What’s your TWA rating?

Written by John Osbon on August 30, 2017

What’s your TWA rating?

TWA is back. No, not the airline. This TWA is about your capacity to manage your own investments.  Do you have the time, willingness and ability to be successful? Few do. There’s a way to find out.

Time: Can you spare it?

Do you have the time to manage your own investments? Of the 168 hours you get each week, how many are you prepared to devote to your own investment management? Pros typically devote 50-60 hours per week to portfolio analysis, market research, relevant news, investment selection, tax considerations, running reporting from various angles, etc. If you can’t spare that much time, you would have to be phenomenally better than average to get the service and attention you deserve from yourself.71m215MpmfL._SL1500_

If you feel like you want to make time for investing, Bob Pozen’s book, Extreme Productivity, can help you. But most likely your time goes to other things first: like family, entrepreneurship, charitable interests and time just for you. To squeeze more time for investing, you’ll probably have to sacrifice something else that you consider at least as important.

Willingness: How interested are you, really?

Investment management can be quite interesting, but the actual practice year after year may not be exactly what everyone had in mind. As soon as I discovered investing as a discipline at Columbia Business School I became fascinated by it and have devoted my professional career to it. Most people don’t feel that way. We hear from clients that they often find investment management uninteresting, intimidating, confusing, scary, and for some full, on boring. How do you feel? Are you passionate about it? Is it a must-do or a want-to-do? Will it keep your attention for not just weeks, but years and decades? Self-awareness can go a long way here.

Ability: How good are you?

Even if you find the time and have the interest, can you build a portfolio that makes sense for you and manage it to a level of performance you’ll be happy with? As we often discuss here, individual investors are notorious for underperforming the market. In addition to investing being a very complicated science, a long list of self-defeating emotions and behaviors hinder results, including poor prediction, failed attempts at timing the market, impatience, fear and greed.

And then there’s the myth of success transfer. This phenomenon most often affects successful individuals who may say “I’ve made a lot of money” or “I’ve managed a big company” and therefore “I can manage investments, too.” In fact, the characteristics that made you good at the first two, like risk assessment and people insight, may not quite translate into investment success.

As a real life example, when I ran global recruiting and training for Morgan Stanley we had access to the best of the best of every graduating class. The trainee failure rate after 2 years of training was anywhere from 50% to as high as 80%, and this was from a group of people who had literally never failed at anything and were putting every waking minute into the effort.

Ultimately, you can try to invest for yourself, but the odds are against you. Why gamble with your money when a reasonable alternative is available?

It’s okay to get help

While it may be a sign of independence to say “I manage my own money,” would you also consider being your own lawyer, architect, CPA, barber, or dentist?

Take a look at the professional “advisor alpha” graphic from Vanguard. It describes the performance boost the average investor will reap from the right kind of professional help. Discuss it with your advisor. Or discuss it with us. We welcome inquiries from individuals across the entire TWA scale.

John Osbon – josbon@osboncapital.com


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