Image Source: The Cheat Sheet via CFP Board of Standards/Youtube
I got a call the other day. From a financial advisor, no less!
"Hey, Aaron, how are ya' buddy? It's [insert the first name of prep school graduate] from [insert name of a firm that specializes in financial trading]"!
WTF? My name's not "buddy" to you, a$$hole!
"Have you got a couple of minutes because I came across some great stuff for you to buy!"
I then promptly hung up the phone. I didn't even say goodbye! Yeah, I'm rather rude when it comes to those people!
If you can't tell, I don't trust financial advisors. Not now, and probably not ever! So you might be asking, Why, Aaron? Here's why I don't trust financial advisors to manage my money:
1) They're always selling something other than themselves. Many financial advisors earn their bread and butter from commissions. Sell a product and get paid, no matter how poorly it performs for the buyer. These are the worst kinds of pond scum! They don't care about lining your pockets; they only line their own.
Not all advisors are paid on commission. Some earn a percentage of your assets as they grow. That can be good some of the time but then...
2) I can't always be certain they have my best interests at heart. When advisors look to grow my net worth, they want to put my money into the next new-new hot thing! This strategy works at times...until it doesn't! They chase the performance of the latest tech stock or energy company before those businesses or industries fall and can't get up.
Financial advisors like these suffer from hindsight bias. I don't want, or like, stock chasers running my portfolio. They have about as much insight as I do about what stocks or sectors will outperform over the next six to twelve months. So, you'd think they should be all about customer service, right?
3) Where is their so-called service? I have yet to hear someone share a story about their broker or advisor calling them about their dog or the loss of a loved one. Seriously, do you think advisors have time for personal niceties? Of course not - they're too busy lining their pockets with your money.
And the service will never come if you don't have a million dollars or more in assets! You only have just a couple thousand dollars? Please! Go and invest with E-Trade! Advisors only give service, and sometimes just lip service, to those with millions of dollars to spend because that's where the money is!
So, you're probably wondering how do I manage my money without an advisor? It's simple with these three steps:
A) Have a plan with a set goal and timeframe. One of my goals is to save enough money for a downpayment for a small business to run by the time I hit my early fifties. I'm not there yet, but by saving and investing with this goal in mind, I know the money I put to work is on the right path. The problem sometimes is how do I know I'm on the right track? Well, that all depends on my process...
B) Develop a process to follow the plan to your ultimate goal. I have a set process of what I invest in, as well as how much and for how long. If the investments I put money to work in don't work out, I know it's not the investment necessarily, but the process I use. Sometimes I may have to tweak my process a bit, but more often than not, I leave things as they are simply because my method has worked for me over time. My process is far from perfect, but it leads me more often than not to the right investments. And in the end, that's all that matters. Well, that and....
C) Understand how much I'm willing to lose before I stop sleeping at night. Investing boils down to one simple rule: don't lose! To be more succinct, don't invest more than you can afford to lose. Making back what you lost investing becomes more difficult as you age. That's why it's so important to understand what you're willing to lose before making any investment, whether it be in crypto currencies, real estate, stocks or your education!
OK, you don't lose anything with an education - no one can take your brain away! But you hopefully can take away some thoughtful ideas on how to better invest for yourself if you're not already doing so. By following these simple steps, your portfolio will love you later in life!
Thanks for reading @ellofinance today. Your time spent here is greatly appreciated!