Dangerous Minds

Five. Another edition of Mr. Stillman's opus Walters world here alongside John Stillman and you might have heard one of John's recent radio shows were we talk about some of the dangerous mindset that people often have as they approach retirement and on the radio show we have the chance to dive too deep into those mindsets become a scratch the surface will give a little bit more detail in today's podcast John so the five dangerous mindsets you outlined were complacency, overconfidence, fear, cynicism and despair. Let's come down one by one.

Complacency's at first what we see complacency a lot right now in a time where markets doing well.

Financial decisions are easy for people to procrastinate. To begin with. And if you can come up with any kind of reason to procrastinate making decisions. Further, then you're going to do it. So we see the market doing well because an easy excuse for people to be complacency well you know things are going well right now and I don't really need to make any changes.

My 401(k) is really I really see a lot of growth in my 401(k) so I'm just gonna leave things as they are kick this can down the road for another day when the reality is that is exactly the time that you should probably be making some moves because I load cell hi right well things are high right now. It's a good time to capture some of those gains and move money elsewhere, but most folks minds don't work that way. That's because of complacency. If you come up with any excuse at all to not make a decision today you probably do it. Yes, that that kick the can down the road mentality.

I'm always reminded especially fear you have lived in North Carolina for any length of time that Blue Cross Blue Shield commercial, which was extremely annoying and obviously very effective. It still sticks in my mind today of the little guy saying like a white background. He's wearing a blue shirt and he goes I need health insurance, but I'll do it tomorrow and then the little miniature version of himself pops up and knocks on the glass good thing to do a today and so simple, but still sticks in my mind to this day, but that's the complacency that is pretty annoying.

Even just having her you describe it. It's like the worst commercial ever. One of those ones that your member on the best commercial ever because years later exact depends on how it applies to us, that's complacency. That's a pretty good by the way John.

I was hoping I could find a nice catchy sort of wood because acronyms like putting the letters CO FCD the different trying to make a word I can really find a word of it makes but it does almost spoke of Effie is pretty and it which you know might be a dangerous mindsets that could be great because I dangerous mindset number two. Following a complacency is over confidence. This is probably pretty common, yeah. And honestly it's in a lot of ways. Along the same lines as complacency or not. Along the same lines but honestly it will always receive overconfidence for the same reasons that we see complacency interest so different types of people are going to react to good weeks in the market different ways.

Some people are going to say as we talked about complacency great everything is good right now I don't need to make a decision today. Let's put this on other people are going to interpret good times in the market St. I you know what I really got this figured out.

Things are going well.

I really think I'm good at allocating in my 401(k). I'm really doing well the last couple years. See a lot of growth and then that overconfidence spills over into other areas of your investing because you think you really have it all figured out where the reality is somebody who pays no attention there 401(k) at all. They just put money in there invested in the same funds they were invested in seven years ago where they you know arbitrarily through darts in the dartboard and picked for five different funds in their 401(k). You know what they're also doing well right now yeah and so it bothers me sometimes when I see folks get too overconfident about their investing prowess just because there 401(k)'s doing well right now and that's again the problem of overconfidence and everything can kinda be linked back to that same starting point. John of yeah things are going well right now. Here's how these different mindsets react to the one complacency. The other overconfidence. The other is fear which might seem odd because the stock market has had this great rally lately. Why would fear you dangerous mindset. Well Ron Paul I just saw an article this week that made major headlines. Ron Paul is not saying a 50% decline in the market basically is impending probably going to happen within a year from now.

But hasn't he said things like that.

The last year and your family before that fear is a really interesting mindset because we honestly have it for a good reason, that sort of you know, caveman mentality of don't poke the bear and run the other direction fight or flight responses in all those kinds of things but fear it can also be a really dangerous mindset can't remember the guys name, but there was a fellow who wrote a book that was like 87 reasons the world will end in 1987, and it didn't but published a second book were sold as many copies 88 reasons the world will end in 1988 and kinda goes along the same influence what your sailor grandfather again.

Different people are going to react to good times in the market different ways and for a lot of people it's paralyzing fear that oh my gosh this is not sustainable.

The market is going to crash tomorrow and you know then you have folks in the media who are probably being paid by some organization to exacerbate this fear pouring fuel on that fire will and so what you see is some people complacent some people overconfident. Some people deathly afraid of what's going to happen in the market because they say this is not sustainable and were all going to die now, obviously there is some logic behind that mindset when you have record highs in the market seemingly every week.

Yeah, that's probably a good indication that you're somewhere near the top. We don't know when the top is going to come could be next week or two years from now we don't know. But when it seems like you near the top is not illogical to say, okay, well, we probably need to be positioning ourselves or crash, but that's not what we see when people have true fear when they have fear, it's part money in cash were not contributing anything about our 401(k) anymore.

