We all know someone with a natural gift for repairing what’s broken. Those of us not blessed with this handy talent usually turn to the Internet to get help with repairs. Do it Yourself (DIY) videos make challenging projects look so easy. After watching a few online demonstrations, I was inspired to take on a bathroom renovation—a big mistake!
Tasks may look simple, but we all know things aren’t always as they appear. A home improvement contractor might consider installing a new vanity to be quite simple. Similarly, a celebrity chef says, “Bam!” and a sumptuous and effortless-looking meal appears. Both the contractor and chef have perfected their craft over the years. Ease is in the eye of the beholder.
And so it is with investing, which can feel simple. But log onto your 401k and look at all of the data and information. Some of us wish we could easily repair a broken sink or quickly serve a gourmet feast, but the process is rarely straightforward. Similarly, some people want to believe that the investing process can be simple and easy with “simple” relating to the process and “easy” relating to the result. This is where demonstrations and videos can instill false confidence.
The nice thing about home improvement projects is you can check them off your list, choosing to live with little imperfections like uneven wallpaper or paint that’s a shade too bright. Or, you can re-do the project to your satisfaction. But ask yourself this question: How do you notice a mistake on your 401k? Is it based on returns relative to a specific benchmark? Do your asset allocations “clash” with events occurring in the financial world? Unlike the home improvement project, you can’t put a 401k on auto-pilot. Investing is not a one and done process. You can sign off on the initial plan, but you must monitor along the way.
USA Today reported that 63% of workers with 401k's manage their own investments. But Fidelity Investments found in a data analysis of 13 million participants across the country that 54% of such folks are not taking an active role in managing their 401k. That is much scarier than any home remodeling or cooking project gone askew! Even scarier is that most people don’t get around to implementing a process for what needs to be monitored or how to evaluate their investment management strategy.
Whether it’s cooking or home decorating, most of us are passionate about our hobbies and interests, so we invest time and money in these areas. In contrast, many individuals don’t pay enough attention to their finances because they don’t have a process for managing their accounts. Sure, they care about their investments, but they haven’t “gotten around” to monitoring and managing these assets.
We all have different tastes. If you don’t have an appetite for planning, find a professional seasoned in investing. Unlike cooking or remodeling, you get just one shot at retirement.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.