From time to time I bounce up against the most interesting things. One of these interesting things are attitudes about financial products. Some people claim to have affection for their credit cards, to the point that their emotions become tumultuous when the time comes to get rid of that extra credit card. Others become invested, and not just financially, in the fortunes of one stock. Others cheer one mutual fund or condemn another with near religious zeal. There seems to be an emotional investment.
The problem with developing an emotional attachment or abhorrence to a financial product is that these attitudes can cloud one’s judgement. For example, if someone forms an irrational attachment to a stock, they may hold the stock longer than they should, even as the value goes to zero. If another person rejects all products of a certain type out of hand, they could close their mind to opportunities that may be appropriate for their financial needs.
There’s a sense of cachet that’s attached to financial products. Like gemstones, financial products are frequently sold by persons in suits and at offices with neoclassical decor and prestigious addresses. Frankly, it looks important. Add to that the sheer magnitude of the products purchased (buying $100,000 of any given product happens often enough, and for the vast majority of people, this is a significant sum), and you have a recipe for developing respect, anxiety and torrents of emotion.
So, how to disentangle yourself from your emotions? One trick I use is to think of financial products as products, in the same sense as canned green beans or dried noodles at the supermarket. That means that this product is manufactured, packaged, and sold, just like any other product. Therefore there’s no reason to get emotional, is there?
Sure, you could say that there’s no comparison between a $0.99 can of green beans and a $99,000 annuity, and you’d be right. The point is that it behooves you to be a cool and rational as you would be shopping for green beans when you are shopping for financial product. Because it’s just a product.
Do you think of your accounts and investments as dispassionately as any other product?