Why analysts and doctors invest differently
Like doctors, analysts need to take a person-centred approach when providing advice.
Your analysts at Intelligent Investor are a bunch of hypocrites. We frequently recommend members buy this stock or that, and then don’t buy it ourselves. We say you should avoid risky micro-cap stocks, and then take a small position. Over and over we recommend you diversify, and yet gleefully concentrate our portfolios into our favourite stocks.
The fact is, if you looked at each of our personal portfolios, the first thing you would notice is that they are wildly different to your own. The second thing you would notice is that they’re wildly different to each other.
I recently stumbled upon a fantastic essay called ‘How Doctors Die’ and was drawn to one paragraph in particular:
‘[Doctors] don’t die like the rest of us. What’s unusual about them is not how much treatment they get compared to most Americans, but how little. For all the time they spend fending off the deaths of others, they tend to be fairly serene when faced with death themselves. They know exactly what is going to happen, they know the choices, and they generally have access to any sort of medical care they could want. But they go gently.’
The author, a medical professor, went on to explain that doctors frequently recommend one thing for their patients and take a different treatment themselves. The reason for such heresy underlines the complexities of giving financial advice.
Patients are individuals with unique goals, religious beliefs, tolerances for pain etc. Every treatment must be tailored to their distinct needs, and the patient knows those needs more deeply than the doctor. As such, medicine is increasingly ‘person centred’ – patients are no longer passive receivers of care, they actively take part in treatment decisions.
The perfect portfolio
You’ve probably read ad nauseam on our website that we can only provide general advice, so it’s important that you take your personal situation into account before acting on our recommendations. Doctors give a similar disclosure when a patient faces hard choices. Who are they to say someone should struggle through chemo rather than opt for palliative care, or that a prospective mother should abort a pregnancy due to risk. A doctor can explain the situation and the various options, but the patient must be the ultimate decision maker. It’s their body.
Investing should be client-centred too. There’s no ‘perfect’ portfolio, even for two investors who have a similar age and lifestyle. Everyone has different tolerances for risk, different goals, and vastly different definitions of success. One investor may want to shoot for the moon and be willing to take on significant risk to get there. Another may just want to beat the market … or their brother-in-law. Some define success as never losing a night’s sleep.
That variety is also present in the analyst team. Some of us have families, some have a high tolerance for risk. Some have long investing horizons, others have a few more candles on the cake.
Like doctors, our job is to make sure you are fully informed. We can conservatively value companies and spot those that are undervalued but a recommendation is never one-size-fits-all, not even for ourselves. Your job is to take our recommendations, price guides, risk ratings and maximum portfolio weightings into account and then adjust them – or completely disregard them – if your unique needs call for it.
Our Intelligent Investor Equity Income Portfolio is now available as a listed fund trading under ASX code: INIF. The fund will mirror the holdings in our current Equity Income Portfolio and have the same low costs, but you’ll be able to buy it on the ASX. You can save yourself the broking commission by applying during the initial offer. The offer closes on Friday, 8 June, 2018.
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