The Dangers of Dabbling
January 15, 2010By Dave Polstra, CPA, CFP®, CIMA®
Dabbling. What comes to your mind when you hear that word? According to Webster’s Dictionary dabbling means “to work or involve oneself superficially or intermittently, especially in a secondary activity or interest.” People can dabble in many different things such as cooking, sewing, auto mechanics, woodworking, and gardening.
Of course there are harmless, recreational versions of dabbling in things that don’t matter. But on the things that do count, I classify dabbling into three main categories: dabbling that is relatively harmless in that it creates only difficulties, dabbling that creates dangers, and dabbling that results in disaster.
Dabbling that creates difficulties. “Honey, I found the perfect wallpaper for the guest bathroom. Can you help me hang it this weekend?” Whether it’s hanging wallpaper, painting a room, removing a jammed DVD from the DVD player, or replacing the plastic line on your weed whacker, these examples of dabbling don’t have the potential to get you into big trouble, just difficulties. In each case, the cost of making a mistake simply isn’t that great. (Sure, hanging wallpaper or painting a room may create temporary emotional strain with your spouse, but hopefully the relationship damage won’t take too long to repair!)
Dabbling that creates dangers. Dabbling becomes a danger when there is a lot of time that transpires before you realize that you’ve made a mistake. As an example, sometimes clients will invest the majority of their investment assets with Brightworth, but decide to keep a small amount of money in a separate account so they can buy a few stocks and bonds that they think will be winners. And then, about five years later, the client resigns himself to the fact that it’s tough to make money in the investment markets with only one or two hours per week of focus. Five years of precious time has gone by … time (and potential growth) that is lost forever. If there wasn’t a lot of money at stake, the dabbling was only a danger.
Dabbling that results in disaster. Dabbling becomes a disaster when there is a lot of time that transpires before you realize that you’ve made a mistake, and the mistake turns out to have a significant impact on your future. Take, for instance, the person who spends their waking hours watching the cable news networks and is worried about the future. So, they invest 100% of their money in gold, bonds or cash, feeling very “safe” about their decision. It’s not until fifteen years later that they realize milk and butter costs twice as much, and that they’ve lost one-half of their purchasing power due to taxes and inflation. Or take the successful lawyer or executive who makes $500,000 per year thinking that if they can save just 10% per year they will retire comfortably at age 55. After all, why pay for a professional wealth manager when their company offers an online software program to help them plan for their future? And don’t forget the entrepreneur who thinks he can invest $50,000 in the “green energy” deal his broker presented to him and another $50,000 in the movie deal his neighbor told him about — it’s sure to be a box office hit! His dabbling in risky investments can easily add up to a lot of money lost over time and the impact on his financial future could turn out to be quite costly.
Delegate, don’t dabble. When it comes to finances, it’s important to delegate, not dabble. At Brightworth, we spend countless hours focused on planning for our clients’ financial futures. Whether it’s flying to New York or Los Angeles to meet with one of our investment managers, or making sure we’ve determined the appropriate percentage to allocate to emerging markets in our portfolios, or developing the optimum strategy for exercising stock options, we take very seriously the fiduciary duties and tasks our clients entrust to us. That’s why when it comes to money, we don’t believe that dabbling is a good option. So you want to dabble? Why not try a new recipe or hang some wallpaper this weekend instead of getting cooked or hung with a costly financial mistake?!
