, you’ll notice an improvement in the way others perceive you. This could not only make your job as a leader easier, but make you feel more confident and better about yourself.
[Ed. Note: For more of Michael Masterson's leadership techniques, pick up a copy of Power and Persuasion]
The Secret of Suggestive Selling
By Dan Kennedy
When I stopped in at my local Bob Evans restaurant during the Christmas holidays, I saw a valuable sales strategy in action: Suggestive Selling.
Before I go any further, I suppose I should disclose that I own stock in the Bob Evans company. But that has nothing to do with the point I’m going to make…
What I noticed, printed on their December placemat, was a list of people you might need gift certificates for. Not just a pitch to buy gift certificates. A list of people you might want them for. And a brilliant headline. It didn’t ask: Do you need gift certificates? It asked: How many do you need?
Here’s another example of Suggestive Selling…
I’ve taught many chiropractors to pass out a form to new patients, asking for referrals. The form (which I provided) had a list of about 20 questions like these: Who do you know who does a lot of heavy lifting on their jobs? Who do you know who frequently complains about headaches? Etc. One of the docs reported going from a pre-form average of two referred leads per patient to an average of nine with the form. In one month, he collected over 180 referred leads and, with direct-mail follow-up, brought in 22 new patients.
So… how can you use (more) Suggestive Selling in your business?
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A Natural Way to Live Longer
By Al Sears, MD
Did you know that you can actually live longer by restricting calories? In numerous studies, cutting calories by 40 percent increased the lifespan of laboratory animals (ranging from mice to geese) by as much as 50 percent. And a 15-year study of monkeys found that a restricted-calorie diet lengthened their lives by 30 percent.
When you eat less, you get a number of anti-aging benefits:
- Body temperature drops
- Blood pressure lowers
- Cholesterol levels drop
- Cells divide at a slower rate
- The rate of glycation drops
- Free-radical activity drops
- Oxidation activity drops
Cutting calories is not as hard as you think. You can, for example, substitute a protein shake for your regular morning meal. Protein powders that feature whey protein isolate are the best. You’ll have the sensation of being full without the metabolic stress on your body.
When you bulk up on protein, you throw "metabolic switches" in your body that lessen hunger and start burning fat. This is a genetic throwback to our caveman days when lots of protein meant "times are good." When your body isn’t worried about starvation, it burns off all its fat stores. (Why do you need stored body fat if you are likely to eat well again tomorrow?)
[Ed. Note: Dr. Sears, a practicing physician and the author of The Doctor's Heart Cure,, is a leading authority on longevity, physical fitness, and heart health.]
It’s Fun to Know: About Beer
The world’s oldest surviving recipe is a formula for making beer. It was discovered outside Baghdad in 1850 on a 3,800-year-old Sumerian clay tablet. Two other tablets contain what are believed to be drinking songs.
(Source: That’s a Fact Jack! A New Collection of Utterly Useless Information by Harry Bright)
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Word to the Wise: Raffish
Something that’s "raffish" (RAF-ish) - from "riffraff," which means "people of low reputation" - is gaudy, cheap, crude, vulgar, or rowdy, though perhaps engagingly so.
Example (as used by Sidney Sheldon in The Best Laid Plans): "The speaker was in his forties, an attractive-looking man with a black eye patch that gave him the raffish look of an amiable pirate."
[Ed. Note: Become a more persuasive writer and speaker ... build your self-confidence and intellect ... increase your attractiveness to others ... just by spending 10 VERY enjoyable minutes a day with ETR's new Words to the Wise CD Library.]
Michael Masterson
Copyright ETR, LLC, 2007