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Never Assume

Jonathan Clements · Nov 14, 2020 · 4 replies

THROUGHOUT THE DAY, we make countless snap judgments, often without realizing it. Think about navigating the grocery store. This involves a blizzard of decisions—which brand, what size, whether it’s good value, will it stay fresh—and yet we do so almost effortlessly.

Most of the time, this is a good thing. If we carefully pondered the assumptions behind every judgment we make, life would become painfully unproductive. Still, it’s helpful occasionally to question whether we’re misjudging the world, especially when it comes to major issues, financial and otherwise. Examples? Here are 35 assumptions we shouldn’t make:

1. That people who are richer are happier.
2. That a fund’s past performance will repeat.
3. That other points of view are without merit.
4. That endless relaxation is what we really want.
5. That stock market investors—in aggregate—care greatly about anything other than interest rates and future corporate earnings.
6. That our future self won’t regret the money we’re merrily spending today.
7. That great companies will be great stocks.
8. That an insurance agent is selling us the best investment products for our financial future.
9. That an item on sale is a bargain.
10. That our immediate reaction is the right one.
11. That sophisticated investment products and strategies deliver better returns.
12. That paying less in taxes is always financially smart.
13. That silence means someone agrees with us.
14. That the collective judgment of investors, as reflected in market prices, is wrong.
15. That people who claim to beat the market actually have.
16. That we’ll have the same high tolerance for risk when share prices are 30% lower.
17. That we’re being rational.
18. That investment experts pontificating on TV have any clue what will happen next in the economy and the financial markets.
19. That friends and family are telling us the unvarnished truth.
20. That material progress—the bigger house, the faster car, the next pay raise—will deliver lasting happiness.
21. That a fee-only financial advisor has no conflicts of interest.
22. That financial reporters fully understand what they’re talking or writing about.
23. That how we think we’re perceived is how we’re perceived.
24. That those who are most insistent or passionate are most likely to be correct.
25. That extraordinary career and investment success is all about talent and hard work—and that luck plays no role.
26. That last year’s insurance coverage still fits our circumstances today.
27. That high investment costs are an indication we’re getting something special.
28. That our home will be a great investment.
29. That we instinctively know what will make us happy.
30. That our life in the years ahead will be similar to today.
31. That we know something other investors don’t.
32. That people who appear wealthy actually are wealthy.
33. That our recollection is correct.
34. That our thinking isn’t swayed by the investment mob’s euphoria and despair.
35. That, when the job is finally done, we’ll feel a lasting sense of triumph.

Follow Jonathan on Twitter @ClementsMoney and on Facebook. His most recent articles include Future Shock, Scary Stuff and Irksome Adversaries.

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4 Comments

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Bruce Trimble

5 years ago

“That stock market investors—in aggregate—care greatly about anything other than interest rates and future corporate earnings.”

“That the collective judgment of investors, as reflected in market prices, is wrong.”

The key word in these is “investors”. How much trading in the
market is done by them vs. speculators and robots? I would
suspect “investors” are a small percentage.

0

parkslope

5 years ago

Reply to  Bruce Trimble

Broadly speaking, speculators and robots are investors. Computer based investing relies on algorithms that reflect human judgments and those algorithms are constantly being modified as judgments about market behavior change.

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Langston Holland

5 years ago

How about a faster car with HumbleDollar accessories? 🙂

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SanLouisKid

5 years ago

This good article reminds of a favorite quote from the old Leave It To Beaver TV program.

Beaver: Gee, there’s something wrong with just about everything, isn’t there Dad?

Ward: Just about, Beav.

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