I Love to Hear the Story

Are we wired to believe in stories?

Our brains seem to be programmed to connect discrete events and fashion a narrative around them. This has been known for thousands of years. How else to explain the durability of the classics, from Homer to Homer Price? And if for some reason we can’t connect the dots, we’ve lost a part of ourselves.

But there’s a downside. Since forever, hucksters and charlatans have been spinning stories attempt to separate us from our savings. As an investor, I’m constantly hearing about a small start-up or expanding mid-sized business that just needs a little capital to expand into the stratosphere. And just maybe they will. After all, Dell and Apple did start out in that mythical garage.

It takes sound judgment to distinguish between the next big thing and a just-so story. That comes from experience with your eyes wide open as to the tell-tale signs of a fairy tale.

One of those signs is complexity. Esoteric deals often mask the underlying economics. Life settlement loans or obscure tax-deferred annuities may have a footnote on page 67 of the document that keeps sellers out of the pokey, but the deal’s structure frequently guarantees cheap funding for the issuer, high commissions for the seller, and a lousy deal for the investor.

In investing, skepticism is your friend. It’s a lot easier to protect value than to earn back a loss.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

direct: 603-252-6509
reception: 603-224-1350

www.chartertrust.com • www.moneybasicsradio.com • www.globalmarketupdate.net
By | 2014-09-05T19:40:17+00:00 July 5th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
Leave a comment if you have any questions—I read them all!
– And Follow me on Twitter @GlobalMarketUpd

Leave A Comment