Investing when the world's in chaos
By Gary Silverman, CFP®
A while back, an advisor I know got this question from a client: “How do we protect ourselves from the coming civil war?” Because of infighting in congress, massive unemployment, cities crumbling both physically and fiscally, this client was sure that civil war was imminent.
While I have not, to my recollection, gotten that question from a client, I have seen worry in many of their eyes…and actions. From wanting to get out of stocks due to the coming collapse of the U.S. dollar, to selling out of bonds in anticipation of China’s pending fire sale making them worthless, to the age-old favorite: burying a bag of gold coins in the backyard for when society falls apart (feel free to use my backyard if you decide to do this).
Though I don’t share in their predictions or advise their solutions, that doesn’t automatically mean that they are wrong; and it definitely doesn’t change the fact that they think they are right. After all, various political and financial commentators back their ideas on radio, television and Internet.
This lends itself to some potentially irrational thinking. Humans tend to not only listen to people who agree with them, but also believe those people are intelligent. At the same time, people tune out those they don’t agree with and label them as fools or conspirators. While that is natural (I have caught myself doing the same sort of thing), it makes it difficult for someone to judge the merits of the various arguments on all sides of an issue.
Start reading the opinions of those who disagree with you. Understand why they don’t see things your way. Examine how they can take the same facts and come up with a different conclusion. Learning the strengths and weaknesses of their arguments will help you learn the strengths and weaknesses of your own.
The scary part: deciding not only how you are going to act if you’re right, but what you’ll do if you are wrong. Those who believe Armageddon is just around the corner and have gold buried in the yard or hidden in the attic may be right after all, but have they considered just how they are going to turn their bag of gold into food, clothing, shelter, and medicine? I mean, if I had a cow and you were hungry, I doubt that I’d want to exchange my cow for your gold coin. I can’t milk a coin.
By listening to all perspectives, especially those that conflict with yours, you pause and consider alternatives to your current conclusions. By both learning facts you may not have considered as presented from the opposition and by researching counter-arguments to their positions, you gain knowledge. Knowledge helps reduce your risk of doing something truly dumb, or will at least warn you of a potential danger that you can then hedge against.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing (available at amazon.com).