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“There is no pebble so small that it won’t make ripples when tossed into a body of water.” (Charles Peck)

In a recent blog post, financial writer Morgan Housel made an interesting observation. He wondered what would happen if people invited public scrutiny of the way they went about trying to find love:

“Imagine if, after your first date with a partner, you had to make every phone call, every text, every conversation with that person public on social media,” he wrote. “You know what would happen: People would tell you you’re doing this wrong, you’re doing that too much, you should say more of this and less of that, on and on. You’d be so embarrassed, nervous, and influenced by other people’s goals and different personalities that you wouldn’t be you. None of the relationships would work.”

The point that Housel was making had nothing to do with romance. He was questioning whether talking to others about your finances and investment strategies doesn’t end up doing much the same thing:

"People become so nervous about what other people think of their lifestyle and investing decisions that they end up doing two things: Performing for others, and copying a strategy that might work for someone else but isn’t right for them,” Housel wrote.

Social pressure

Think about what’s likely to happen when a friend, colleague or family member starts talking about their investments. Would this be information that you simply take as interesting, or is it going to influence you in some way?

Chances are, it’s the latter. Particularly if they appear to have been successful with what they are doing, it’s inevitable that you’ll start to wonder if you’re missing out and whether you should be doing the same thing.

The result is that you might find yourself questioning your own investment strategy, even if it’s one you’ve carefully planned out. The temptation to keep up with others or avoid feeling left behind can lead to impulsive decisions – like jumping on the latest trend without doing your homework. 

That leads to your portfolio looking less like something designed for your needs and more like a collection of other people’s ideas.

“Investment performance theatre” 

Nobody wants to look like they don’t know what they’re doing, especially when it comes to money. So, when you start discussing investments with others there’s a real risk of falling into “investment performance theatre”. In other words, you start doing things that you think make you seem smart or impressive.

How many people, for example, have put money into cryptocurrencies without having any understanding of how they really work? And how much of that was because they wanted to be doing what the “smart people” were doing?

This kind of “performance” can lead to taking on more risk than you’re comfortable with, just so you can boast about your potential returns, or diving into “trendy” investments to have something to talk about in the school parking lot. 

The problem with this is that it’s not sustainable. Your financial decisions should be grounded in your own goals and risk tolerance, not in what’s going to get you a few nods of approval from others. Over time, this kind of performative investing can backfire, leaving you with more stress and less financial security.

Just do you

It’s important to bear in mind that there’s no one-size-fits-all approach to investing. Your financial situation is unique, shaped by things like your income, your goals, how much risk you can handle, and when you’ll need the money. Just because your friend is doing something with their money, no matter how well it may seem to be serving them, doesn’t mean you should do the same thing.

Trying to copy someone else’s strategy without thinking about your own circumstances is like wearing someone else’s shoes – they might fit, but they’re likely to give you blisters. Investing is personal. What works for your brother-in-law might be completely wrong for you. 

That’s why your investment strategy should be between yourself, your immediate family and your financial adviser. It’s not about being secretive or anti-social; it’s about protecting your financial well-being. By avoiding the influence of social pressure, resisting the urge to perform, and focusing on a personalised approach, you’ll be better equipped to make decisions that truly align with your goals.

As Housel noted:

“There are two ways to use money. One is as a tool to live a better life. The other is as a yardstick of success to measure yourself against other people. The first is quiet and personal, the second is loud and performative. It’s so obvious which leads to a happier life.”

To discuss your personal financial needs, speak to us.