Conventional wisdom exists everywhere, and although it’s typically accepted at face value as theory, it turns out to be wrong quite frequently. For example, millions of people used to be absolutely certain that the earth was flat.
This holds truer than ever in finance, where our natural instincts are often counterintuitive to what’s actually successful in investing.
Once you’re aware of the actual facts, you’ll realize that there’s some conventional financial wisdom you should ignore:
“I need to do something”
We’re naturally inclined to take action when something is going wrong, and often this is the right reaction (like in a fire). When it comes to a downward trending stock market however, this can prove to be harmful. Often, this entails selling when the market is already trending downward, and then buying back in during its eventual recovery.
Historically, the stock market has always recovered from its crashes and gone on to reach new highs. So if you’re investing for the long-term with a diverse portfolio, your best option may be to sit tight and whether the storm. When you’re tempted to perform a gut reaction, realize that this is some very costly conventional financial wisdom you should ignore.
“I need to stay informed”
It seems like staying constantly informed about the stock market would prove beneficial, but this is also some conventional financial wisdom you should ignore.
The truth is that media hype is meant to draw viewership when it comes to the stock market, not inform smart investment decisions. For instance, it’s downright impossible to know if a stock will go up or down at any given time, but talking heads on T.V. will be “certain” about a stocks future performance.
Although it’s seems completely counterintuitive, staying constantly informed can throw your investment strategy off-track, so it’s another nugget of conventional financial wisdom you should ignore.
Using an advisor to stay on track
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.