The Three Financial Principles - J.E. Wilson Advisors

The Three Financial Principles

There are an almost endless array of financial/investment strategies to choose from today (mostly disguised ideas from the past), but really just three important underlying principles: The Principle of Evidence; The Principle of Un-Conflicted Advice; The Principle of Planning. Each of these contribute to the calm and confident state that we all seek for our financial lives.

The Principle of Evidence

Evidence is primary because it is derived from facts, not emotion. Science is concerned with the pursuit of truth. We are the beneficiaries of decades of peer-reviewed research into investment markets and how we make choices (behavioral finance). Being a successful investor requires that you be a smart investor. Smart about the approach you take and the costs that you incur. The science, the evidence, tells us that predictions and prognostications are of little value. The likelihood of someone selecting the best performing stock or mutual fund is about what one would expect by random luck.

Markets provide returns but we sometimes get in the way by searching for “the best investment” or “the highest return”. What matters most is the level of return, (and commensurate level of risk), that is appropriate for your long-term goals. After all, you save and invest for something in the future. Returns flow first from the purpose for the funds that you are investing. There are some excellent resources for those interested in learning more about the width and breadth of the evidence. A good place to start is by viewing some of the short videos by Sensible Investing. This link is one part of their series “How to Win the Loser’s Game.” This clip is about 8 minutes and provides a very good overview.

The Principle of Un-Conflicted Advice

Webster’s defines advice as “ a recommendation regarding a decision or course of conduct”. One of the words used in the definition of conflicted is “irreconcilability”. To accomplish long-term financial aims you need to “reconcile” the advice you receive, thus the term “un-conflicted.” We believe strongly, backed up by 30+ years of actual client experiences, that true advice, un-conflicted advice, helps avoid debilitating behavior and missteps.

One of the most valuable aspects of un-conflicted advice is our ability to focus on possibilities instead of fears. Many investment products are foisted upon investors using fear. This can lead directly to “irreconcilability”

 The Principle of Planning

Financial planning helps us prepare for the future, a future that is unknowable. Because we can’t know, we need to plan realistically and acknowledge that mid-course corrections may be required along the way. Planning starts with a long-term aim, a long term goal. Without this, it is far too easy to wander and be distracted by short-term events. Perhaps the most important benefit of financial planning is that it helps suppress the proclivity to panic. In other words, planning helps you “stay the course”.

The three financial principles are combined within our Wealth Rx ® process. Ready for a real conversation?

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