Sheryl Sutherland says investing is a lot easier than you might think. It’s no more complicated than the issues you face each day at home and work. The key is to get started

By Sheryl Sutherland*

I’ve written quite a lot about being aware of biases. One reader asked me “what about using the power of intuition to support good decision making? Surely,” they suggested, “intuition is worthy of trust.” 

Gary Klein a renowned psychologist suggests that it’s not sensible to process that gut feeling by saying to yourself “I can act on that, and I don’t have to worry”. Klein suggests taking that gut feeling as an important data point and then consciously and deliberately evaluate it to see if it makes sense.  You need strategies that help to rule things out.  

Generally, intuitions should not be taken at face value. This leads to overconfidence, a powerful source of illusions which create the quality and coherence of the story you can construct, not its validity. If you can create a simple and coherent story you will feel confident no matter how well grounded it is in reality. This leads to lucky risk takers using hindsight to reinforce their own and others belief in your intuition. We always seek the story which validates our actions and views.  

One of the problems this brings is that people have expertise in some domains and not others.  

There is a logic in not using intuition but setting an itemised strategy – a plan. Intuition relies on our quick, ‘gut’ response which will not utilise our trusty prefrontal cortex which is the fount of rationality. We hate plans and limits, by nature we are active doers. In the case of a financial plan even more so. The whole concept can seem overwhelming, we have no idea where to start and the possible complexity we imagine is extremely off putting.  

You can tell where this is leading; to help you set up a plan, which is an evolving process you need to collect all relevant information.  

Start here;

1. Determine your current financial situation

2. Develop your financial goals

3. Identify alternate courses of action 

4. Evaluate alternatives. Consider areas such as your life situation, personal values, economic factors, asses your risk profile. 

5. Consider any relevant legal concerns

6. Create and implement financial action plan

7. Revise and review on an annual basis 

Make it a priority. It won’t happen unless you make a concerted effort to begin, so start organising your financial life by putting it at the top of the list.  

Get going. The most important thing is act. No one can do it for you, and the sooner you start, the easier it will be to reach your financial goals. You don’t need to worry if you are new to investing, what you do need is to be willing to learn. 

Seek help. While you are responsible for your financial well-being, you don’t have to determine your investment strategy alone. A financial advisor can help you create an investment programme for your needs.  

Listen, read, learn and ask. If you are making decisions with your financial advisor, try to understand the basics. Use your adviser as a resource; don’t be afraid to ask questions. 

Don’t worry. Investing is a lot easier than you might think. It’s no more complicated than the issues you face each day at home and work. Investing can involve risks, but the main thing is you need to worry about is not acting. Getting your financial house in order can be one of the best things you do, for yourself and family. Be a role model.

*Sheryl Sutherland is director of The Financial Strategies Group, and author of Girls Just Want to Have Fund$ – Every Women’s Guide to Financial Independence, Money, Money, Money Ain’t it Funny – How to Wire your Brain for Wealth, and co-author of Smart Money – How to structure your New Zealand business or investments and pay less tax. You can contact her here.