ISMS 27: Larry Swedroe – Familiar Doesn’t Make It Safe and You’re Not Playing With the House’s Money

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry discuss three chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this eighth episode, they discuss mistake number 13: Do you confuse the familiar with the safe? Mistake number 14: Do you believe you’re playing with the house’s money? And mistake number 15: Do you let friendship influence your choice of investment advisors?

LEARNING: Just because you’re familiar with something doesn’t make it less risky. Diversify globally to get the real benefits of diversification. Your financial advisor is not your friend; it’s a business. Value and protect your investment gains as much as you value and protect the principle.

“We’re all human beings and have made these mistakes. What differentiates smart people from others is that they don’t repeat the same behavior when they learn it’s a mistake. They change it. They become aware of investment biases and overcome them either on their own or with the help of a trusted financial advisor.”

Larry Swedroe

In today’s episode, Andrew continues his discussion with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.

Larry deeply understands the world of academic research and investing, especially risk. Today Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this eighth episode, they discuss mistake number 13: Do you confuse the familiar with the safe? Mistake number 14: Do you believe you’re playing with the house’s money? And mistake number 15: Do you let friendship influence your choice of investment advisors?

Missed out on previous mistakes? Check them out:

• ISMS 8: Larry Swedroe – Are You Overconfident in Your Skills?
• ISMS 17: Larry Swedroe – Do You Project Recent Trends Indefinitely Into the Future?
• ISMS 20: Larry Swedroe – Do You Extrapolate From Small Samples and Trust Your Intuition?
• ISMS 23: Larry Swedroe – Do You Allow Yourself to Be Influenced by Your Ego and Herd Mentality?
• ISMS 24: Larry Swedroe – Confusing Skill and Luck Can Stop You From Investing Wisely
• ISMS 25: Larry Swedroe – Admit Your Mistakes and Don’t Listen to Fake Experts
• ISMS 26: Larry Swedroe – Are You Subject to the Endowment Effect or the Hot Streak Fallacy?

Mistake number 13: Do you confuse the familiar with the safe?

People tend to double up on investments they’re familiar with compared to new companies. But according to Larry, knowing about something doesn’t make it safer. When it comes to risk,