If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.
Tuesday, May 31, 2011
I am an advocate for do-it-yourselfers. But not for those who do not know, or refuse to learn, the basics.
Some true life stories from "Financially Fit" on money mistakes;
1. Bought vacation home as an investment.
2. Too much money in employer stock.
3. Trusted pro picks and ignored fees.
4. Too risk averse for age.
5. Short-term savings in growth stock.
These mistakes are simple, but very costly, errors people make over and over and are easily preventable. A weekend reading a good investment book (for example, The Elements of Investing by Malkiel and Ellis)
would prevent most of them. No. 1 and 2, for example, are diversification issues. #3 is one that is hammered home by this site and the aforementioned book. The bottom line is most pros will underperform over the longer term and fees will eat up a nest egg. #4 is about asset allocation. The most important consideration in deriving an appropriate asset allocation is age. #5 is covered by a very simple, basic rule - if you need the money within 5 years, keep it in cash equivalents or near cash equivalents.
Again, these are errors that shouldn't be made. They are like drinking too much and driving, skating on thin ice, or driving and texting. Really, you just have to scratch your head and wonder.
To be sure, there are more difficult issues in finance. For example, how to determine the upper limit on student debt to take on in pursuing a college education or the appropriate withdrawal rate in retirement. The mistakes described above aren't in this category.
A short time ago, there was a story in the local paper about a do-it-yourselfer who attempted to hook up a gas dryer. He blew his house to smithereens and killed his wife. Please: if you are not sure what you are doing investment-wise, spend an hour with an investment professional. Avoid the silly mistakes.