I think back to the days I was a financial advisor for a large brokerage firm. The client comes in and I’m talking to him on the phone or in the office, and the client has $500,000 sitting there in a rollover IRA. They say, “What do I do with my money?”
Well, as a financial advisor, my job is planning your investment. I have this prescribed questionnaire that I ask them: What is your age? When do you plan on retiring? What is your risk tolerance?
And then I say “here is the prescribed fund, or suite of mutual funds that you need to invest in.”
And that was it.
All my series, all my licensing, all my training came down to, “Let me ask you a few questions.”
That is scary because that person works his entire life to earn that $500,000 and I’m sticking them into some mutual fund that has a lot of volatility and financial risk in it. I mean, that’s a pretty scary advice to give a person. That’s a big part of the reason why I finally stepped away and said, “I don’t feel good about this.”
It’s interesting, in the financial world that I live in on a daily basis, there is a serious lack of education and true financial planning that exists. Even these “financial planners” may not even know what else to do.
Obviously, the investors emotionally tied to those monies and seeing those monies just sitting there and doing nothing is an emotional hiccup, in and of itself. They’re thinking “Well, I’ve gotta do something with it, ‘cuz eventually inflation’s gonna eat it up if it just sits there and does relatively nothing.”
There’s always the emotion of what can I do, but also the panic in there that says what if it doesn’t turn out? Then what? Then, like you said, without having the educational foundation in place to support those decisions and choices.
And that’s the advice that most “financial planners” will give you. You need to do something with your money, let’s find a mutual fund. But the fact of the matter is that there are tons of other options that often aren’t even talked about. If you don’t know your other options, you’re not planning your investment, you’re just gambling your money and hoping for the best.
Now, are we saying that the stock market’s bad? Are we saying the different types of investments are bad? No, not necessarily. But, if you have a plan set in place, and you’re logical about it and rational about what you’re doing, then fantastic. The problem is, we’re humans.
I mean, just take a look at the last recession. How many people started getting out of their mutual funds? How many sold everything out and put everything into cash money market funds? And it just sat there until when the last couple years when people realized the market’s back up again. Where the high is now, on the Dow Jones and the S&P 500, people are buying in at a huge, huge premium and, frankly, it’s scary.
If you walk into the grocery store and see five boxes of Cheerios and every one of those boxes is the same except they’re listed at different prices. People are saying, “I just want whichever one is the most expensive. Give that one to me.” No. People don’t do that. They go, “What’s the cheapest box?”
With the traditional “financial planning” approach, your investment in the stock market is totally reliant on what the stock market is doing at that time. Maybe you get in a good time, but maybe you get in at the worst possible time. That way of thinking isn’t planning your investments at all. It’s a sheer gamble.
When it comes to planning your investment, all of a sudden it’s kind of Las Vegas: if I just drop another quarter in, maybe this time it’ll work for me. There’s too much speculation, and it comes down to that emotional need, or fear of not doing anything and losing that opportunity.
The bottom line is that no one should rush into that investment decision. You need to have a good foundational understanding of what the options are, and what’s right for you. Actually planning your investments will remove a lot of the volatility and risk that threatens your hard-earned savings. You’ve worked your whole life for that money, don’t gamble it away.
If you’d like to get in touch and stop gambling your investments away, click the link below to start your journey.