The following is a piece former podcast guest and New York Times Columnist, Carl Richards wrote for his newsletter. We enjoyed his humorous take on “pretend” investors.

Pretending to be an investor is dangerous. It’s not like when you were a kid pretending to be a superhero. That’s because kids generally know better than to confuse “make-believe” for reality. It’s pretty rare that a child jumps off the roof because they actually think they can fly.

But when it comes to investing, adults confuse “make-believe” and reality all the time.

Don’t you think it’s time we grow up a little? 

Here are six ways to tell the difference between real and pretend investors to help get started.

… 

1. Pretend investors think that financial pornography is real, and therefore, the news ticker scrolling across the television screen represents actionable information.

Real investors know it might be entertaining, like going to the circus. But they would never make a decision because of it.

2. Pretend investors think it makes perfect sense to change their investments based on what they hear in the news: There’s a new president, so act! He doesn’t like the Federal Reserve, so trade! He criticized bankers, so buy bank stocks!

Real investors make changes to their investments based on what happens in their own lives. If their goals change or there is a fundamental change in their financial situation, then they consider making a change in their investments. But they would never make a change based on someone yelling “buy” or “sell” on a Financial Pornography Network.

3. Pretend investors think they need to monitor their investments all the time. (The little supercomputer they carry around in their pockets makes it so easy!)

Real investors know it takes a long time for a tree to grow, and it will not help to dig it up to see if the roots are still there. The same rule applies to investments. 

4. Pretend investors talk about their investments—a lot. They say things like, “I’m long this, or short that.” They use jargon that often does not make sense, though it sounds kind of impressive if you don’t listen too closely. Sometimes they cheer for things like increased consumer spending, higher unemployment, or in some cases, even war.

Real investors understand the difference between the global economy and their personal economy, and choose to focus on the latter.

5. Pretend investors worry endlessly about the news in some far-off part of the world and the impact that news will have on their portfolio.

Real investors focus on the things they can control, like saving a bit more next year, keeping their investment costs low, not paying fees unless it’s necessary, and managing their behavior by not buying high and selling low.

6. Pretend investors complain endlessly about volatility in the markets, and focus on days.

Real investors are focused on enjoying the benefits of the returns the market generates over decades.

… 

Look, if it feels like I’m getting in your face a little, it’s because I am.

But I’m doing it for you!

Jumping off the roof because you think you can fly can have disastrous consequences… it just so happens, so can throwing around your money because you think you know how to invest.

If any of the six items in bold above sound like you… you may want to think about what it means to be a real investor.

Or just jump off that roof, and see what happens.

This podcast episode (42 minutes) is worth listening to for a variety of reasons. Most importantly, Carl Richards is one of the best in the world at connecting money and emotion in ways real people can understand. He is the creator of the Sketch Guy column, appearing weekly in The New York Times since 2010. With over 800 simple sketches, Carl knows how to get us thinking and talking about what really matters in our lives. Through his writing, speaking, and sketches, Carl makes complex financial concepts, easy to understand. His work also serves as the foundation for his two books, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money, and The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money.

Matt loved taping this episode with Carl from his new home in London and counts Carl as a long-time friend.

Don’t forget to leave a review wherever you subscribe to podcasts! Your support really helps spread the word.

Financial simplicity, like many goals, is as desirable as it is elusive.  

Or so it seems. 

If you took a sample of 100 investors and asked each one about the vital signs of their portfolios – their fees, returns, and allocations – you’d be hard-pressed to find many who could speak confidently and accurately about them.

This isn’t just a guess from left field. In 2016, MarketWatch cited a Prudential Investments retirement preparedness survey that  found more than 40% of Americans had no idea how their investments are allocated. We’ve seen similar stats from other surveys published since then. 

What’s most disappointing about this apparent collective bewilderment, is that the system seems designed to be this way. We work in an industry where thousands of “advisors” are not only encouraged to sow seeds of confusion, they’ve made millions of dollars doing so. 

When a broker pulls an investor out of their comfort zone and into the weeds, the investor becomes vulnerable. Accordingly, advice becomes a sales pitch, and costs become confusing –  a pattern we see time and again. 

We know investors deserve better, so we’re on a mission to make the complex simple, to make financial conversations comfortable, and ultimately to shed a liberating light into the dark corners where families have been harboring their greatest financial fears for years. 

As our friend Carl Richards has embodied in his Behavior Gap sketch above, an advisor’s job isn’t to prove how much they know. It’s about helping investors see the few, elegant, simple changes they can make to their plan, to make a huge impact over the long-term.  

There’s nothing more rewarding for us at Hill Investment Group than seeing someone’s reaction when the air finally clears for them, and they realize that simplicity wasn’t as elusive as they once thought. 

In the words of pianist and composer Frédéric Chopin, “Simplicity is the final achievement.”