Personal Investment Advice
Financial advisors often tell you that the best thing you can do when investing your money is to start early. Financial planner Carl Richards claims that investing early is the best decision you can make because of compound interest. Richards is the director of investor education at the BAM Alliance and is the author of “The Behavior Gap.” He works in Park City, Utah.
In a New York Times article, Richards writes that two of the major mistakes that investors can make are to either fail to clearly establish their own goals, or to invest based on the goals of someone else. The latter of the two mistakes can become more problematic when investors make decisions based on what others are doing. Richards outlines the following examples as common instances where this can occur:
1. You hear that Harvard’s endowment is buying dairy farms in New Zealand.
2. You hear your wealthy uncle talking about how important it is to own municipal bonds. He has to be really smart because he’s so wealthy, right? And what he’s saying sounds so sophisticated that you think there has to be something there.
3. You hear the cool kids who just got hired out of Stanford’s M.B.A. program talking about investing 100 percent of the 401(k) in stocks. (They must be smart too. They went to Stanford!)
The above examples illustrate how investors can often be influenced by the knowledge or investment decisions of others, but Richards points out that considering your own investing goals is more beneficial in the long run than following the actions of others. “…while dairy farms, municipal bonds and stocks might be good investments, you aren’t just looking for good investments. You’re looking for good investments that will help you reach your goals.”
The most fool-proof solution to making investment decisions is to work with an investment firm and financial planner/advisor with the experience needed to understand your personal investment goals. This will help ensure that you put your investment dollars in the right place.