Making The Decision Not To Invest is More Expensive Than You Might Think
By Anthony Rhodes
I admit it; the business of investing is a very
challenging one, indeed. Our consistent use of esoteric industry jargon and
complex mathematical algorisms is enough to intimidate just about anyone who
may be considering involving themselves in the process of managing their own
investments. Add to this milieu the high stakes of potentially losing all of
your investment capital, and there’s no small wonder why so many seek out the
counsel of professionals to perform such tasks. While the logic behind this
action is certainly understandable (and, by the way appreciated) I somehow fail
to understand the thinking of those of you who refuse to involve yourselves in
the process at all. Are you simply oblivious of the effect that inflation has
on your money? Or, are your decisions based on one of the many investment
myths, which unfortunately influence the misinformed?
Whatever the reasons, whether you’re aware of it or
not, the decision not to invest is
having a considerable effect on your family finances, and is potentially
costing you more money than you know. This week, in our first part of a two
part series, we’ll tackle a few of the myths which contribute to this idle
mindset, and attempt to inform our investment phobic brethren of the true costs
associated with sitting on the sidelines.
Myth #1: "I Can't Afford A Financial Advisor"
Myth #2 "All Those Guys Are Crooks, Anyway"
Another of these contributing myths is the
assumption that all of us associated within the investment profession are no
more than slick talking, pull-the-wool-over-your-eyes, bandits, who are just
waiting for the opportunity to trounce on an investment naïve public. Many
trade publications and news organizations help to solidify this image, by only
showing the negative side of the profession; which usually includes some
alleged, meticulously scheming stockbroker being hoisted away in handcuffs. I
don’t intend to imply that our line of business is without flaw. The investment
profession, along with many others, has its fair share of unsavory characters.
And, just like other professions, the antics of these individuals unfortunately
overshadow the more predominate, successful stories of the business; those
which the non-investing public normally hears very little about. To help
prevent employing such an individual, as you prepare to hire a financial
advisor, I would suggest performing the same principals of due diligence that
you should when hiring a professional in any field: conduct interviews, ask for
references (and check them) and review their professional database for consumer
complaints and past indiscretions. When you find the right person for your
particular situation (and you will know), I think you’ll be pleasantly
surprised to find that he or she doesn’t have a horned brow and pointed tail,
at all. But in fact, upon complete reflection of the relationship, you may
actually conclude them to be a gift from above.
Myth #3 "I Don't Have Enough Money To Invest"
Amazingly, some of the people who say that they
don’t have enough money to invest are the very same people who actually can’t
afford not to. Many of these individuals often have so many different sources
siphoning from their finances, that most would need the proceeds generated from
investments simply to break even! Usually, poor economic decisions help
contribute to their arrival at this conclusion. Some may be paying $400 a month
on a car whose value depreciates on a daily basis, and others may be supporting
an unsustainable shopping habit. But whatever the vice, the commonality linking
them together is the unquestioned fact that their money is hard at work for someone
else, instead of working hard for them. This is why investing is so
important. When one invests, they are putting their hard-earned money to work
for them, instead of for someone else. As for the money, if you can
afford a fast food lunch five days a week, you can afford to invest. The notion
that you somehow need these large sums of money to begin the process is simply
untrue. You may not be able to employ the services of a professional at those
rates, but placing those proceeds in well positioned no-load mutual funds will
more than adequately suffice, until you have enough money accumulated to hire a
professional.
I hope this myth busting portion of the series
helps you to gain greater comfort regarding the possibility of investing. And
although I don’t expect you to come rushing through the doors of your nearest
investment professionals’ office anytime soon, hopefully, those seats are
beginning to feel just a little bit more uncomfortable. Next week we explore
the actual costs associated with non-participation, and believe me, you can’t
afford to miss it.
(Anthony Rhodes is a
Registered Investment Advisor and owner of wealth management firm The Planning
Perspective www.theplanningperspective.com)
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