I’m really fortunate (and it could be viewed by Readers who enjoy my scribblings as fortunate - although much less so for those who detest them) that some off the wall ideas for Blogs just seem to spring into my mind from time to time and I have got in a good habit of somehow recording the ideas so my ‘Slate’ is pretty lengthy and full of stuff that is challenging (and therefore enticing) to write and I like to pretend it is often of a nature that cannot be found anywhere else.
I think this idea came to me a few days ago and it is late at night on the Friday 2 Days before Xmas that I come to be working on the initial Blog Draft and I was trying to find something that was reasonably easy to produce (I am defo in Seasonal Holiday Mood and really can’t be arsed to work on anything too difficult that entails much research etc. - this is simply off the top of my bonce which is the easy and fast way to write.)
The basic essence of my thinking here is that when it comes to the Financial Services Industry in all its various incarnations and nooks and crannies, a very simple and ultimately valuable stance for Retail Punters is to take the view that all Advertising and Marketing material is a potential danger to your wealth and that you need to have your Brain turned up to ‘Full Scepticism’.
This sounds horribly cynical and untrusting and all that, but I am without doubt that much of the Marketing and Glossy stuff shoved in our direction is more for the benefit of the Providers doing the adverts than for the intended target audience. This applies right across the various Products and Services that the Industry throws our way - from Trading/Investing Platforms through Analytic Software Packages to individual Asset Classes like Funds in particular and direct ‘investments’ in Gold or something and of course even Books and Magazines etc. etc.
A Coping Mechanism
The way I deal with this (and perhaps Readers could benefit from a similar mindset) is to pretty much ignore it all !! (Yet another example of one of my fave mantras - “Cut out the Noise !!”). I subscribe to Investors Chronicle and get it every week sent through the post (it is excellent - and that is not an Advert, that is what I honestly think and IC is an essential part of my Investing ‘Toolkit’) and of course on almost every other page there is an Advert of some sort or other but I bet you could hand me a copy for an hour and then afterwards ask me to name any Companies I saw advertising in it and I would not be able to name even one - my Brain is just now honed over many years to just totally ignore stuff I do not need to know and which will not help me but is more likely to hinder me.
So I totally flip the thing around - rather than the Financial Services Industry ‘pushing’ stuff at me, I actively go looking for things WHEN I HAVE DECIDED ON MY OWN AFTER MUCH THOUGHT THAT I WANT A PARTICULAR PRODUCT - then I will be much more responsive and open to Adverts as I am using them to help me respond to a need I have. For example, if I utterly independent of anything much, decide over time that I would like exposure to a Property Unit Trust, then I would tune my Brain to be on the look out for Adverts around such a thing and of course I would actively go on the Interwebs (that’s a deliberate spelling for fans of ’Fast N’ Loud’ - “Let it rip, taylor chip“) and seek out such Unit Trusts which would involve me taking advantage of the Marketing stuff that is out there - but it is me actively hunting it out rather than a Company with a very different agenda trying to ‘brainwash’ me into buying it.
OK, this is a tad tangential (hey, you should know how I write by now with all my various detours and meanders…..), but there is a very clear link here to Share ‘Tips’. At some point I will hopefully be issuing a Blog which is more specifically on the subject of Tips (I have written a decent draft of it but other subjects seem to get my attention and I have never got around to finishing it) but the basic premise here is that Tips should be seen in the same way in which I think we should deal with Adverts from the Financial Services Industry (alright, there might be a case that we should apply similar thinking to all Advertising, whatever Industry is pumping the cr*p at us !!).
What I am getting at is that instead of us reading a Tip and then getting all excited and fixated on the Stock concerned and pretty much inevitably buying it, we should just see this Tip as yet more ‘Noise’ in the torrent of 98% useless Information that is constantly gushing in our direction and rather than taking a Tip at face value, we should at our most active/positive just make a note of the Company as a potential Stock for the future and leave it at that. Regular Readers (it’s that All Bran again - I keep telling you !!) will know about my ‘Little Black Book’ and if I read a Tip which looks pretty good I just make a note of it in the Book and why I like it and then it just gets parked there. If I am actually going to invest in that Company, the process is most likely to be that in a few weeks time I will be looking through the Book for potential candidate Stocks and I might see this Tip and think “oooh, I remember that one, I do quite like the look of it” and then it is a route to more in-depth Research and Analysis and a lot of thought before I am in a position to be buying it. Buying immediately after a Stock is tipped is probably a mistake as you are very likely to be buying a Short Term ‘Spike’ higher that needless to say dissipates shortly after you have bought and you are very quickly into a losing Position.
