April 12, 2013
Are You A Casually Competent Investor?
Steven Grey and Advisor Propsectives recently published a stellar article titled “The Myth of the Casually Competent Investor”. Not only was he spot on with his analysis, he gave some great analogies about how everyone considers themselves qualified to beat the market.
A small snippet of the article shows two great examples of how silly it would sound for other professions to be casually involved.
In most serious undertakings, the barriers to entry rise and fall with the complexity of the task. No one becomes an airline pilot merely by pinning a pair of plastic wings to his lapel. Nor is anyone permitted to perform an appendectomy simply because she had decided that morning that she was qualified to do so. And yet every day apparently intelligent people essentially declare themselves competent investors, as if the act of deciding somehow makes it true.
Much of this comes down to self-realization and self-awareness. We all have our own strengths and weaknesses, but they are often very difficult to identify. An example that I use quite frequently for individuals that pick stocks is:
As an electrical engineer, do you feel more knowledgeable about Apple than the dozens of technology experts sitting on Wall Street analyzing the stock 24 hours a day for their full-time career? If so, why are you an electrical engineer and not a day trader of Apple stock?
Over the weekend, enjoy this excellent article and consider if you are fall into the characteristics of a Casually Competent Investor.