Back in December of 2014 Carl Richards at Behavior Gap was gracious enough to share twelve of his best graphics with anyone that wanted them for absolutely no charge.  His hope was that folks in the  financial services industry could take these images and use them to convey the importance of using a disciplined process to reach your investing goals.

I've taken Carl's images and used them to explain how to systematically approach investing based on these twelve pictures.

Investing in Twelve Pictures (pictures one through eleven):

• Picture One - You Have To Start With a Goal
• Picture Two - You Need to Focus on What You Can Control
• Picture Three - The Best Solutions Are Simple
• Picture Four - It is NOT a Plan it IS a Process
• Picture Five - Over Time You Will Learn New Things
• Picture Six - There Will Be Ups and Downs Along the Way
• Picture Seven - You Will Fail If You Succumb to Fear
• Picture Eight - Diversification
• Picture Nine - Asset Allocation is the Key to Investin
• Picture Ten - Most Investors Out-Think Themselves
• Picture Eleven - It Is Not About The Money

Hopefully they will help at least one individual take the necessary steps to reach their personal, professional, and financial goals.  Without further ado, picture number twelve...

Between You And The Big Mistake

Today we come to the final of our twelve pictures.  The one I have entitled “Between You and The Big Mistake”.  Study after study has shown that investors perform better when they partner with an advisor (google “Dalbar Study” or “investor performance vs investment performance”  to see the details yourself).   I have two theories on why investors using advisors outperform those that do not use advisors.

The first theory focuses around the “time, knowledge, discipline” hypothesis:

• If you are to be successful as an investor, you need to invest adequate time, ensure that you understand how investing works in concert with your financial plan, and have the discipline to develop and adhere to an explicit investment strategy. written It states:

The second theory focuses around the “bouncer, teacher, coach” hypothesis

• If you are to be successful as an investor you need to have someone fill the roles of bouncer (i.e. one that keeps the “investment rif-raf” out of your portfolio), teacher (i.e. someone that can explain to you the complexities of investing and financial planning), and coach (i.e. someone that can keep you focused on the game plan).

Richards picture suggests that for many the advisor is the key to protecting the investor from “the big mistake”.

Do you need a financial advisor to be successful as an investor?  Absolutely not.  My theories support the following alternatives to hiring an advisor:

• You will be successful if you have the necessary time, knowledge and discipline to implement an investment strategy.
• You will be successful if you can act as your personal bouncer, teacher, and coach.

However, if you lack time, knowledge or discipline; or, if you cannot act as your own bouncer, teacher, or coach, you might consider working with a financial advisor.

To help you in choosing an advisor, I’ve attached a link to a copy of NAPFA (National Association of Personal Financial Advisors) “Field Guide to Selecting a Financial Advisor” as well as a link to my firm’s answers to the questions that NAPFA encourages you to ask the advisors you are considering

Some other posts that you might like:

• How Are DFA Funds Different than Index Funds?
• How Families Can Calculate Retirement Income Wants Versus Needs
• What Your Grandma Taught You About Investing
• Making Sure You Can Collect a Paycheck in Retirement