Do-it-yourself surgery? Really? [Certain Times]

Have you ever considered doing surgery on your spouse?

I didn’t think so.

So how about doing surgery on your self?

I wouldn’t dare, and I’m guessing you wouldn’t either.

Even if you are uber-cool with the sight of blood, you might find that your emotions would impair your judgement, leading you toward a less-than-favorable outcome.

While I am certain you would never attempt an important surgery on yourself, I am also certain that some of your colleagues are “playing doctor” with their own investment accounts.

I am also willing to bet that the average physician who manages his or her own accounts is doing far worse than they let on, and not as well as they would with a competent investment advisor’s help.

Oh, it’s not because your colleagues lack intelligence or information or insight. It’s simply because they’re human.

Despite years of training in the sciences, they’re not always rational decision makers and, when it comes to money, this can be costly. Especially over 10, 20 or 30 years.

Don’t believe me?

Let me share a recent article from Morningstar that supports my position. But first, let me remind you that there is a yawning gap between an investMENT’s return and an investOR’s return (that's your colleague, by the way).

When you see an ad in a magazine or on TV about a mutual fund and its performance over the last X years, those performance figures are often very different than the returns that actual investors experience in that same fund.


It comes down to bad behavior. Instead of buying and holding a diversified portfolio of tax-efficient mutual funds, the average investor (your colleagues included) tends to trade in and out; buying when they should sell, selling when they should buy, quietly wringing their hands in fear or greed all the while.

And they do it again and again.

So here's that article from Morningstar I was talking about. For your colleague’s sake, please take a peek.

In the first chart in the article, you'll see that the average investor did worse than their investments by anywhere from 1.66% to 3.14% per year over the last 10 years, depending on what they owned.


We call this difference in investOR results versus investMENT results the “Behavior Gap” and it puts a real drag on your buddy’s ability to pay for college or retire in comfort.

As a reader of this blog, you’re probably way ahead of that game but your colleagues—those guys and gals who are checking their accounts between cases—are quietly struggling as they try to do their own investment surgery.

They have their family's lives in their hands, and we all want them to survive the experience, so please ask them to contact us.