How Conventional Wisdom Can Steer You in the Wrong Direction in Investing

Aug 1, 2016 | Blog, Investing

Conventional wisdom is frequently accepted at face value as if it were scientific theory. This is especially a truism in investing, where success is often counter-intuitive to our natural reactions and thinking processes.

Look no further than the recent housing market to see how conventional wisdom can steer you in the wrong direction in investing.

Just ten years ago, conventional wisdom said that home prices would never go down. Many followed suite by treating their residence as an iron-clad investment. Even worse, plenty bought three to four homes (since little down payments were needed then), because of their absolute “certainty” that they’d be able to grow their wealth with these “surefire” investments.

As you’re probably aware, the Housing Crisis then turned this conventional wisdom completely upside its head. Much of the US learned an incredibly expensive lesson that home prices can, in fact, go down quite rapidly. Over a 5-year time-frame, housing prices dropped 27 percent on a national basis. Even today, the average housing price in the US is still down 3.2 percent from the peak levels reached nearly ten years ago (according to the most recent data).

Even today, conventional wisdom can steer you in the wrong direction in investing.

Outside of the Housing Crisis, investors frequently rely on conventional wisdom in investing. Every time a “surefire” investment pops up, many rely on wisdom to guide them to pour their money into it (often to their severe disappointment).

Using a financial advisor to avoid conventional wisdom in investing.

At LexION Capital, we ignore conventional wisdom. Our fiduciary advisors have decades of experience in the field, and utilize Nobel-Prize winning academic research to back our decisions. If you would like to learn more about our services, don’t hesitate to reach out and speak with one of our advisors today.

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