More dangerous than the coronavirus, high stock valuations, or interest rate gyrations is the guy or gal in the mirror when you brush your teeth every morning. For me, one of my most significant insights over the last 20 years is the importance of behavioral finance. The father of value investing, Benjamin Graham, warns in “Securities Analysis,” a book whose third edition stayed in print for over 60 years, that investors are their own “worst enemy.”


Using this as the starting point, Adam Grossman (Humble Dollar, Jan. 19, 2020), recently pointed out seven paradoxes that bedevil investors. Investing is not a science like math or physics; instead, Grossman points out it is more chaos theory. As such, we should understand the constraints we face. Financial education is laudable, but it’s more than one high school semester.


Diversify across the entire stock market is the best option, but the great fortunes of America have come from people like Gates, Rockefeller, or Bezos, whose primary wealth came from a single stock.


The stock market may appear overvalued, but the reality is it could go higher, have a steep decline and still be higher than it is today. A married couple in their mid-60s has a 50% chance one will live to age 95; they should expect periods of weak markets. If you don’t need to sell, a market decline is background noise. Market declines can be a time to buy low; it was in 2009. Regulations, rules, and tax rates can change as they did recently undermining a well-planned strategy. Sometimes life throws us curve balls we can’t reach unless you play for the Houston Astros.


Grossman cites the demand for high-priced, exclusive colleges as a paradox when lower-cost state schools are a better investment. College tuition is an investment; don’t kid yourself. Anecdotally, our children’s merit-based scholarships to the University of Georgia, aka Harvard of the South, allowed me to pursue a mid-life career change.


Nothing fuels the appeal of early retirement like a booming stock market. Unfortunately, some people have physically demanding jobs or ones they despise. Statistics show early retirement can have harmful effects. A 2014 study of over 500,000 self-employed workers in France showed an increase in dementia for early retirees. Using data from tax incentives provided to Dutch workers, the Center of Retirement Research at Boston College concluded delaying retirement for men in their early 60s decreased mortality by over 30 percent.


People worry about outliving their money, but scant few buy a product, a single premium immediate annuity (SPIA), designed to provide lifetime income. SPIAs pay lower commissions than other annuities and advisors who charge asset management fees don’t recommend them because a SPIA purchase means a smaller asset base to charge fees.


Be flexible, understand you are trying to hit a moving target and don’t let paradoxes mislead you.


You can’t always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.