Fix It Friday Ep. 28 - Ego vs. Family: The Hidden Risk of DIY Investing

• Investment success depends more on behavior and emotional discipline than intelligence.

• Easy access to financial information does not create a lasting investment advantage.

• Overconfidence can quietly expose even highly successful individuals to unnecessary financial risk.

• A truly successful financial strategy should continue working for your family even when you're no longer there to manage it.

  
  
  

Disclaimer: [00:00:00] The following podcast by Fusion Family Wealth LLC, Fusion, is intended for general information purposes only. No [00:00:05] portion of the podcast serves as the receipt of, or as a substitute for, personalized investment advice from Fusion or any other investment professional of your choosing. [00:00:10] Please see additional important disclosure at the end of this podcast.

A copy of Fusion's current written disclosure brochure discussing our advisory [00:00:15] services and fees is available upon request or at www.fusionfamilywealth.com.

Jonathan Blau: Welcome back to [00:00:20] another episode of the Fix It Friday edition of the Crazy Wealthy podcast. [00:00:25] Thanks for joining us again. The title of the podcast is called Ego Versus Family: [00:00:30] The Hidden Risk of Do It Yourself Investing.

So let me ask a tough question today. [00:00:35] Are you putting your ego ahead of your family? Not intentionally, not [00:00:40] even consciously often, but quietly unintentionally. Are you making decisions [00:00:45] about your wealth that feel right to you but could leave your family exposed? Because [00:00:50] today I want to talk about two ideas that are deeply connected, the belief that, [00:00:55] and I quote, "I can do this myself," and the hidden risks that that [00:01:00] belief creates, not just for you, but for the people you care about most.[00:01:05]

Voiceover: Welcome to the Crazy Wealthy Podcast with [00:01:10] your host, Jonathan Blau. Whether you're just starting out or are an [00:01:15] experienced investor, join Jonathan as he seeks to illuminate and demystify the [00:01:20] complexities of making consistently rational financial decisions under [00:01:25] conditions of uncertainty. He'll chat with professionals from the advice world, entrepreneurs, [00:01:30] executives, and more to share fresh perspectives on making sound [00:01:35] decisions that maximize your wealth.

And now, here's your host.

Jonathan Blau: So let's [00:01:40] start off by saying success can become a liability If you're a [00:01:45] successful entrepreneur, executive, business owner, you've earned your confidence. There's no [00:01:50] question about it. You've made great decisions. You've had good luck along the way. You've solved [00:01:55] hard problems, and you've succeeded where most people have not.

But here's where [00:02:00] it gets dangerous. That success can create a very specific behavioral [00:02:05] bias, and that bias is called overconfidence bias. And in investing, [00:02:10] overconfidence is not an advantage, it's a liability. There's a term for what often happens [00:02:15] next. It's called epistemic trespassing. It means stepping into a field [00:02:20] where you don't have any deep expertise, but assuming that your intelligence [00:02:25] alone and success in your prior endeavors is enough to succeed in this field where [00:02:30] you have no experience.

And in investing, it's the perfect trap for this because unlike your [00:02:35] business, you don't control the variables, there's no repeatable playbook, [00:02:40] and feedback is delayed, sometimes for years. So early success does not [00:02:45] prove skill. It often just reinforces the illusion of it, and I'm talking [00:02:50] about early success as an investor.

So who are the people that are most [00:02:55] at risk to this bias, overconfidence? Here's the uncomfortable truth. [00:03:00] When it comes to investing, those among the highly educated [00:03:05] multimillionaires, the wildly successful entrepreneurs, and the people with no [00:03:10] formal financial training at all are not just equally capable of making [00:03:15] serious mistakes.

But in my experience, the most successful people are often [00:03:20] more likely to make those mistakes and to make them more often. [00:03:25] So let's ask why. Because success breeds confidence, and confidence in [00:03:30] investing often becomes overconfidence bias. When you spent a lifetime being right, it [00:03:35] becomes very difficult to recognize when you're in a domain where being right consistently is [00:03:40] nearly impossible, and investing is exactly that domain.

Because investing [00:03:45] success is not driven primarily by intellect, it's driven by temperament, by [00:03:50] behavior. It's not what we know that counts most, it's what we do. And human [00:03:55] nature hasn't changed. It never will. We all respond the same way to fear, [00:04:00] loss, envy, regret. And what this means is the person [00:04:05] who built a fifty million dollar business and the person with no financial background are [00:04:10] both equally vulnerable to selling at the bottom, chasing what's hot, [00:04:15] abandoning a sound strategy at exactly the wrong time, not because they lack intelligence, [00:04:20] but because they're human, and human nature is immutable.

