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Let me preface my remarks by saying I am certainly no expert in terms of financial planning, just an ordinary Joe who, like most of you, is trying to make ends meet and put some money away for a rainy day. As a rule, I generally do not trust financial planners. I've heard a lot of bad financial advice over the years and I am wary as a result. I look at most of them as car salesmen from the 1970's when they wore polyester pants, white shoes and white belts. However, there are some good ones out there which can be typically found through word of mouth, certainly not those silly commercials on television.
The term "investment" sounds more like something connected with fashion as opposed to finances. Obviously, it refers to the purchase of an item or asset in the hope it will generate income or appreciate in value, but years ago it meant the act of laying siege to something with military force, which seems to be a more suitable description of my finances. One of the first lessons I learned over the years about investing was:
"If you are relying totally on your own expertise to make investment decisions, then you likely have a fool for a client." If we were all experts, we wouldn't all be working (and I certainly wouldn't be writing these columns).
We all worry about our financial future. Some people do well, but I suspect most of us are in the dark as to what to invest in. There is, of course, the stock market, bonds, annuities, precious metals, gems, real estate, etc. You can even invest in commercial prison systems if you are so inclined. Certificates of Deposits and Money Market Funds used to be considered solid investments years ago, but I don't think too many people gamble on them anymore. That's just the point, it is a crapshoot as there are so many areas to invest in and enough variables to boggle the mind. It should come as no small surprise when people get caught up in a Ponzi scheme; this is when greed supersedes common sense. Consequently, we make some bad decisions along the way. This leads me to my next observation:
"There are no guarentees for success." Even if the company or investment seems fine on the surface, there are many other external influences affecting it, such as a market dragging it down, changing governmental regulations, inflation, or the monetary exchange rate. This brings up my next point:
"You have to watch your money at all times."
As a child, my mother opened a Passbook Savings account for me in order to teach me thrift and the need for saving money. I basically learned to put my money in the account and forget about it. When a bank statement came in, I was giddy with the idea of earning interest. It was simple, it was predictable, and I didn't have to worry about it. However, due to the many types of investments available today and the rules associated with them, following your portfolio can turn into a full time job, which most of us cannot afford to do.
Over the years, I have learned a few other harsh realities:
"If you hear of a new stock or investment opportunity, it's already too late to capitalize on it." Others are already in on the ground floor and they will be the ones profiting, certainly not you.
"The moment you purchase a stock, you can count on it declining immediately." Investments are somewhat Newtonesque in nature and rarely violate the laws of gravity when you purchase them initially.
"The moment you sell your stock, it will either immediately soar to new heights, split, or both." You are dumbfounded by this as you held the stock for several years and it did nothing during this time.
Some would say I have a defeatist attitude about investments. Frankly, I think I am more pragmatic than most and recognize investments for what they are: legalized gambling. Just as in a casino, the only people who truly understand the odds are those who control the game. The rest of us are just little guys placing simple $5 chips on the Pass Line.
I wonder what my Passbook Savings Account would be worth today had I not cashed out years ago? Probably a small fortune. The last lesson of investing should be rather obvious: "Hindsight is always 20/20."
Keep the Faith!
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Copyright © 2012 by Tim Bryce. All rights reserved.