ProTip: Don’t invest like an ASS. That is, don’t give in to the temptations of investments that are Aspirational, Signalling, or Sexy. I didn’t plan it this way, but like all great concepts, the acronym is there. It sounds silly, but these can be serious portfolio killers.
Aspirational marketing has been around for as long as there has been stuff to sell. The product is promoted as something used by the person you want to be in the setting you wish you were at. A great way to sell bad beer is to show bros with washboard abs drinking on a beach with girls in bikinis. This is an obvious aspirational marketing gimmick. You’re entirely too smart to fall for that, right?
There is a sneakier technique almost imperceptible to adults. Watch commercials aimed at children. You’ll notice that the children in the ads are usually slightly older than the children the product is intended for. Ads aimed at tweens usually show teenagers. Ads aimed at teenagers often show actors in their 20s.
Buying that hedge fund does not confer any sort of market knowledge to you. That cologne will not turn your husband into Johnny Depp.
How can you tell the world how great you are without flat out saying that? Signalling. The cars we drive, the clothes we wear, and even the way we speak can all act as signals for how we want other humans to perceive us. Name-dropping is a great example of this. A person who can’t make it through a conversation without casually mentioning their interaction with a noteworthy person wants you to think that they are a noteworthy person, too. Or they might place-drop instead to equate their swanky vacation with how they’d like their wealth or lifestyle perceived.
Others like to collect investments so they can humblebrag about their supposed sophistication without saying as much. These folks often don’t have an honest measure of their performance or what exactly they are invested in at all.
Sexy investments are not bought, they are sold. The pitch often involves talking about a trade, play, or bet. This gives an impression of urgency. You don’t want to miss out on this trade, do you? Here’s the thing: the salesguy isn’t going to call back and tell you when to sell the investment. He has no duty to you. His duty is selling product so he can pay his kid’s orthodontist.
It is incredibly important to be honest about whether your portfolio is made up of investments to match a financial plan or if it’s a collection of short term trades. Just recognizing that there is a difference is a big step in the right direction.
If you feel pressured to invest just like or even alongside the big boys on Wall Street, remember: don’t invest like an ASS.
If your buddy tells you he can get you into an exclusive name-brand hedge fund, remember: don’t invest like an ASS.
If you are afraid of missing out on the next leg up in a certain sector, remember: don’t invest like an ASS.