Hi everyone.
I’m doing my final prep for teaching on how to intelligently manage and invest your net worth for maximum wealth. Just sat reading through my notes on traditional investments pushed on most individuals and I noticed i started getting a little bit angry.
Hence I thought I’d “blog it out” and share my 3 biggest reasons why I hold traditional financial advice to be so potentially dangerous:
1) Most financial advisors are really securities dealers with NO fiduciary responsibilty to you. They only have to give you advice to investments that are “suitable” and that standard is just not acceptable to me.
LESSON: make sure you ask, in writing, if they are a fiduciary role for you or not… that term matters… it has legal force.
2) For those of you who invest in securities (think stocks/bonds/mutual funds), study after study show that Index funds held over long term and NOT actively traded will outperform over 80+% of the actively managed funds for total returns over the long term… If you are going to use this vehicle (and personally I’m a commercial real estate and business guy so I don’t, not where my personal advantages are) why would you go any other way?
LESSON: if you are going to invest in securities, then appropriate LOW COST index fund (i.e. expense ratio under .3 percent) is the way to go… and DON’T actively trade it!
3) “Stocks… Bonds… Other…” and the myth of diversification. I do not believe that you manage investment risk by investing in a huge cross section of areas… I think the best way to manage risk is to educate yourself and cultivate investing advantages… this requires you t oFOCUS not diversify. You can’t be great in all areas, choose the area that best meets your goals, your Advantages, and your current starting point. Then out of strength you can choose to broaden your niche over time. In the interim, 1-2 index funds gives you plenty of diversification if you want to just take the average market returns (and DON’T just take this unless you have a LONG — think 10+ years– window to needing your money.)
LESSON: Invest in yourself. If you asked me, David I have $20,000 where should I invest it?” My simple answer would be for you to take 5-10k of it and over 12-24 months invest it in your financial,business, and wealth education. This means getting the books, taking the classes and workshops, and going through the home study courses. This is one investment that to ignore could cost millions…
Thanks for listening… I feel a bit better.
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