The importance of becoming more professional with your approach to investing

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 amateurOften, 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 the perils (stupidity) of this and wouldn’t even consider trying. Instead, we find a professional than we respect and trust because we have what phycologists refer to as conscious incompetence. That is, we know that we have a deficit of knowledge and experience to do it ourselves.Your responsibility is to manage the people that manage the moneyJust because you can do your own financial planning, taxation, loan structuring – it doesn’t mean you should. More importantly, maybe you have misunderstood your role. Your role is to not figure it all out yourself. That is potentially way too costly in the long run. Instead, your role is to hire the best people you can afford to help you make the smartest possible decisions. It’s what we all do in other areas of our life. It’s what successful professional investors do too.Use a professional lends when selecting the right people to have on your teamIn order to do this successfully, you have to have a robust methodology for selecting the right professionals. Here are some of the things I consider when selecting other professionals that help my clients.1. How do they make money?It’s importantMy new book is available for pre-order now: Pre-ordering the book will help me get it into bookstores. So please do me a favour - please consider pre-ordering now - links and pre-order bonus are available here: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at [email protected]. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.