It [00:04:25] doesn't change. And in investing That is what matters most. So let's talk [00:04:30] about the illusion of, and I put in quotes, "knowing." Now layer on something else, what I call [00:04:35] accessibility bias. Today, information is everywhere. You go on the [00:04:40] internet, the computer, you can get information twenty-four/seven from many different sources.[00:04:45]

Market forecasts, economic predictions, analyst research, stock [00:04:50] recommendations. It's instant and it's constant, and it creates a [00:04:55] dangerous illusion that because information is available, it's valuable. That because we [00:05:00] understand it, we have an edge, and because we have knowledge, we have wisdom, but we don't.[00:05:05]

And here's the distinction. Data is information. Knowledge is [00:05:10] understanding that information. Wisdom is consistently doing the right thing with it And [00:05:15] that last step is where most people break because even if you know what to do, [00:05:20] executing it calmly, consistently for decades, especially when fear or [00:05:25] euphoria take over, is incredibly rare.

And this is where another confusion shows up. [00:05:30] We tend to overvalue traditional IQ, our ability to analyze, reason, and [00:05:35] process information. But investing success depends far more on something closer to [00:05:40] emotional discipline. Your ability to recognize fear when it's driving decisions, [00:05:45] resist the urge to act on that fear, and stay committed when emotions are pulling you off [00:05:50] course.

Business success rewards intellect. Investing success [00:05:55] requires self-control. That is wisdom, and it's far rarer than people think. [00:06:00] Here's the part no one talks about. If we take it one step further, let's assume [00:06:05] you're the exception, that the laws of human nature that derail virtually every [00:06:10] investor somehow don't apply to you.

Let's assume you really can do this [00:06:15] successfully on your own. Even then, here's the question almost no one asks: What happens when [00:06:20] you're no longer there? What happens if you, God forbid, pass away unexpectedly, [00:06:25] become incapacitated, or simply step away from managing things? What [00:06:30] happens to your family?

Because now they inherit a portfolio they didn't build, a [00:06:35] strategy they don't understand, and no framework for how to make decisions. They don't [00:06:40] have your experience or belief system. They don't have your conviction. They don't [00:06:45] have your perspective. And in an industry where most advice defines safety as [00:06:50] avoiding volatility rather than protecting against inflation, they're especially [00:06:55] vulnerable to being guided toward the wrong definition of prudence.

Too much in bonds, [00:07:00] too much emphasis on stability, too much forecasting and predictions [00:07:05] going into their strategy, and too little concern for the long-term erosion of purchasing [00:07:10] power. In other words, they're left exposed, not because they did anything wrong, but because the [00:07:15] system they inherited was never designed to function without the person who [00:07:20] bequeathed it to them, the do it yourself investor.

So in closing, I would say this [00:07:25] is why the real question isn't whether you can do it yourself. It's whether doing [00:07:30] it yourself is an act of wisdom or an act of ego. Because if your plan only [00:07:35] works while you're there to run it, it isn't built for the people you love. And when ego is put ahead of [00:07:40] family, even unintentionally, family is the one that ultimately pays the price.

[00:07:45] Thanks again for tuning in to this episode of Fix It Friday. Until next time, stay crazy [00:07:50] wealthy. You can reach us on fusionfamilywealth.com, [00:07:55] crazywealthypodcast.com, and all your favorite podcast venues.[00:08:00]

Voiceover: Thank you for tuning in to another episode of [00:08:05] the Crazy Wealthy Podcast. For more insights, resources, and to sign up [00:08:10] for our newsletter, visit crazywealthypodcast.com. Until then, [00:08:15] stay crazy wealthy[00:08:20]

Disclaimer: The previous podcast by Fusion Family Wealth, LLC, Fusion, was intended for [00:08:25] general information purposes only. No portion of the podcast serves as the receipt of, or as a substitute for, personalized investment advice from Fusion [00:08:30] or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance [00:08:35] of any specific investment or investment strategy or any non-investment related or planning services, discussion, or content will be profitable, be [00:08:40] suitable for your portfolio or individual situation.

Neither Fusion's investment advisor registration status nor any amount of prior experience or success should [00:08:45] be construed that a certain level of results or satisfaction will be achieved if Fusion is engaged, or continues to be engaged, to provide investment advisory [00:08:50] services. Fusion is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice.

No portion of the video content [00:08:55] should be construed by a client or prospective client as a guarantee that he or she will experience a certain level of results if Fusion is engaged, or [00:09:00] continues to be engaged, to provide investment advisory services. A copy of Fusion's current written disclosure brochure discussing our advisory services and [00:09:05] fees is available upon request or at www.fusionfamilywealth.com.