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BY DR. DAVID EDWARD MARCINKO MBA MEd CMP™
SPONSOR: http://www.MarcinkoAssociates.com
SPONSOR: http://www.CertifiedMedicalPlanner.org
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A paradox is a logic and self-contradictory statement or a statement that runs contrary to one’s expectation. It is a statement that, despite apparently valid reasoning from true or apparently true premises, leads to a seemingly self-contradictory or a logically unacceptable conclusion. A paradox usually involves contradictory-yet-interrelated elements that exist simultaneously and persist over time. They result in “persistent contradiction between interdependent elements” leading to a lasting “unity of opposites”.
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And so, as we plan for our financial future thru a New Year Resolution for 2025, it’s helpful to be cognizant of these paradoxes. While there’s nothing we can do to control or change them, there is great value in being aware of them, so we can approach them with the right tools and the right mindset.
According to Adam Grossman, here are seven [7] of the paradoxes that can bedevil financial decision-making, clients and financial advisors, alike:
- There’s the paradox that all of the greatest fortunes—Carnegie, Rockefeller, Buffett, Gates—have been made by owning just one stock. And yet the best advice for individual investors is to do the opposite: to own broadly diversified index funds. More: https://tinyurl.com/285vftx4
- There’s the paradox that the stock market may appear over valued and yet it could become even more overvalued before it eventually declines. And when it does decline, it may be to a level that is even higher than where it is today.
- There’s the paradox that we make plans based on our understanding of the rules—and yet Congress can change the rules on us at any time, as the recent 2024 election results attest.
- There’s the paradox that we base our plans on historical averages—average stock market returns, average interest rates, average inflation rates and so on—and yet we only lead one life, so none of us will experience the average.
- There’s the paradox that we continue to be attracted to the prestige of high-cost colleges, even though rational analysis that looks at return on investment tells us that lower-cost state schools are usually the better bet.
- There’s the paradox that early retirement seems so appealing—and has even turned into a movement—and yet the reality of early retirement suggests that we might be better off staying at our desks.
- There’s the paradox that retirees’ worst fear is outliving their money and yet few choose the financial product that is purpose-built to solve that problem: the single-premium immediate annuity.
CITE: https://www.r2library.com/Resource/Title/0826102549
How should you respond to these paradoxes? As you plan for your financial future, embrace the concept of “loosely held views.”
In other words, make financial plans, but continuously update your views, question your assumptions and rethink your priorities.
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