A while ago, I had a conversation with a friend about our respective businesses and the changes we made due to Covid.
When I told him that our investment managers moved away from investing in funds to investing in individual stocks,
“That sounds really risky! What’s going to happen when the market crashes? I wonder how they’ll do then.”
I responded with a perfectly good technical explanation.
Later that night (as I replayed the conversation in my own mind) I realized the VALUE of his question, and how my explanation missed the mark!
Think about it…
Risk is all around. All the time. We live with it every day!
But 99% of the time we don’t give it any conscious thought because our brain knows how to spot, assess, and avoid most risks faster than we can utter the word… "Risk!”
But UNFAMILIAR risks .... or …. PAINFUL risks that we experienced in the past cause us to STOP before proceeding (if we proceed at all).
It's a survival mechanism!
And so when he said “That sounds really risky!” I should have known better.
This was either entirely unfamiliar to him, or he may have had a bad investment experience in the past.
In either case, my technical answer added ZERO value to him in that moment!
So I want to thank my friend for a valuable reminder.
Especially for us “advice giving” professionals (but also as parents, partners, spouses, et cetera).
We need to be more attentive to words … feelings … perceptions … and experiences of people to whom we’re giving advice.
Because even the best advice will go unheeded when our defense mechanisms activate internal alarms.
PS. Stock investing is NOT more risky than group investments like mutual funds.
Just like driving a car is NOT more risky than being a passenger on a crowded bus.
There are risks on both sides...but the risks are different!
Because in both examples, if you’re willing and able to accept the responsibility of “being behind the wheel,”
You will have more control and find the experience to be more flexible, enjoyable, and more rewarding!