Depending on who you ask, you might get varying opinions about whether a certain food is good for you.
Are eggs good or bad?
What about butter?
Milk?
Red meat?
Red wine?
But there are certain foods that anybody with half a brain will agree aren’t good for you. And believe it or not, we can find a lot of those unhealthy foods represented in the financial world…
Empty Calories
Empty calories are the ones that add calories to your diet but no actual nutritional value. Soft drinks, candy, chips, pastries, and frozen desserts would all fit the bill here. They’re problematic because they make you feel full so you don’t have room for foods that actually give you the vitamins and minerals that you need.
Consider these two different meals:
1) McDonald’s Quarter Pounder deluxe, medium fry, and 20 oz Coke.
2) Grilled chicken breast, avocado toast on whole wheat bread, a fruity protein shake, and Pascha dark chocolate for dessert.
Both meals give you somewhere between 1100-1200 calories. The first meal provides you virtually no helpful nutrients, other than a little bit of protein in the Quarter Pounder. But the second meal is high in potassium, phosphorus, zinc, iron, magnesium, copper, protein, fiber, vitamins B and C, omega 3 acids, beta-carotene, and riboflavin—all for the same number of calories!
In the financial world, empty calories come from that 75-page financial “plan” that you get from the big brokerage house.
Most of those pages aren’t customized to you, and they don’t really provide any true advice. Once you sort through all of the pages that are just boiler plate filler and disclosures, you’re left with just a couple of pages that actually give you some analysis that’s actually related to your situation. And most of that analysis isn’t even that accurate.
So you’ve added a lot of “paper calories” to your file cabinet’s diet, without any real tangible benefit. But you feel like you’ve accomplished something because you have this 75-page document, so you don’t really push any further to get a true plan in place for yourself.
It’s no different than eating the McDonald’s meal and feeling full, so you don’t feel the need to eat anything else to give you the nutrients you need.
Added Sugar
Several months ago, a neighbor was cleaning out their pantry in preparation for a move and asked us if we wanted some of the canned goods that they needed to get rid of. Sure, why not—who turns down free food?
As it turned out, most of the cans weren’t things that we’d actually eat, and we ended up purging most of the cans from our own pantry a few weeks later. During the purge, we noticed the ingredients on a can of tomato soup. The first ingredient, to no one’s surprise, was tomato paste. But the second ingredient was high fructose corn syrup.
I’m sorry, tell me again why we’d want sugar in our tomato soup?
Well, we don’t. But most food companies are just trying to fill the can the cheapest way they know how. This often means you get a lot of sugar in foods that don’t seem like they should warrant a high sugar content.
A lot of fruit juices are bad about this too. They even go out of their way to market themselves as a healthy option, but when you really study the ingredients, you find out that most of them have an absurd amount of added sugar.
The problem with most “added sugar” foods is that you think you’re eating smart when you have them. Tomato soup, fruit juice, yogurt…at first blush, all of those sound healthy. Very often, they aren’t.
In the financial world, added sugar comes in the form of hidden fees. You might believe that you own a product with very low fees, or no fees at all. But when we take a closer look at that product (either by exploring the prospectus or by calling the company and asking a few very specific questions), we often find that your fees are much higher than you would have guessed (or in some cases, much higher than you were led to believe).
Trans Fats
Usually when you’re consuming trans fats, you’re aware that you aren’t eating healthy. Cakes, pies, cookies, and doughnuts all fall into this category.
Nobody has ever eaten cookies or doughnuts and tried to convince themselves that they were making healthy choices. You know they aren’t good for you, but they just taste so dang good that you can’t help yourself.
In your portfolio, this is the same as having too much risk exposure. You’re 58 years old and you’ve been watching your 401k grow and grow for the last several years. You know the ride can’t last forever, but it just tastes so good to see that account balance keep growing quarter after quarter. You can’t stop yourself from feasting on the risk.
“I’ll make it more conservative once I get to $500,000,” you say. Or $750,000. Or a million. “Just one more cookie and then I’ll start my diet tomorrow.”
But you never do start the diet, the market crashes, and you’re left with the financial equivalent of a diabetic coma.
The good news about all of this is that it’s actually much easier to eat healthy in your portfolio than it is to eat healthy in real life. So there’s really no need to put it off…