It's Your Money, Following the Crowd Can Be Dangerous

It's Your Money, Following the Crowd Can Be Dangerous

“But all the kids are doing it!” I’d argue as a child when I wanted to do something. Predictably, the parental response was, “If all the kids jumped off the Empire State Building, would you jump, too?”

Parents: 1, Kids: 0. Down in flaming defeat.
 

Flash forward to adulthood, and our desire for being part of the crowd hasn’t abandoned our psyche, especially when it comes to making financial decisions.

Regardless of the crush of popular items out there, we generally move in lockstep. We want to buy the hot stock, the popular hedge fund, the crypto currency, rental real estate—or wherever the herd is heading. We watch cable news, buy subscriptions to newsletters that promise success. It’s ingrained in our brains to follow the group in hopes for success. Standing alone and apart is not cool—rather it’s lonely and requires a level of courage and self-knowledge; two characteristics that go and hand in hand.

Socrates said, “Know thyself” hailing anyone to stop and understand three important things:

  1. Who you are
  2. What motivates you
  3. Why you make the decisions you do.
     

In other words, “because” just doesn’t cut it. “Because everyone’s doing it” is irrelevant and unwise. But let’s face it—we live in a society where FOMO is prevalent, where we typically lack a deep understanding of topics beyond our specialty or our interests (except where we’ve devoted time and effort to learn and master).

Here are some common beliefs I have heard:
 

  1. You cannot lose money buying rental real estate.
  2. I don’t need life insurance, if I die, my wife will get remarried.
  3. Hedge funds are a slam dunk, they protect your money from loss.
  4. My kids will go to college on sports scholarships.
  5. It’s stupid to buy anything other than US stocks.
  6. It’s important to load up on stock in the company I work for.
  7. Social security will cover my needs in retirement.
  8. Keeping cash in an emergency fund is dumb; better to invest the funds and allow your money to grow.
     

These examples come from the mouths of intelligent and successful people who firmly believe their statements are true. The reality is, they are shrieking statements of either magical thinking, misinformation, or a mental dam that for some reason has inserted itself into their belief system. In any event, they are great examples of the antithesis of “know thyself.”

In order to move closer to Socrates’ exhortation, begin by examining the data, as follows:

  1. What do I believe?
  2. Why do I believe it?
  3. Is it objective fact or just an opinion that I’ve adopted as my own?
  4. What do I really know about the topic and more importantly, what don’t I know?
     

There are so many decisions to make in navigating your financial life—and many are not qualified to make the mandatory decisions involved in financial planning. Trying to make all the right choices for yourself and your family is onerous at best. There are many DIYer’s who believe they are best equipped to make the right choices. Becoming sufficiently knowledgeable in all areas of financial matters requires ample time and education. While some may have this time and education, very few have the objectivity necessary to consistently make the right decisions.

There are many who work with stockbrokers and insurance salespeople who believe that their recommendations are made without prejudice or self-interest. Sadly, too few question the motivations of those who earn their living from the products you purchase. Somehow, most consumers believe they are suitably knowledgeable and objective.

Related: Reality Check: 24 Stock Market Facts You Need to Know

Rather than look inside to lay bare the lack of experience and knowledge, following the crowd is easier and more comfortable.
 

Remember, there is no shame in not having the knowledge or experience—if it’s not your occupation or something in which you’ve studied or been trained, why would you be an expert? [Hint: if you didn’t go to medical school but you look at WebMD, you’re not a doctor!]

The challenge is to carve a path to your success by knowing what you know and what you don’t know; without blame or shame. Align yourself with experts who will help you navigate the many decisions in an objective manner. Do not align yourself with those who profit by selling you a product. Continue to explore the “why” of your decisions and what exactly impacts your thinking.

Socrates had it right in that real self-knowledge was bedrock to living authentically and with meaning.

Michael Kay
Advisor
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I founded Financial Life Focus because I wanted to work with people who put your success at the forefront of everything they do; people who understand that finding balance is ... Click for full bio

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

Written by: Jeremie Capron

China is on a mission to change its reputation from a manufacturer of cheap, mass-produced goods to a world leader in high quality manufacturing. If that surprises you, you’re not the only one.


For decades, China has been synonymous with the word cheap. But times are changing, and much of that change is reliant on the adoption of robotics, automation, and artificial intelligence, or RAAI (pronounced “ray”). For investors, this shift is driving a major opportunity to capture growth and returns rooted in China’s rapidly increasing demand for RAAI technologies.

