“I would like to avoid risk as much as possible” is what we often hear or even say. That’s understandable for a conversation but the attitude we show towards risk is the single largest determinant of our success. And that attitude was likely formed even before you entered your teenage years. There could be any number of triggers for it.
Haven’t we seen a lot of those already? The personal finance blogosphere is filled with material, both strongly for and vehemently against, homeownership. Due to my preference for a globally mobile career and the ‘invincible’ DC market saga, you know which side of the fence I am on. But the real estate asset class can’t be broad brushed by individual experiences. It can be a delicious entree or a nice side dish in a fulfilling financial meal, if done well and in moderation. I will give you my personal recipe here.
Of course, you are! We all are. We just don’t want to admit it. The biases we have are so hidden and yet, so effective, that they pretty much control how we think, speak and act in many situations. That’s a pretty tall claim, I know. In my life and in my corporate experience, I have often found that those who feel they are objective or unbiased often have deep-rooted biases that they think actually make them unbiased! Ironical, isn’t it? Such is the nature of cognitive bias (as psychologists call them) that it spares no one on its path. They can stop you from investing efficiently. They are enemies on your path to financial independence.
My past articles have been on many essential topics relating to life, work, savings and even relationships. Those posts serve as preparatory work for getting into a serious topic in this article – on investing. Before starting on our investing journey, it is clear that we should learn to save more and be sensibly frugal. The next step is to understand what efficient investing is – nobody taught me this but I learned the hard way by making mistakes, which I hope you will avoid. You are smart to learn from my past investment mistakes. Efficient investing is an important concept that will make a huge impact on your future, easily adding over $100,000 to your retirement stash with no effort on your part!
Let’s face it. Americans, and for that matter, most of the western world, are ill-prepared for their retirement. Reading ER blogs and personal finance websites will not give you the real picture as the authors and commentators are a progressive bunch who, collectively, are better off financially than others. The real truth, of course, is scary. In this post, I analyze two charts from a well-researched American study to explain what this means to you and why you should care.