If you have an expensive life, a recent Harvard study solves the problem (or at least it can really provide insight into the solution). I read about it in a cool new book, The Secret Language of Money by Dr. David Krueger.
Here’s a three-minute video sharing a fascinating study done at the venerated college. I think you’ll find the results astounding…I know I did. This isn’t about retiring rich or creating wealth. It’s about your life – right now.
After you watch the video, let me know how you are going to apply the lessons of the study…and when.
Rob Bennett says
January 14, 2010 at 8:08 AMNeal:
You look great on the video!
I ask that you and your readers reflect on whether we all have been paying too much for stocks for a long, long time now.
Stocks were priced at three times fair value before the crash. That means that, for every $300 we put into our 401(k) accounts, we got back $100 worth of stocks and $200 worth of cotton-candy nothingness that of course was fated to go “Poof!” over the course of time.
The Efficient Market Theory (the intellectual framework for the conventional investing wisdom of today) says that this is impossible. The entire Buy-and-Hold model starts with an assumption that humans would never collectively overpay for stocks, that the market always gets the price roughly right.
This study suggests that this is wrong. Humans overpay for things all the time because they get caught up in the excitement of “beating” others (why else would people pay $300 for a one-hundred-dollar bill?)
If we considered that stocks are owned by humans and that humans simply do not behave in accord with the assumptions of the conventional model, we could all invest far more effectively, retire many years sooner, and quickly get out of this economic crisis. This study is teaching us something important.
Rob
Shirley Docken says
January 13, 2010 at 10:55 AMI am enjoying your blogs, YouTube videos and all that food for thought. This one especially. Thanks, Neal.
Neal@Wealth Pilgrim says
January 13, 2010 at 11:12 AMIt’s an honor….thanks for your kind words….
Neal@Wealth Pilgrim says
January 13, 2010 at 7:21 AMOh Sam……I don’t know if that’s a compliment (given the results of these goof balls)
Oh….here’s a solution if you want to pay less tax….make less money! I know you wont’ be making any ROTH conversation mistakes – and needlessly paying taxes.
Financial Samurai says
January 13, 2010 at 7:12 AMNeal, thnx for highlighting the study. You kinda look like a Harvard professor! lol.
I spend too much on taxes. Gotta fix that!