My wife and I used to receive compliments for being perfect parents… then our third child came along and no one ever mentioned that again. It wasn’t that she was bad, it was just that she had a different way of learning. Her oldest sister learned by logic. Sister number two learned by observing. And she, like the guy who had to pee on the electric fence to get it, learned by doing. To her logical, observant father, it was a flaw that drove me crazy. So, when she did something particularly stupid, she would have to endure one of my angry rants, after which she would usually acknowledge, “That wasn’t very smart, was it?” At that point I would smile and reply, “Ya think!” She was basically a great kid, but damn, she was really a hard one to raise.

Then again, the Association for Psychological Science informs us that parenting any child isn’t easy. A recent post, The Myth of Joyful Parenthood, states that “Raising children is hard and any parent who says differently is lying.” And that isn’t an unsubstantiated opinion, explains John Cloud in a Time Magazine article — Kid Crazy. “Researchers have known for some time that parents are… more depressed than nonparents…” They’re more depressed and stressed, writes author Jay Belsky, PhD, because of “…a fundamental truism about the world we inhabit: The future is uncertain. As a result, no parent…can know for certain what would be best for his or her…child…” Neither can investors know with certainty what is best for their portfolios. So, like parents, “investors hate uncertainty,” points out Wall Street Journal columnist Jason Zweig. But certainty, which he defines as “…a state of clarity and predictability… doesn’t exist, never has, and never will.” However, “Our need for certainty in an endeavor as uncertain as raising children [or, I may add, investing for retirement] makes explicit ‘how-to-parent’ [or investment] strategies both seductive and dangerous,” warns researcher and TED Talk sensation, Dr. Brené Brown.

Therefore, it is hard to resist “…seductive-sounding ideas that will supposedly enable you to beat the market,” writes Zweig or be a “perfect” parent, Brown would add. But you must. That’s why Brown says you have to “let it go” and Zweig says to “get over it.” By doing that, Zweig explains you can then “…try to control the things that are controllable,” which is mainly your behavior. So, Brown encourages parents to “Be what you want your kids to be” and Zweig admonishes investors to adhere “…to a set discipline… [to] prevent yourself from making impulsive decisions…”

Investors should heed both pieces of advice and try to emulate the behavior of disciplined role models like Warren Buffett. That means not only knowing what he does but also doing it. “Only when you combine sound intellect with emotional discipline do you get rational behavior,” Buffett maintains. For him to nurture such intellect and discipline, he told CNBC, “I do more reading and thinking, and make less impulsive decisions than most people in business.” It’s something “All of you can do,” he points out, “but I guarantee not many of you will do it.” And that’s the reason why so many investors make the same mistakes over and over.

As humorist Franklin P. Jones observed, “Experience enables you to recognize a mistake when you make it again.” Regrettably, there is more truth than humor in that statement. It’s true because, “…it turns out that our brains are hardwired to get us into investing trouble,” laments Zweig. In other words, nature has cross-wired our brains in such a way that we believe that the world is more predictable and controllable than what logic, observable facts, or past experiences would suggest. Because of that, neither parents nor investors can let go of the belief that perfection (or near perfection) is possible. And that’s not very smart, is it? Ya think!

Article by Guerdon Ely

Guerdon T. Ely has over 25 years of experience as a financial planner and investment adviser. He is the author of Uncertainty is a Certainty: Fables for Fiduciaries, a book on prudent fiduciary investing. He is the creator and developer of two highly regarded retirement distribution software programs, MRD-Determinator and Pre-Determinator, which have been reviewed in MorningstarAdvisor.Com, Investment Advisor, Accounting Today, and WebCPA. Mr. Ely received a Master of Business Administration degree from California State University, Chico after graduating from the University of California at Santa Barbara with a degree in Economics. He is a Certified Financial Planner™, an Accredited Investment Fiduciary Analyst™, and a Chartered Financial Consultant™.

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