You might assume with years of experience around business and finance, Mr Nocera would have an impressive record when it comes to his own finances.
Unfortunately for Joe, now pushing 60, you’d be wrong.
In an honest admission in his New York Times column, Joe documented his that 401(k) (Superannuation in the US) was ‘in tatters’.
Joe started putting small amounts of money into a retirement account in the late 70’s and when the money grew in market booms he started overestimating his abilities.
This overconfidence left him heavily invested in tech stocks when the dotcom bubble burst in 2000.
That lack of diversification cut his 401(k) in half and six years later a divorce wiped out half again.
After buying a house needing significant renovations, Joe, in the ultimate example of short term thinking, raided his 401(k) to fund those renovations.
Joe’s conclusion, despite writing a book on the growth of financial opportunity, is his previous enthusiasm for investing was unwarranted.
While the financial toll the divorce took couldn’t be avoided, his lack of diversity while chasing the latest hot sector during the dotcom bubble and raiding his account for home renovations were his choices alone.
They’re prime examples of a lack of investor discipline.
Behavioural economists suggest these kinds of tales are common place.
Ignoring the income shocks, it’s our own fallibilities that cause the most financial damage.
Over confidence, focussing on the short term and believing current trends will continue repeating, often result in investors buying high and selling low.
Joe can take comfort in the fact he loves his job and it’s something he can do for many years to come.
However, investing didn’t limit his retirement options, his behaviour when investing did.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you want help with your financial future, we’re arguably the best financial advisor in Australia.
