#68: What hot new financial knowledge are you likely to find in 2022?

3rd January, 2022

Welcome to the Idiot Money newsletter. This week, becoming wiser with money by understanding that investing like a non-idiot has almost nothing to do with actual investment knowledge, including:

• succumbing to the siren calls of simplistic substitutes for actually worthwhile advice;

• why financial decisions outside the very limited realm of making changes to an investment portfolio are so much more important than those in it; and

• something about kettlebells.

Why, given the aim of these articles is to get people investing like non-idiots, I rarely write about investment management.

I occasionally get asked if the balance in these newsletters between the philosophy and the strictly investment stuff isn’t a bit off. Where are all the charts?!

Other than this series of posts, and the listicle last New Year, I’ve hardly touched on appeasing the hunger for tips, tricks, tactics, and magic beans from the ‘Just tell me what to invest in!’ crowd.

This balance simply reflects the relative importance of a wiser worldview and magic beans in getting a grip on and making the most of your financial circumstances.

How to invest like a non-idiot isn’t a big secret. Anyone that tells you it is is almost certainly trying to sell you on something – probably a product, or their status as a financial genius.

Because the investment advice anyone ever really needs comprises about 30 things not to do and about three things to do, it’s perfectly primed for clickbait articles. ‘These six investment mistakes are killing your gains! Number five will surprise you!’

There are millions of articles telling you not to try to time the markets, that active investment management doesn’t work, and to spend less than you earn.

(And while there are bafflingly fewer on not spending money on stuff that doesn’t make your life better, there are enough of them too).

There are just as many millions of people reading them, and then ignoring them, while sounding either like an addict (‘Just this once’) or someone primed to fall for a scam (‘That advice is for the idiots, but I’m smart enough to make it work.’)

It’s almost as if these articles are completely pointless. As if nobody actually sets out to spend more than they earn, or even if they did, would stop doing so because a Tweet told them to.

Consistent and easy non-idiot outcomes come from non-idiot brains

Investing like a non-idiot is much the same as doing anything like a non-idiot. It’s much less about investing and much, much more about not being an idiot.

This, in broad terms, is about becoming better at formulating problems, and at solving them.

In most things, but especially when it comes to money, this is about seeing your world and how you interact with it more clearly.

This about becoming less self-deceived.

When you build a better relationship with money by building a brain that’s less prone to succumbing to self-deceptive, self-destructive beliefs around money, all that terrifying investment stuff that inspires the call to just be told what to do all just… vanishes.

The hard part isn’t finding the ‘right’ person to tell you the ‘right’ thing to do. It’s recognising that the very wiring that made you believe that the million and first person to tell you the same thing is going to make the difference is the very thing you want to challenge, and change.

What about expensive delegation?

That’s all well and good for advice plucked from the online swamp, I hear you cry. But what about proper investment advice. The sort you pay for. The sort you (probably unwittingly) pay more for than everything else you buy each and every year, and that for most people inflates in line with market returns and additional contributions – easily double-digits a year.

This used to be my job (though pleasingly, never at a place that pulled that insidious inflation trick).

This certainly has its uses. It’s very often worth it, even at such extraordinary prices.

Yet even those that have not only been told what to do, and paid tens of thousands a year for it, and not only to a well-meaning adviser, but also a well-trained one (by luck more than judgment probably, given most do so somewhat out of panic, or at least ignorance)… then yes, they will be in a healthier financial position…

But if you think they’ve stopped worrying about money, and stopped making dumb financial decisions, then my entire time in financial advice tells you you’d be mistaken.

‘Peace of mind’ that you have a non-insane investment selection or the numerical ability to ‘retire’ isn’t the same as peace of mind that you’re comfortable and confident living with money in a non-insane way, or that you have a purpose that would make retirement anything other than a really dumb idea.

Avoidance of the worst investment errors isn’t the same as making the most of your money – leveraging what’s likely a fortune of historic proportions to not only avoid the gutter but reach some starry potential of an all-round healthy life packed full of flow (as if there’s a kind of ‘life’ that isn’t ‘all-around’…)

Financial decisions outside the very limited realm of making changes to an investment portfolio are so much more important than those in it.

Yes, it doesn’t take a huge investment pot for wiser investment decisions to have a disproportionate effect on the size of those numbers relative to all the other ones in your life.

But unless you’re so chronically insecure that the size of the numbers has an equally outsized effect on the quality of your life, investment decisions make up only the teeniest tiniest fraction of the financial decisions that both shape and express your overall wellbeing.

And because money is intertwined with almost all of your daily activities, unless you somehow do nothing to make it, don’t spend it, and don’t think about it, those daily money-infused activities count for something far beyond what can be counted on a calculator.

Financial health is like physical health

Something similar happens with physical health, and while matters of physical health can get pretty triggering, they’ve got nothing on money, so it’s often a more effective path to seeing the same thing.

‘Tell me what to do to be physically healthy’ is even easier than ‘Tell me what to invest in’. No one needs those articles… though there are of course even more millions of them.

The world’s physical health isn’t suffering because of a lack of telling people that sitting for more than 6-8 hours a day is bad and kettlebells are good, or that there’s no such thing as a sweet tooth, or the thousand other things that are too obvious to bother spelling out.

Everyone already both knows what to do and what they’re doing. No one seriously thinks through their physical situation and concludes it’s a surprise they’re not feeling as wonderful in their body as they want to. They’ll keep unthinkingly believing it though. Just like they’ll keep believing in the power of ‘starting Monday’ to change it.

Control, experiment

The key to better financial or physical health is taking control, not ceding it. Specifically, taking control of the decision-making machinery that makes you do idiotic things because you didn’t want to think them through, that, had you thought them through, you wouldn’t’ve done.

Fighting the ‘right’ version of being told what to do isn’t nearly as important as seeing more clearly what to do, with undistorted, non-deceptive vision.

Do that, and the living is easy.