We should treat Advertising in a similar flippant manner. It deserves no more than this.
I am perhaps going a bit tangential again but something I observe in People and I think it applied to myself in the past and is probably part of a typical Journey for a Trader / Investor as they start off and then ‘mature’, is that when we first get involved in Stocks we are most likely looking for Tips and we buy Tips as the fact they are recommended by a Magazine or something feeds our need for ‘Confirmation Bias’ and shows a lack of Self-Belief and Confidence (although this is very understandable when you are starting out).
To be honest, if you are serious about making Money and want to step up into the Big League, then it is important to break this habit of buying Tips and you must start to move away from such a reliance and you need to be seeking out your own Stocks and doing your own Research and Analysis. This is a crucial step forwards really - part of it is going through the process of Stock Selection and Buying and seeing how they work out and if they go bad, then you need to analyse the Trade / Investment and figure out what went wrong and what you could do differently. This kind of Feedback Loop is essential to improving over time and becoming a really good and experienced Player in the Markets - relying on a crutch of Tips sort of leaves you in a particular cul de sac and you need to get back onto the Open Road, where you can properly accelerate.
Of course there are some complications such as the lack of time and I suspect for the majority of People who rely on Tips that is one of the main reasons they behave in this way. If you only have very limited time it is much easier to read a short bit of text in the Mail on Sunday and to buy the Stock they Tip than to do in depth Research on a Company you discovered yourself via a Screening Exercise or whatever.
What I am saying here is that if you are someone who relies on Tips then that is not necessarily a totally bad thing and when time is limited it is partly understandable - however, I think it is wise and important to recognise what you are doing and to understand the limitations this puts on you and on how you will progress as an Investor. It never hurts (I would say it most definitely helps !!) to ‘look in the mirror’ and do some self-analysis and in fact I think it is crucial if you really want to become a better Trader / Investor.
Cos I am so steeped in Psychology stuff these days, I just have to bung in a bit regarding the Brain Science and how Adverts distort our thinking. It really is quite amazing, much of the reason that Advertising works and why Companies spend so much on it is simply that it is there at the right time. In other words, it plays to our Brains susceptibility to ‘Recency Bias’ and ‘Availability Bias’ - this means that we are more likely to be attracted to (drawn to) something that is easy for us and takes no effort and in effect solves a ‘problem’ we have in the simplest way for us.
Look at it this way - if for instance you decide you want a new Share Dealing Account but you haven’t put much effort in yet and it is only an early stage in your Decision process, then it is highly likely that when you read something like Shares Magazine (this is another really good Mag) if they have Adverts for a particular Share Trading Platform Company then you might be influenced a lot to use them as it just easily springs to mind when you come round to actually getting on with opening a new Account.
There is no doubt that familiarity with Adverts, Marketing and Public Relations efforts for a particular Company affects how you perceive a Company and how positive you view them. For example, you might never have used a Spreadbetting Account with a particular provider but because you see their Adverts so often you actually have a very warm predisposition towards them - it is the familiarity with their Adverts that makes you think they are good, not because you have actually used the Platform and know for a fact how effective it is as a Trading Platform.
This applies to all Products and Advertising / Marketing - we might never have driven a BMW or even been sat in one as a Passenger but if someone was to ask you “Do you like BMWs?” then you might answer “oh, yes, I love them, particularly that new 520i in Black”, but this is merely an irrational response from your ‘Fast Thinking’ Brain which has positive feelings towards BMWs because for many years you have been brainwashed that “German Cars are the best” and “Vorsprung Durch Technic” (whatever that means…..) and of course Mercedes always do well in Formula 1 and Michael Schumacher is German……
This example with Cars is also a great example of the Psychological trait of ‘Question Substitution’ - when asked the Question “Do you like BMWs?” quite often our response is not really an answer to that particular Question - it is more likely we are answering the Question “Would you like to be the sort of person who is wealthy enough and of a high enough status in society to drive a BMW 5-Series?” or a Question along those lines.
