incentives
Sound advice is unexciting
The rule
Good money advice is usually plain and boring. Be most suspicious of anyone who promises to beat the market.
Where it flips
But plain advice can also be lazily wrong for your own situation. The fix is to prefer boring-and-sound by default, while still checking it truly fits your goals, not following it blindly.
Graham's test for an adviser is almost the opposite of most people's gut feeling. The honest advice is dull: spread your money, keep costs low, stick to a plan. The thrilling promise to beat the market is the mark of a salesperson or a fool. If the advice is exciting, check who gains from it.
A worked example
One adviser promises to double Aarohi's money with a special strategy. Another tells her to spread her money, cut fees, and wait. The dull second voice is the trustworthy one. The exciting first is selling something. [illustrative]
How to spot it
- ·a promise to beat the market
- ·excitement where there should be caution
- ·advice that pays the adviser more than you
Benjamin Graham · The Intelligent Investor