You may have heard of ‘Made in China 2025,’ the strategy announced in 2015 by the central government aimed at remaking its industrial sector into a global leader in high-technology products and advanced manufacturing techniques. Unlike some public relations announcements, this one is much more than just a marketing tagline. Heavily subsidized by the Chinese government, the program is focused on generating major investments in automated manufacturing processes, also referred to as Industry 4.0 technologies, in an effort to drive a massive transformation across every sector of manufacturing. The program aims to overhaul the infrastructure of China’s manufacturing industry by not only driving down costs, but also—and perhaps most importantly—by improving the quality of everything it manufactures, from textiles to automobiles to electronic components.

Already, China has become what is arguably the most exciting robotics market in the world. The numbers speak for themselves. In 2016 alone, more than 87,000 robots were sold in the country, representing a year-over-year increase of 27%, according to the International Federation of Robotics. Last month’s World Robot Conference 2017 in Beijing brought together nearly 300 artificial intelligence (AI) specialists and representatives of over 150 robotics enterprises, making it one of the world’s largest robotics-focused conference in the world to date. That’s quite a transition for a country that wasn’t even on the map in the area of robotics only a decade ago.

As impressive as that may be, what’s even more exciting for anyone with an eye on the robotics industry is the fact that this growth represents only a tiny fraction of the potential for robotics penetration across China’s manufacturing facilities—and for investors in the companies that are delivering or are poised to deliver on the promise of RAAI-driven manufacturing advancements.

Despite its commitment to leverage the power of robotics, automation and AI to meet its aggressive ‘Made in China 2025’ goals, at the moment China has only 1 robot in place for every 250 manufacturing workers. Compare that to countries like Germany and Japan, where manufacturers utilize an average of one robot for every 30 human workers. Even if China were simply trying to catch up to other countries’ use of robotics, those numbers would signal immense near-term growth. But China is on a mission to do much more than achieve the status quo. The result? According to a recent report by the International Federation of Robotics (IFR), in 2019 as much as 40% of the worldwide market volume of industrial robots could be sold in China alone.

To understand how the country can support such grand growth, just take a look at where and why robotics is being applied today. While the automotive sector has historically been the largest buyer of robots, China’s strategy reaches far and wide to include a wide variety of future-oriented manufacturing processes and industries.

Related: Smooth Tomorrow's Market Volatility With a Smart Approach to Robotics & AI

Electronics is a key example. In fact, the electrical and electronics industry surpassed the automotive industry as the top buyer of robotics in 2016, with sales up 75% to almost 30,000 units. Assemblers such as Foxconn rely on thousands of workers to assemble today’s new iPhones. Until recently, the assembly of these highly delicate components required a level of human dexterity that robots simply could not match, as well as human vision to help ensure accuracy and quality. But recent advancements in robotics are changing all that. Industrial robots already have the ability to handle many of the miniature components in today’s smart phones. Very soon, these robots are expected to have the skills to bolster the human workforce, significantly increasing manufacturing capacity. Newer, more dexterous industrial robots are expected to significantly reduce human error during the assembly process of even the most fragile components, including the recently announced OLED (organic light-emitting diode) screens that Samsung and Apple introduced on their latest mobile devices including the iPhone X. Advancements in computer vision are transforming how critical quality checks are performed on these and many other electronic devices. All of these innovations are coming together at just the right time for a country that is striving to create the world’s most advanced manufacturing climate.

Clearly, China’s trajectory in the area of RAAI is in hyper drive. For investors who are seeking a tool to leverage this opportunity in an intelligent and perhaps unexpected way, the ROBO Global Robotics & Automation Index may help. The ROBO Index already offers a vast exposure to China’s potential growth due to the depth and breadth of the robotics and automation supply chain. As China continues to improve its manufacturing processes to meet its 2025 initiative, every supplier across China’s far-reaching supply chains will benefit. Wherever they are located, suppliers of RAAI-related components—reduction gears, sensors, linear motion systems, controllers, and so much more—are bracing for spikes in demand as China pushes to turn its dream into a reality.

Today, around 13% of the revenues generated by the ROBO Global Index members are driven by China’s investments in robotics and automation. Tomorrow? It’s hard to say. But one thing is for certain: China’s commitment to improving the quality and cost-efficiency of its manufacturing facilities is showing no signs of slowing down—and its reliance on robotics, automation, and artificial intelligence is vital to its success.

Want all the details? Download the ROBO Global Investment Report - Summer Brings Best ROBO Earnings in Six Years or visit us here.

ROBO Global
Robotics and AI
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ROBO Global LLC is the creator of the ROBO Global® Robotics and Automation Index series, which provides comprehensive, transparent and diversified benchmarks representing the ... Click for full bio