You've swung the pendulum and the complete opposite direction and you're so deathly afraid of market crash that suddenly you put all your money on the sidelines. The problem is, I've seen people in that boat for the last three or four years 2013 was a great year in the market.

A lot of people set out while we can't be near the top 2008 2009 was still fresh in our minds and they park their money on the sidelines in 2013 will think of all the growth that they missed out on in the last couple years so as it always comes down to. We have to have a plan for money and is not just what's going to happen. What we think is going to happen with the market tomorrow. It's how soon do we need this money.

And with that in mind, how do we invest accordingly.

The guy who is writing the books 87 reasons why 88 reasons why 1988 terrible business model in terms of longevity was great until he got to the end of 1999, 99 reasons why 99 but then when you get the 2001 reason you've only got zero and 2001, only one reason you can't write a book OR usage is 2001 reasons why the world is good at it another now as workload goes way upset you maybe devote a paragraph to each reason.

Instead of the chapter. Here he really shot himself in the foot so to speak with you know that business model of intimately so maybe that's why we don't see those books anymore these days he's good he's he's waiting for this to be like 25 real head again and have started 2025 you make an appearance again. Yeah, exactly. He probably died with his coat lay during the incident several years ago. Yeah, exactly. I took complacency, overconfidence, fear, then there is cynicism, where you sing cynicism today. Yeah. So I don't necessarily see this one as much as the others, but when I do see it. It tends to be a pretty extreme take on things where it's like you know I can't win this investing game it's rigged against the little guy is all investment banks and big companies taking advantage of all the rest of us.

When the reality is you know that probably is true to an extent you're not gonna beat those entities but you can't let cynicism cause you to do nothing in the world of investing because putting money under your mattress is not going to get the job done so put it this way. Let's suppose you had the option of investing in the market for pick a period of time 15 years and you say I could average 7% return over the course of those 15 years, but then you say well but is not fair because the big investment banks are making twice that much over that period of time. It's rigged against me there making 14%, while only making seven okay well your other option is not participate in the system at all. Go park your money and the mattress are coffee kids in the backyard right and you make nothing yeah money still there but you made nothing on it and in fact you lost the buying power relative to inflation so what's better, not making as much as the big entities that you fill it out to get you or making even less than that was saying ha ha I didn't participate in your scam right right so you just have to be very careful with that cynical mindset. I think it again I will sell a lot but the people that I do see it in. They are pretty extreme in their worldview.

Yeah and and it can be a big problem because of that which is something else given mine so it would very much dangerous mindset so one more to give you complacency, overconfidence, fear, cynicism. This is been pretty downtrodden podcast so far talking about Huxley's dangerous mindsets. So let's end it with a bang. John despair.

The final mindset to cover on their movie dangerous minds interest my mid 90s or something or have seen it is not a show that's Criminal Minds that is a show that is shows a dangerous mind interest. I will get up while you answer the in any event, despair. So we see a lot of people who just had this feeling and I probably see three or four people a month that fit this category when they really feel like either. They're never going to be able to retire. 1995, dangerous mind that the thriller drama category. I got one hour 39 and think it only 29% on Rotten Tomatoes that tells you some so you have people who feel like they're never going to be able to retire or they're going have to work until a very advanced age because it's elective done such a bad job in the cases they are not in great financial condition, but very often there in better shape than they realize it's just because they have no plan at all.

Debbie can't they can evaluate where they are on their financial roadmap and so once you actually put a plan together and they say okay well I need to focus on debt pay off for these next couple years and focus really aggressively am saving for a couple years and you know what I actually can retire at 68 instead of 78. As long as I manage things within these parameters here and so I see it. A lot of people in this despair category.

You know, very often it's because life has punch them in the throat, in one way or the other whether it's a divorce has really changed their financial situation, death of a spouse illness of a spouse illness for themselves. So many things can really cause problems in your financial life that really has nothing to do with bad financial decisions you made. It's other things in life usually that's where we see the despair that so often with a plan you find out that you're in better shape than you realize.

So don't let despair get the best of very important to remember these dangerous mindsets are you letting them control or dictate your investing your planning life a little bit too much complacency, overconfidence, fear, cynicism, despair, all good ones to think about. They can be dangerous mindsets to approach retirement and financial planning.

With so make sure that again they're not in control of you. John, thanks for the help on these dangerous mindsets from uplifting conflict. Next time I do my best Deposit got about as dangerous mindsets, gentlemen, water stroke. This is been another edition of Mr. Stillman's opus