This is part 4 of a 10 part series about behavioral finance.

[00:00:00] But before we get started, I want to let you know something that went down last week.

[00:00:06] My dad and I attended the Donald Driver Hall of Fame induction ceremony and for those of you who don't know, I'm from Wisconsin. I have a deep love for the Green Bay Packers. Do not hold that against me. Donald Driver was a great wide receiver and he was being inducted into the Hall of Fame. The Packers have this big party to celebrate. Tickets are very expensive. You get a nice steak dinner. You get some wine, and appetizers. Even some things to take home with you. And the reason we went is my wife got us tickets for Father's Day. She had a real hard time getting the tickets. To be honest with you when she got those tickets I was thinking of myself it a lot of money. Do we really need to be spending this kind of money for my dad and I to attend this Donald Driver thing? And then we went in it was well worth it. Let me ask you - Are you building abundance in your cornerstones. Do you even know what your cornerstones are the most important things in your life like your family your friends your health maybe your career your experiences your spirituality and your finances?

[00:01:30] If you can identify what they are early and plan to build abundance in these cornerstones, you will end your life with zero regrets. Is it difficult to sit back and think of what your cornerstones are? No. I think you can do that. It's making a deliberate plan to add abundance in them on a consistent basis. That's the hard part. We build abundance without even thinking about it just by going about our day to day activities. But what if you were deliberate about it. What if what if you set a plan in all the things that you were going to accomplish within each cornerstone. Would you be working at the same job as you are right now or would you be taking actionable steps to get to your dream job. Would you simply be an okay dad or are you going to be a dad that is present in your kids’ lives. What are your cornerstones?

[00:02:42] Are you building abundance in your cornerstones. I'm guilty of it myself and I really need to thank my wife for being deliberate in setting up this experience with my dad. When I think about it my dad and I haven't done that many things together.

[00:03:03] We spend a lot of time together but not always just this one on one time. It was one of the best experiences of my life because I was standing right next to my dad. That my friends is real wealth.

[00:03:20] Let's get to the topic of the day. You are not that special.

[00:03:34] Now what I mean by that because you know what we're all special people. But when it comes to behavioral finance my friend you are not that special. I'm not that special either. So, this series we're on behavioral finance based on Dr. Daniels book The Laws of wealth and this is one of the laws. Dr. Daniel starts out with a quote in his book and his quote was from Chuck from the fight club He states, "you are not special. You are not a beautiful or unique snowflake. You're the same decaying organic matter as everything else." Well, I'm starting off on the right foot trying to get people to listen to this podcast. But let me ask you a question. Do you think that you're a better than average driver? Be honest because 90 percent of drivers believe they are better than the average driver. However, this is impossible.

[00:04:43] Fifty percent are better and 50 percent are worse. Ninety percent of people can't be better than the average driver although 90 percent of us think that we are. There's names for this kind of thinking too; illusionary superiority. That's one of them. Another one is the better than average affect. It's not only driving. We think that we're more honest than the average person. We think we're more persistent, and we think we're more original than the average person. It's just impossible because only half of us can be better than average.

[00:05:23] The same is true in investing. You may not say it out loud but a lot of us think this way. If you don't know the rules of good investing and you rely on your own intuition about a stock or your risk level or where the market is headed you set yourself out as someone who is above average: someone who's better than the rules to follow. You have this feeling that this stock or sector is going to do better or country. I work for this specific company so I know the stock is going up because I have the inside scoop. Why do you think people think that they're above average in driving? Or more honest? Or are better and faster because the average is linked to something negative, not positive. People just don't want to be average. They want to be above average. It doesn't sound good. But as I learn from this book when it comes to investing investors who own their own mediocrity can rely on rules and systems and they do what works. The do what the research tells them they build a plan around it Ultimately, they’re able to reap rewards. But the opposite - those who believe they are better than average - they go down a completely different road because they don't want to be average. They want to beat the market or they want to get to financial freedom sooner than the guy next to them using risky speculation. They insist on flaunting the rules in favor of their own ideas and pay a steep price for their ignorance. This isn't just an inexperienced investor.

