We All Have Money Blind Spots

Blind spots, in the realm of investing, can be likened to the unnoticed smudges on a pair of  glasses. They obscure a clear view of reality, but can easily go unnoticed. In the world of  finance, this can have costly implications.  

Imagine Sarah, an IT executive. She’s tech-savvy and feels very confident investing in the tech  sector. She sees the potential in every new startup, understands the nuances of emerging  technologies, and believes fervently in a tech-dominated future. Because of this, Sarah’s  portfolio is overly weighted in tech stocks. While she might understand the industry, she may  have placed herself at risk if there’s a downturn in the tech sector. Sarah’s blind spot is an over reliance on what she knows and loves. 

Similarly, James, a loyal, long-term employee of a publicly traded company, may hold a  significant portion of his investments in his company’s stock. It might seem like a good strategy,  given that he believes in the company’s mission and its potential. Yet, objectively, he may be  exposed to high risk if that one company faces a headwind. His blind spot is the deep-seated  belief that his company stock is the right choice when diversification likely makes more sense.  

Ava, a dedicated environmentalist, heavily invests in green companies. Her passion for  sustainability guides her choices. However, her portfolio may be at risk due to its lack of  diversification. While she believes in the potential of green energy, the industry is prone to  market fluctuations and technological shifts. Ava’s blind spot is her emotional attachment to the  cause, potentially overshadowing a well-rounded investment strategy.  

Managing these blind spots can be challenging, but here are a few steps you can take:  

1. Diversify Your Portfolio: Avoid putting all your eggs in one basket. Diversification helps to  spread risk across different types of investments. Even if you have a strong belief in a  particular sector or company, it’s essential to have a mix of assets to cushion against  potential downturns. 

2. Seek Professional Advice: Just as an athlete might benefit from a coach, investors can  gain perspective from financial advisors. These professionals can provide an objective  view of your investments, helping you identify areas of risk and suggesting ways to  optimize returns. 

3. Regularly Review Your Investments: Financial markets and industries evolve. What  might have been a good investment a few years ago might not be the case today.  Regularly reviewing and adjusting your portfolio ensures it aligns with your current  financial goals and market conditions. 

4. Separate Emotions from Investing: It’s natural to have emotional attachments, like Ava’s  passion for sustainability. However, investment decisions should be based on sound  financial principles and not solely on emotions. It’s essential to strike a balance between  personal beliefs and financial prudence.

5. Educate Yourself: Continuously educate yourself about the financial markets, emerging  trends, and investment strategies. The more informed you are, the better equipped you’ll  be to recognize and address any blind spots in your investment approach. 

Keep in mind that emotional resistance often comes when confronting our blind spots. Just like  someone might be surprised to find out they’ve been running “incorrectly” all their life, an  investor might feel a sting of pride when it’s pointed out that their stock picks aren’t as savvy as  they thought.  

In reality, everyone has blind spots, not just in investing but in various facets of life. They shape  our choices, often without our realization. By acknowledging their existence, seeking external  guidance, and being open to feedback, we can navigate the treacherous waters of the  investment world with a clearer vision. After all, the goal is not just to invest but to do so wisely  and efficiently. 

This material is being provided for information purposes only and is not a complete description, nor is it a  recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. 

This information has been obtained from sources considered to be reliable, but we do not guarantee that the forgoing  material is accurate or complete. You should discuss any legal matters with the appropriate professional. 

This information was developed by the Oechsli Institute, an independent third party. The opinions of the Oechsli Institute  are independent from and not necessarily those of RJFS or Raymond James.


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