5 Reasons why [very] smart people tend to fail miserably in investment

smart people in investment
(Last Updated On: 03/03/2017)

Warren Buffett famously said – “You don’t need to be a rocket scientist. Investing is not a game where the guy with IQ 160 beats the guy with 130 IQ”

Or if you have any friends who did better financially than you now even if he used to lag behind you academically in school, read this. (Don’t lie, we all have friends like that).

Let’s examine the psychological oddities of smart people.

I love them…

…but sometimes I want to give them a wake-up-call slap.

They might excel in their corporate careers, but being smart also leaves people with peculiar issues in different areas of life.

Thanks to my exposure to mostly professional working people – the likes of doctors, engineers, lawyers, etc, I’ve spent a lot of time around smart people…and today, I get to share their weird psychological curiosities with you.

This is gonna be fun.

So without further ado…let’s talk about SMART PEOPLE PROBLEMS which cause them to under-perform their not-so-smart peers in investments.

 

SMART PEOPLE PROBLEM #1: OVER INTELLECTUALIZE INVESTMENTS

Smart people tend to over-intellectualize things, sometimes to the point of analysis paralysis. Since they can see lots of angles — in fact, they’ve been rewarded for seeing multiple angles in their careers — they often can’t accept what’s in front of them. How could they? They were trained to see beyond the obvious and the face value of things.

This can be ideal when they’re considering complex corporate strategies, medical diagnosis or engineering analysis. But when it comes to investments, they refuse to accept anything less than 100 marks (because they used to score 100 marks easily in school).

I am not saying doing your due diligence is not good

But I’ve seen cases where they chose not to make an investment decision just because 9 aspects of a thing is good, and the remaining 1 aspect is less than ideal.

For example, property investment.

Here’s an ideal apartment to invest in – 10% rental yield, 10% capital appreciation per year, expatriate tenant pays you on time, located in CBD area, price within your budget…where to find in today’s market?

 

SMART PEOPLE PROBLEM #2: BEING PERFECTIONISTS

Let’s take about having some standard in every aspects of our lives – whether it is choosing a bf/gf or buying a real estate property.

  • No/low standards = loser
  • High standards = fantabulous
  • Perfectionism = loser

It’s an odd backwards-bending curve, isn’t it?

No/low standards, and you take anything you can get. Those people who have no boundaries or standards. Maybe they don’t have a choice. Like a beggar. I doubt you are a beggar if you are reading this, but beggars can’t be choosers, right?.

On the other hand, high standards show you have selectivity and options. This is someone who sets boundaries, knows who they are, and is unapologetic about it.

If you are lady, why is it wrong to set a standard of the kind of guy whom you will date? Like “I want guy who’s taller than me, ambitious and has good career prospect”

Then…

…you have perfectionists.

Perfectionism can be paralyze you in life – figuratively speaking.

It’s the smart person’s version of Fear of Failure.

When you’re surrounded by high performers who achieve amazing things, you don’t want to get crappy results or do crappy things. Just like in that public exam, getting a ‘B’ equals to suicide for smart people. (nor should you — study harder and get a fucking A).

But there is not perfect investments. Some are just better than others, but still there will be inherent risks and uncertainties in whatever investments you can find in any given time.

Example, if recession comes tomorrow, would you invest more because everything in the stock market is on deep discount, or would you wait until the price bottoms?

If it is the latter, it means you are trying to be in the perfect timing to buy when the price bottoms. Then you will only buy in, otherwise you refuse to act.

But will you be able to be 100% sure when is the bottom?

See my point?

And by the way, I know this first hand.

SPM result cf lieu

 

 

SMART PEOPLE PROBLEM #3: FEAR OF LOOKING STUPID

Most people, especially smart people, hate going to events about money because it makes them feel bad about themselves.

My Pendidikan Moral teacher used to have a term for this group of people who don’t know what they don’t know yet too arrogant to ask for help or admit it:

“Bodoh sombong”

The psychology:

“I’m smart. I should already know this. I don’t want to go and ask a stupid question. I should figure this out on my own.”

DUH! We all know how our education system fails us by teaching us Sejarah Kesultanan Melayu Melaka but never about personal finance or investing. And talking about money in a family is a taboo for many Asian household. How the hell were people supposed to know about investing back then?

Frankly, it would be better if someone kinda dumb decided to learn about money. At least they’d be honest that they don’t know investing (and why should they?). And they’d jump into learning with both feet after seeking proper advice.

For some smart people, they spend years ‘paying tuition fees’ to Mr Market without any real progress.

Time to change if you are one.

 

 

SMART PEOPLE PROBLEM #4: FORGETTING WHAT IT’S LIKE TO BE A BEGINNER

Sometimes the very best are horrible teachers.

That’s because they just can’t remember what it’s like being a beginner!

Smart people have spent so many years working on something that they often forget what it’s like to be a beginner.

As you get more and more advanced in your field of expertise , it becomes harder and harder to relate to true beginners. That’s because you’ve built your skill on a series of increasing foundational blocks of knowledge — like building a skyscraper, first sketching it on paper, then with the concrete, then on and on.

If you’re a stocks trader and someone comes to you and asks how to invest in unit trust, you’d stare at them blankly. ‘Who the hell bother with unit trust? I want to talk about technical analysis, CFDs, warrants and options to use as leverage to boost my returns.’

But you know what,

In investments, using complicated instruments or strategies doesn’t mean you will get higher returns than other plain-vanilla instruments/strategies. A KISS (keeping it simple, stupid) strategy works just as good, if not better.

Talk is cheap, if you want proof – go to WarrenBuffettHQ.com 

 

SMART PEOPLE PROBLEM #5: SKIPPING THE BASICS.

Too many people think they’re too advanced to perfect the fundamentals.

They want to fast track in anything and everything.

Of course you can, after seeing how Snapchat founder Evan Spiegel becomes billionaire at the age of 26.

Mind you, that’s an exception, not the norm.

The fact is – Anyone who’s the best at their game, understands that you becomes better only by deliberate practice of the basics. That’s when you combine all the basics to form the advanced.

This video shows you about The Secret of Getting Good Fast.

Stop getting too advanced for your own good and stop trying to skip ahead.

Again, if you want proof – go have a look at WarrenBuffettHQ.com

If you have smart friends, share this article with them and see if they can tell it’s about them.

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