I was skimming through Investors Chronicle whilst I was drawing up a quick plan for this Blog (yes, I know, it is hard to believe I have a ‘plan’ for these rambles) and I saw an Advert from ‘a well know Spreadbetting Company’ which had a picture of a bloke on a Mountain Bike all covered in mud and smiling like a demented lunatic and it said something like “The best Traders should have the best Tools” - presumably implying that the bloke had a great Bike or something - but anyway, what gets me about this Ad is that it is just utter bollox - they try to paint a picture of a Trader who is enjoying life to the full and is a man of leisure and excitement - but the reality is that Trading means looking at a Screen and being scared, elated, terrified, distraught, ecstatic, exhausted, drained, joyous, dumbfounded, enthralled in a succession of Emotional torrents and it is not really quite like the Mountain Biker image presents…….
Clearly in this example the Company is playing on your Emotions to attract you towards their Product - which actually in this case is an excellent Platform (I use them myself !!) but it is indicative of how so much Financial Services Industry advertising / marketing is not really for your benefit but merely to suck you in as the next victim.
This may not fit the Flow of the Blog but I want to cover it so I will give it a Section of its own. I regularly talk to other Investors / Traders and something I often find is that many of them subscribe to so much stuff - they must spend Thousands of Quids on this stuff but there is no way they have time to read it all and even if they could they would not really be extracting the few bits of key information that are proper Nuggets. I only Subscribe to Investors Chronicle and ShareScope and SharePad (ShareScope is my ‘Workbench’ and I enhance my Subscription by adding SharePad for something like another £50 a year - well worth paying) and I think that is about it and I might buy the odd book or two over a year (although I don’t seem to be buying so many Investment Books these days - maybe I have read most of the decent ones). All in all, I bet my total subscriptions for everything over a year add up to less than 0.1% of my Total Portfolio Value - it is worth thinking about what you spend in these terms - if you are spending more than perhaps 2% of your Portfolio on stuff then you might want to cut down (obviously if you are just starting out and your Portfolio is just a few Grand then your Costs might be quite high at the start - but be careful and try not to buy stuff you don’t need and won‘t actually have the time to exploit).
So the trick is to be disciplined and hard on yourself and really be objective about whether or not you are using a Subscription and getting the most out of it - if you are not really using it then just cancel it and save your money - it is better being invested (and more importantly, Compounded over time) than wasted on something you don’t get the time to properly look at or you don’t find useful anyway.
Oh, and be careful with ‘Trial Periods’. The idea here is that by offering a Trial Period of 4 Weeks or something for FREE the Company is trying to suck you in and get you to sign up for their Product on the hope/belief that you will find it invaluable and keep using it when you have to pay or that once they have you sheer lethargy, laziness, and inaction will keep you paying even though you barely use it. Trial Periods can be brilliant on something like SharePad or Stockpedia where they give you a superb chance to try out something that you think would be very useful and you know a lot of experienced Investors use, but just taking up such Trials for the sake of it without any real thought is pretty dumbass. Don’t do it - you mustn’t waste vital Trading Capital.
Particularly when it comes to Advertising (and especially from the Financial Services Industry), anything ‘Pushed’ at you is probably bad and should be viewed in a sceptical and untrusting manner. The Financial Services Industry is geared up to take your Money - don’t just roll over and let them mug you.
This all reminds me of that old saying “There is no such thing as a Free Lunch” - there is obviously much truth in this and a lot of stuff related to the Financial Services Industry is ‘Free’ but of course it is vital to remember that if something is ‘Free’ then you are probably the ‘Product’ and the Company offering the Free thing will be passing your Data onto some other Companies or something.
Despite what I have rambled on about in this Blog, not all Advertising is bad (and some is actually quite uplifting or amusing) but it certainly is wise to approach with caution and be sceptical.
When it comes to Advertising / Marketing that the Financial Services Industry pushes at you, be aware of the Biases within your own Brain. Stay in Control and be Disciplined. Control your Emotions. Keep Rational and Objective. You could say that about so many aspects of Trading / Investing !!
Have a Default Stance of ‘Keep away’ and train your Brain to become Averse to Advertising.
On the psychology side of things, I wrote this Blog a while back and it is probably worth reading (this is Part 3 but it includes links at the start to the earlier Parts):
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