The Power of Doubt

Doubt is a powerful tool. Although an unsettling emotion, a healthy dose can uncover dangerous illusions or costly omissions. This is especially valuable in investing where certainty is the rare exception. In fact, if you’re feeling too certain, you may have missed something important along the way. Here are five ways to use doubt to your benefit.

5 Doubts and the uncomfortable comfort 

• Am I paying too much? Stop the fee leakage! Too many investors are paying unreasonably high fees just to own a brokerage account of tax-inefficient mutual funds. Ask yourself if you are aware of the fee leakage in your investments. A great way to increase returns is to routinely audit your costs.
• Is there enough “me” in my portfolio? No single mix of investments is right for everyone. Your portfolio should reflect your current financial situation, age, career, family, long-term goals and other factors that are unique to you. If you’re working with an advisor, does he/she know you well enough to custom tailor your plan of attack?
• Am I up to date? Have I been reading sufficient content to stay current in an ever-changing world? Daily reading of the Wall Street Journal, Financial Times, NY Times, and Bloomberg.com is crucial. What are the independent thought leaders, Buffett, Swenson, Vanguard, or even Tony Robbins saying?
• What are my other options? No matter how comfortable you are with your current portfolio or money manager, go exploring once in a while. See what other managers are offering – from hedge funds to brokerage firms like JPMorgan, etc. Learn about other investment models and fee structures. Comparisons are a great way to educate yourself on the landscape.
• What can I learn from my peers? Have your friends and colleagues moved on without you or do they validate your actions? More money is moving into low cost index ETFs from providers like Vanguard than into any other investment category. Active management and commission-based brokers are losing ground. Watching trends like this can validate your investment decisions or illuminate new opportunities to consider.

In investing, you can’t wait for 100% certainty but you can’t guess either. The key is getting comfortable operating in the vast grey area. That’s what we do.

Max Osbon – mosbon@osboncapital.com