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Simple question Michel Pireu     | Business Day Thursday, December 6, 2018
From Joe Wiggins at Behavioural Investment:

A major impediment to our ability to obtain useful information and insights in financial situations is our, often overwhelming, desire to manage how we appear to others. We are prone to ask, or fail to ask questions, because of how it may reflect on us, rather than because of the importance of the question itself.

Don’t ask questions to prove your competence - you should be able to justify why you are asking a particular question. But, not asking questions to avoid appearing incompetent, is a more pernicious problem. Asking a too ‘simple’ or a really ‘dumb’ question can be painful and bruising to the ego, but not asking the question can be far more costly. If you fail to ask simple questions, there are likely to be significant gaps in your understanding of an investment.

Besides, simple questions can be the most difficult to answer, particularly where complicated investment products are concerned. It is easy to become lost in the weeds of an investment strategy and forget core principles that can often be drawn out by unassuming questions. Seemingly naïve enquiries can be both challenging and insightful. Whilst expertise around complex areas is rightly highly regarded, it is usually the simple things that define our success or failure.

A useful heuristic for us all is that if the essence of an investment cannot be distilled into elementary concepts, it is probably best avoided.

Also, it is important not to confuse a simplistic question with a bad one – effective yet simple questions are those that improve your understanding of how and why a strategy works, and clarify areas of uncertainty.

Nor does it come at the expense of more detailed lines of enquiry.

So, take care to manage your investments rather than your image.

And don’t avoid the simple questions.
 
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