Shades of right – avoiding black & white thinking and “musturbation” when it comes to your finances

Sonnie Bailey

12 March 2021

The idea that there is one specific way to invest, or to manage your financial affairs, is kind of weird.

This might seem like I’m contradicting myself, since when I prepare advice for clients, I prepare a report with specific recommendations for where and how to invest.

Similarly, I often tell people that they need a certain type of personal insurance, and suggest a specific level of cover, explaining how I came to that figure.

Ultimately, I outline what I would do – if I were in their position, and shared their values, priorities, and concerns.

But increasingly, I find the idea of providing clients with a single set of recommendations is weird.

The truth is, in most situations, there is a whole universe of really good options.

The sins of black and white thinking and musturbation

Black and white thinking

It’s easy to think in terms of black and white, versus shades of grey.

I fall into this trap all the time, even though I’m on constant lookout for it.

In the field of cognitive behavioural therapy (CBT), this is referred to as a “cognitive distortion”, or a “sin of thinking”.

It’s a trap I see many people fall into when it comes to their financial affairs, and it causes a lot of unnecessary stress. They want the one optimal approach, when there are actually lots of good approaches.


This distortion is often linked to another sin of thinking – of thinking in terms of “shoulds” or “musts”.

Or in the words of one of CBT’s founding fathers, Albert Ellis, “musturbation”. (I guess he’s referring to rubbing yourself the wrong way?)

We see other people say they’re doing something, or promote some approach to investing, and think that maybe we “should” be doing the same thing.

It’s important to remember: just because something is appropriate for a friend, family member, colleague, or neighbour, doesn’t mean it’s right for you.

We all have idiosyncratic circumstances, needs, objectives, fears, values, and priorities. We’re all at different stages in our own unique stories.

What’s right for one person may not be right for another.

There are usually many shades of right

In school, we’re often presented with black and white propositions. Tests are often graded based on answers being right or wrong. 2 + 2 = 4, and nothing else.

But in real life, we’re rarely presented with these sorts of choices. Most choices in real life involve uncertainty and trade-offs.

With most decisions, there are many shades of right.

Your neighbour or colleague may be all-in on property investment. That’s cool! It may be appropriate for you. If it is, it’s likely to be one of many appropriate options available to you.

(It might not be right for you, too, based on your circumstances such as your short- to medium-term liquidity needs. It might not be right for your neighbour, either, despite their bluster!)

Aim to be “right” with the questions that really matter

You may stumble upon debates between “active” and “passive” investing, and about which KiwiSaver fund is the “best” based on any one of a number of different criteria.

But most of the time, we are really talking in terms of shades of right.

Sometimes there are investment decisions that should be a “hard no”. Some managed funds, for example, may be structured in a way that should ring alarm bells – such as where the same entity is responsible for managing and promoting the investment, holding investor funds on trust, and is also in charge of maintaining a registry of who is invested and their stake in the investment. A fund like this is subject to “Bernie Madoff risk”, ie the risk of someone running off with your money.

Some funds might invest in underlying assets that aren’t going to generate a return to make up for the risk involved. Hot tip: don’t invest in a managed fund that specialises in mid-80s wrestling cards.

Let’s say, however, you’re investing in a growth-oriented KiwiSaver fund. All KiwiSaver funds are structured in a way that protects investors, and I’m yet to see a KiwiSaver fund that doesn’t invest in sound underlying investments. For the most part, we’re talking about shades of right.

You can agonise over which KiwiSaver growth fund to invest in, but all you’re really doing is choosing among a bunch of appropriate options.

Stepping back, the question isn’t so much which fund manager to go with. The question is whether a growth-oriented fund is appropriate in the first place.  If it’s not (for example, you plan on using your KiwiSaver funds soon for a house deposit), and you invest in the “best” fund available, you’re still going to be investing inappropriately.

On the flip side, if a growth fund is appropriate, then we are talking in shades of right. No one knows which fund will outperform the others over the long-run.

(I might have my prejudices – for example, towards low-fee, index-based funds. But whether you invest in growth fund A or B over the long-run isn’t nearly as important as whether you’re investing in a growth fund in the first place. That is the decision that will really move the needle in terms of your long-term outcomes.)

Areas where it pays to be as right as possible

 Notwithstanding all of the above, there are questions where, instead of being 80% right, it’s worth trying to be 95% right.

They have little do with money, at least in any direct sense. They are big, perennial questions that don’t lend themselves to fast answers. They are worth a significant investment of your time and energy.

They include:

  • Who do you want to populate your life with (ie, what type of people enrich your life, and vice versa), and how do you attract them into your life?
  • In your professional life, how do you find what you like, and what likes you, and how do you create value and make this a rewarding path?
  • What are your ethical and moral standards, and how can you act according to these standards?

Get these right, and you’re likely to have a much broader sense of wealth than financial wealth alone.

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