There is an old Chinese proverb that says: “Insanity is doing the same thing in the same way & expecting a different outcome.” In plain English it can be expressed as: This time is different. It seems to be a guiding principal among many when it comes to investing. They hop on the latest bandwagon towards quick money again and again. The reason these people are not rich is that something always goes wrong and their plans don’t work out. I knew something was going very wrong back in 2000 before the tech bubble burst. I met a nice older woman whose complaint was that her investments were only making 22% and she wasn’t keeping up with her friends. At that point I realized that these big returns had become commonplace and people were beginning to think that they would last forever. Investing in something “riskier” just meant that you were going to make more money, not actually have a chance of losing money. This scene played out again until the spring of last year. When it comes to money nothing has had more power over people’s investing decisions then fear and greed.
I wrote an article about fear a few months ago. This one article will have an underlying theme of greed. It’s that force that causes the 4 dirty words of investing. The whole concept of “this time is different”. It is a cop-out so people can follow the crowd and hope for the best. If it’s the same thing only packaged differently, then the outcome will be the same time and again. People need to understand that sometimes good things take time. Growing your wealth slowly may not be fun, but it will help you appreciate your money more and it is a more proven track to success. You need to do homework on the investments you are buying. Try to stay on top of them and make sure that the risks you are taking are appropriate for you. That is why all of the disclaimers on investment prospectuses say that past returns do not indicate future performance. Things can always change. This really is meant more as a warning for people to watch out when it comes to their money. This time will be different is something that you hear at the racetrack or in Vegas…not a sentiment that should be expressed when it comes to retirement planning. The same old money management habits will lead to the same outcomes. If you have seen anything reputable on dieting, the advisors always say that diets are short term, and what people really need for sustained weight loss is a lifestyle change. That is the same thing that you need when it comes to your money.
With that being said, many people do not have the time to study all of their investments and they turn instead to professionals. Don’t get me wrong, we are all human and we are not perfect. Advisors can make mistakes, so can fund managers, even the treasury secretary can’t get it right all of the time. What I do know is that a knowledgeable professional can be a great asset, money well spent and peace of mind worth having. While it’s true that no one will care more about your money then you do, at least someone else can come in a close second. Having someone who watches finances daily and has specific training is a good thing. I’m not trying to toot my own horn, or anyone else’s for that matter. Let me be so bold as to assume that you are good at your job. Because you are good at your job let me also assume that you are well compensated or on your way to being well compensated for your job. Now, wouldn’t it make sense for you to focus on what you are good at and what makes you the most money and try to delegate as many other things as possible? If you can spend a small portion of the money that you invest or save every year and recruit the skills of a professional wouldn’t it be worth it? Someone who spends all of their time reviewing investments and insurance products. Who is trained in advanced planning techniques, tax strategies, risk management, and asset preservation.
If you don’t think you need such a person and you have the time and a good head on your shoulders, you can still invest and make money. That is a simple fact. I’m advising the people who don’t have the time or acumen towards investing to use a professional. There is also a time of life when a financial advisor can be priceless. That is after you are done working and saving and want to retire and use your money. It is much easier to accumulate your wealth than it is to properly distribute it and make it last. Consider the situation if you start saving and investing in earnest when you are about 30 and you retire at about age 60. This will give you 30 years to save for retirement. Your life expectancy will be about 90. That means that you will be retired for 30 years as well. That can be a scary thing when you figure that whatever you have put aside now needs to last that long. This is where an advisor with the correct training and tools can make sure you don’t outlive your money. At that point in your life an advisor can make all the difference in the world.
Now back to the concept of “this time will be different”. If you have tried investing before with less than acceptable results, an advisor may be able to help. He or she can help direct you and make sure that “this time will be different.” They can help you avoid some of the pitfalls of investing and break some of those bad money management habits that are holding you back. Someone who can help distinguish the good ideas from the bad, and help you safely through the landmines. Someone to figuratively and literally hold your hand through the bad times and prevent you from doing something rash. Those panicked moves made at the wrong time can do the most damage to your portfolio and derail your hard work. During the good times it becomes easier to make money. It’s during the bad times that a quality advisor really earns their money by providing the best advice and support that you need. Now I suppose I will get down off of my high horse and let you go make your own wise decision about how to carry on with your finances. I only encourage you to think about what I have said. Until next time… happy investing.