[00:07:25] This is somebody who went to college and then off to Wall Street. You know I'm a prideful person. I always have been. It's something I'm working on. My wife reminds me of this all the time and I suffer many times from something called overconfidence bias. I like to inflate my successes and deflate my failures. I do it with my business. If you listen to this podcast for a long time you know that I started Fortress Planning Group because it was my passion. And I let everybody know it. So, when people see me they ask how business is going. I always say great. My job is awesome - I made the right decision, I say. I do believe I made the right decision. But it's not always great. I still have bad days. There's parts of my job that I don't like. I have failures. There are prospective clients that come to me and decide not to hire me as their financial adviser. That happens but I enjoy telling people when new clients come aboard. I don't enjoy and I don't even bring up when new clients or prospective clients reject me. In the medical world, this is called fundamental attribution error. Thank goodness, I'm not alone or I would have a big ole complex. In the paper "In Search of Excellence" 100 percent of the men in the study thought they were better than average interpersonally and ninety four percent of all the people said they were better than the average person at athletics.

[00:09:24] James Monnier said Ninety five percent of people in his study think that they have a better than average sense of humor. Impossible - but I am of that 95 percent because I think I'm a pretty funny guy and I'm probably not. I'm probably in the bottom 50 percent. Dr. Daniel talks to about the worldwide mathematical proficiency in the US and the US is in the middle of the pack for mathematical proficiency. Ask and US citizens and they will say we lead the pack.

[00:10:03] The combination of mathematical mediocrity and overconfidence may just be what is wrong with Wall Street today. Trying to time the market or trying to find that next hot stock or getting over risky with your clients.

[00:10:21] All the mathematics in the world is not going to help you time the Market. I had a dog Frankie (my in-laws have Frankie right now). When Frankie was a puppy and even now w he's a little bit crazy. Even some of your dogs - when you're walking them in the morning and they're going this way and that way trying to smell every smell.

[00:10:47] You don't know what their next move is because are bob and weave and in and out and back and forth. You can't predict the next movement of your puppy. You never know what the dog is going to do next. That my friends is like trying to time the market. We do not know where the market is headed tomorrow.

[00:11:07] It's impossible to time the market because there is no (I repeat no) system or formula to help you do this. But both novice and professional investors try and do this all the time. We try to time when the U.S. is doing better or international or emerging or value or small or growth or large. The overconfidence makes us believe in their guess and they try to get you to believe, too. Every occasionally, we make a good decision and that good decision is what we own. This is what we talk about. This is what we remember. But that bad money decision or that bad market timing or that buying something we never should have bought - those failures we completely suppress in the end we think that we're a better than the average person with our money. We remember the success and forget our failures and it leads us to think that we're better than average with our money and with our investing. When your portfolio is up we credit ourselves. When stocks are down we blame something external. Jeremy Grantham was asked what people learned about the Great Recession and he responded, "In the short term. People learned a lot - in the medium term very little - and in the long term nothing at all."

[00:12:54] In the book Dr. Daniel says arrogance is the enemy of the very self-reflection that saves us from ourselves and allows us to learn from history. This happens in my business all the time. I work hard to try and determine a client's risk level both from a risk questionnaire but mostly from our conversations and past actions. When times are good clients wonder why we aren’t in more stocks -forgetting about the past. Forgetting that we're building portfolios for the long term not knowing in the short term what might happen. We are building Portfolios for financial freedom and in retirement and need to be built for a lifetime. Then the opposite happens. They're happy when the downside comes and they aren't fully risked up into the market because we're going to go through another recession. And then they're happy, but only for a short period of time because people start wondering we now aren't more in in bonds and in cash. They wonder why I had them in this much of a stock portfolio. Hey, it's as simple as admitting that you are not an above average person. It's the best thing you can do for your money is long term future. The one that admits he is not above average puts themselves in a place for the best chance of success.