Countless columnists and commentators tell you to do it yourself. When it comes to investing, that is.
Do it yourself. You can get all the information you need from books and online sites. Buy mutual funds on your own. Create your investment plan solo. Buy and sell stocks. Avoid the hassle and sales pitch. Save the money brokers and advisors would charge you.
Millions of investors do it themselves. And do good work. Millions flop at this. Millions truly need assistance and should pay for it.
I thought of this when I saw a piece by Steve Forbes. He reminded us that Congress recently added a choice for our retirement planning. It is a Roth 401(k).
Forbes writes: “There are at least 11 kinds of retirement accounts, with different rules for who’s eligible, when you get phased out, when you can, can’t or must roll something over, when you get docked for taking out too little and when you get smacked for taking out too much.
“Here goes: deductible IRA, nondeductible IRA, spousal IRA, inherited IRA, Sep-IRA, Roth IRA, 401(k), aftertax 401(k), Roth 401(k), Simple IRA and Simple 401(k).”
He reminds us there are six different income cutoffs. That is, point where we can no longer contribute. Or can no longer roll over.
You face five different tax treatments for withdrawals. Tax-free. Or tax free for only the principal. Or taxable at regular rates. Or taxable at regular rates plus 10% