Why You're Not as Unique as You Think You Are

Your mother was wrong. You're not particularly unique at all; at least in terms of your needs for basic investment advice.

Why do I say that? Because in many conversations I've had with investors over the years about investment advice, one of the foremost requirements they list is their desire for the advice to be "customized," taking into account their particular characteristics.

But when I press them regarding their supposedly unique characteristics that require customized advice, there's really, as Gertrude Stein said, no there there.

Because for the most part, the customization they're looking for turns out to be nothing more than a desire for personalized tips on stocks and actively managed mutual funds, and/or recommendations on when to get into or out of specific asset classes.

If that's your criteria for personalized advice, I have news for you: you're being sold a bill of goods. Yes, the investment selections and timing advice may well be geared toward your own risk tolerance (as much as anything that's being shared with a group of like-minded clients can be considered customized), but the reality is that the value of that custom made advice is very hard to identify.

Think about it. If you had the ability to profitably predict which stocks and mutual funds were poised to outperform, or when the market was set to rise or fall, would you be sharing that information with anyone, or would you be acting on it for your own benefit?

Rather than customized advice, such clients are being sold a service that appeals their most basic instincts, a hope that someone somewhere knows what the heck is going on in the markets, and that if one is willing to pay enough for it, they'll share their wisdom.

The fact of the matter is that good, basic investment advice doesn't need to be customized to any large extent. Setting someone on the road to investment success requires, first and foremost, nothing more than implementing some very basic, general principles. Keep costs low. Diversify broadly. Find an asset allocation you'll be comfortable with over the long term, and for crying out loud leave it alone.

Sure, you can do some tinkering around the edges based upon your personal circumstances -- bumping your stock allocation up or down based on your need and/or willingness to take risk; tweaking your exposure to international and emerging markets -- but the fundamentals of a sound financial plan are wonderfully basic.

Is such a basic plan, as one person I spoke with put it so derisively, a "cookie cutter" approach? As a matter of fact, it is. But that's because the components of any successful approach to investing are consistent regardless if you're a poor 20-something just starting out or a multi-millionaire in your 60s.

As Warren Buffett said, successful investing is like dieting: it's simple, but it's not easy. Don't make the mistake of thinking that efforts to make it more complicated than it needs to be is somehow linked to superior results. For in reality, the truth is precisely the reverse.

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