I’m a huge fan of Seth Godin’s work. He’s a presenter, author and entrepreneur and if you have any interest in marketing or business, you must subscribe to his daily
blog. Anyway, his
recent blog about the difference between an
amateur and
professional got me thinking. I think many of us could benefit from approaching our finances more professionally.
The different between a professional and amateur
Often, a professional investor such as a fund manager approaches investing a lot differently than an amateur investor. I have listed some of these differences below to highlight this point.
Professional
– Understands that making investment decisions requires experience, education and understanding the market
– Seeks out experts in their field and is willing to pay a fair fee for their advice
– Will have a methodology for hiring and firing advice professionals – a clear list of things they want and want to avoid, thorough methodology, etc.
– Will hold their advisors accountable for producing results
– Won’t try and take on a task that is outside their sphere of experience
– They make investment decisions on a daily basis
– Will take almost any steps to ensure the risk of losing capital is low or non-existent.
Amateur
– Has no metric or methodology for measuring the value of advice
– Asks friends or colleagues for advice
– Is prepared to have a go at trying to do it themselves before asking for help
– Considers it a saving if he works it all out himself and therefore don’t need to pay anyone for advice
– To some extent, is guided by emotions e.g. it feels right, falls in love with the potential returns, etc.
– Gets seduced by investment returns and doesn’t adequately consider (and mitigate) investment risks
– Doesn’t realise the danger of their lack of experience
– Makes a handful (or less) of investment decisions over their lifetime.
– Its prepared to make a mistake i.e. learn through trial and error.
But we don’t compromise on some things…
Imagine how you would react if your friend told you that he did his spouses dentistry work. Or wrote their own will. Almost all of us understand t
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