To someone in the financial services industry, this may be an obvious question, but I don’t work for them. I do this job for you!
When I was a child, English was my worst subject. Ironic considering all the writing I do now, right? I remember one teacher telling me that, when we write, we should assume the reader knows nothing about our subject.
If they’re honest, I think most professionals would say it can be easier working with someone who knows little about their expertise. You come to me for help with financial management, so never be afraid to ask questions. Also, please don’t feel like you need to impress me with your knowledge.
Unfortunately, finance is a difficult subject because the thickness of our wallet is tied directly to our ego. We would rather struggle than acknowledge our need for help with our financial situation. There are many “successful” people who are one unexpected $500 expense away from being homeless.
This happens every day in our country. It’s easy to blame bosses, corporations, and politicians for our struggles, but it might be time to admit our pride is at fault as well. Having the courage to ask for help might be the greatest investment you ever make.
Today investing is open to everyone.
Investors are often portrayed as the suit making a shady deal in the back room of a business. Sure, there have been bad apples in financial services just like every other industry
throughout our fallen world’s history. I think we use the dark past of the financial services industry as an excuse not to invest.
After all, the financial advisor is just going to rip us off anyway, right? Unfortunately, that attitude is an investment in itself. The truth is almost every action (or inaction) we take each day is an investment.
Savings are important, but having everything in a “safe” savings account is an investment choice.
Unfortunately, this is normally a choice led by fear and is rarely rewarding. Usually, the interest earned in these accounts is less than inflation. This means your money is sitting there safely losing its purchasing power.
When you’re in the grocery store saying, “A dollar sure doesn’t go as far as it used to,” you are experiencing inflation as a loss of purchasing power. The only way to fight it is by increasing your purchasing power, which means you need the courage to put some money at risk.
I’ve heard the lottery being called a tax on gullible people because the chance of winning is rare. Similarly, I think inflation can be considered a tax on fear. We are so afraid of losing our investments that we WILLINGLY let our money sit in a savings account, losing value each day.
No, it’s not the banks’ fault or a politicians’ fault this happens. We as citizens of sound mind and body make this choice each day! Of course, fear is healthy to a point and some of your savings should be held in these safe accounts.
You’ll have a tough time reaching your goals, or even getting ahead in life, without putting some money at risk through investing.
I’ve posted before about when you should invest, but we aren’t always clear about in what we invest. Think about your retirement account. If your job offers a 401(k), take a moment and look at where the money is invested.
You may have to dig deep into the statement, but you should see a mixture of stocks and bonds. They may be individual companies, mutual funds, ETFs, REITs, commodities, etc. What you won’t see are extra mortgages on rental property, baseball cards, comic books, or a small business loan for your restaurant idea.
Yes, there are cases where these things provide high returns, but they require hard work by you and follow through by other people. There is a reason why collecting, cooking, and home renovations remain a hobby for most of us instead of the investment solution for your future needs.
If only we could invest in the same products we see in our 401k, but without the restrictions of retirement accounts. Well guess what! You can!
Many financial planners, me included, promote retirement accounts because they are so important.
Social Security was never meant to cover our full retirement needs. It is meant to be a supplement. I tell clients their retirement resources come from three parts: Social Security (Government), 401k/Pensions (Employer), and YOU. The part completely controlled by you consists of savings accounts, IRAs, etc.
We promote IRAs because people like the tax advantages. Everyone loves the idea of a tax break and the feeling like we’re outfoxing the government. While we may like the tax break, we don’t like the penalty for using the retirement funds early. The penalty isn’t that bad and can usually be avoided, but it is enough to cause indecision.
Similar to fear of loss, the fear of fees can cost you through inaction. Time is your greatest asset, and it cannot be invested wisely when you are controlled by fear. The rags to riches stories that inspired so many throughout America’s history happened in spite of fear.
Maybe you aren’t ready to commit to a retirement account with me, but you can still invest.
No, I won’t be calling you to buy the next hot stock like you see in movies. I also won’t harass you for constant commissions like the sleazeball that lost your parents’ money in 1996. Fortunes are lost daily by people who hold on to grudges like that.
I’m not licensed to buy and sell individual stocks for commissions, and I don’t want to be. However, I can use the same tools and build a portfolio, like in a retirement account, in a brokerage account. The paperwork to open the account is different, but that’s all. Sounds easy enough, right? What are you waiting for?
The only downside to the brokerage account compared to a retirement account is the taxes. Each time our trading team makes a move in your brokerage account, a taxable event occurs. This means that you could pay a tax on the profit made. Of course, we can work with your CPA and make moves to lower the tax burden as much as possible during the year.
Capital gains taxes from selling stocks can be a shock to people and sour them on investing. However, to be fair, we are taxed in savings accounts as well. Unfortunately, most of those accounts don’t make enough interest to actually trigger a tax.
Taxes suck. Nobody enjoys paying them, but they shouldn’t hinder you from moving forward. Once you achieve financial independence, you’ll have plenty of time to argue with politicians. Until then we’ll just have to grin and bear it…and vote, of course!
Investing with me has two rules.
First, we cannot invest more than you are willing to lose. If you want to gamble, bet on sports. We don’t do that here.
This rule is more for the beginner investor. It takes a lot of courage to start investing, so the last thing you want to do is invest your mortgage payment hoping to make a quick return before the payment is due. You could lose your money, your home, or even your marriage. Not to mention you’ll probably never invest again based on a bad experience that should have never happened.
The second rule is that you must be willing to lose. Your portfolio can go up or down every day. Watching it constantly can cause gray hair and heartburn. That’s why having a plan with clear goals is so important.
The worst mistake investors make is they panic and sell when their portfolio value drops. When our money is working for us, patience normally pays off. After all, you pull an arrow backwards
before it flies toward the target. In investing, the target is your financial goal. The path may be bumpy, but hitting the target is what matters!
Conclusion: Is investing only for retirement?
Yes, you can invest without it being a retirement account. You can do it on your own with the technological resources available, but I’ll be glad to handle that for you. Taking risks can be scary and I understand the fear of losing money has a special hold on us.
I can’t promise you won’t lose when you invest, but I can promise investing is the best way for you to pursue your reasonable goals. You work hard, shouldn’t you expect your money to do the same? When you’re ready, email me!
