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Financial Goals

Investing Lessons from Hollywood

Add these movies to your queue and let the popcorn butter melt.

Katherine Buck

By Katherine Buck
  |  Published: August 2, 2013

Staff Picks: Investing Lessons from HollywoodThe Smartest Guys in the Room (2005)

Lesson: Diversify, diversify diversify

The Smartest Guys in the Room is a documentary about the collapse of Enron. Enron’s stock plummeted and became worthless, causing many investors — including Enron employees who held their retirement savings in company shares — to lose everything.

One of the basics of wealth management is to diversify away as much risk as possible. If you work at a company that is publicly traded — like Enron — you should actually own less Enron stock in your portfolio (and companies like it). This is because when there is a downturn in an industry — like financial services or healthcare — employees can lose both jobs and wealth.

It’s crucial to diversify — especially investments meant for retirement. Says Betterment Behavioral Economist Dan Egan, “Individual companies can go bankrupt — even the big ones.”

Wall Street (1987)

Lesson: Honesty is the best policy

Wall Street is a cultural icon: The suspenders. The banker cuffs. The faux brick. But Wall Street is also a valuable lesson in making money — an honest dollar is the best kind. Antagonist Gordon Gekko engages in many financial no-nos, from insider trading to corporate raiding.

Eventually justice is served, and Carl Fox tells his son Bud, “Stop going for the easy buck and start producing something with your life. Create, instead of living off the buying and selling of others.”

That’s the kind of advice that will stand the test of time. Hair gel is another story.

Blank Check (1994)

Lesson: Windfall? Put it to work

This cult Disney classic is about a kid who writes in $1,000,000 on a blank check to purchase a new bike. It’s also a fun reminder of what to do when you receive a windfall. A big spender at 11 years old, Preston tears through his $1,000,000 fortune — he even goes into debt.

If you come across extra cash, try to put it towards your financial goals. Your good fortune should be used to increase your retirement savings, pay down debt, or invest to build wealth. A portfolio of low-cost index funds is your best bet for putting that windfall to work (plus a small treat for yourself!).

Pi (1998)

Lesson: Some things, you’ll never know

Pi chronicles the quest of mathematician Max Cohen to unlock the secrets of the mathematical constant “Pi” and universal patterns found in nature. But nature, like financial markets, cannot be predicted. As Max discovers, obsessing over telling the future can lead to paranoia and some dire consequences.

When it comes to predicting market activity, don’t. You can suffer some major losses in your investment account and fretting over short-term volatility isn’t worth the time. If your investments are long-term, buy-and-hold perseverance is the winning strategy of your portfolio.

The Pursuit of Happyness (2006)

Lesson: And speaking of perseverance..

Based on a true story about a homeless single father who overcomes his own spate of adversity, The Pursuit of Happyness can teach us both life and portfolio lessons.

Source: movpin.com

Personal success requires discipline, just like staying invested during rocky markets. And you have to put in your time (Pursuit‘s Chris Gardner worked as an unpaid intern before he was hired in a full-time position) — we’ve written many times about the value of time in the market. Compounding returns are a beautiful thing.

What financial or behavioral lessons have you learned from a favorite film? Please leave a comment below.

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