Following The Crowd Can Be Dangerous

Whose Money Is It?
January 31, 2019

Following The Crowd Can Be Dangerous

Sometimes following the “Crowd” can not only lead you in the wrong direction but as you will see can endanger you financial wellbeing. After suffering three severe bicycle wrecks over a 20-year period I no longer ride, that getting in shape thing almost got me killed. However, in 1997 while taking a bike ride in the country near “The Villages” and following my typical route, my destination was very clear. I had taken the same route dozens of times and was very certain that I was going in the right direction. About half way through the ride I noticed a loan rider approaching in the opposite direction and as he passed he screamed at me “You’re going the wrong way”. Not sure what to make of it I kept on pedaling but then several more riders approached me with the same message “The Finish line is ahead, you’re going the wrong way”. They were in a bike race and thought I was in it also and had gotten turned around. For the next hour I had to endure people yelling at me to turn around and follow them it was quite comical and after a while I just ignored their warnings and kept pushing forward in what I was certain was the right direction.

The moral of the story is do not follow the crowd they’re not always right especially when it pertains to your financial health. With the stock market seemingly on a never ending spiral upwards many tend to forget that it can also go south very quickly. It’s like the gambler that goes to Las Vegas and tells you how much they won but doesn’t mention the losses in prior trips! I have seen this play before in 1999, 2000, 2001 & 2008. Everyone seemed to be intoxicated with the gains they were making but ignored the inherent risk’s associated with investing in assets that carry no “No Guarantee’s”. Just this past week in meeting with the son of a client who was getting ready to retire he told me “Fred I have lost 1.97% this year in my 401K plan when on T.V. the experts say everyone is making money. How is this happening when the plan is being managed by one of the biggest firms on Wall Street”?

You must realize that many of the so-called experts you see on television and radio have never met with individuals like you and have never managed money in a highly volatile environment. They also work for firms that direct them as to what products they can offer for they are under contract. Next time you in the bank read the sign that is displayed in front of the advisor’s door. It will read something like “Securities offered by are not insured by the bank. These products are not obligations of this bank, are not endorsed, or recommended, or guaranteed by this bank or any government agency. The value of the investment may fluctuate, the return of the investment is not guaranteed, and LOSS of principal is possible”.

Why any retiree would place their money in these types of assets is mind blowing but it happens every day. What do you mean that these assets aren’t recommended by the bank, the advisor works for a firm that is contracted with the bank. It’s all designed to minimize the bank’s liability.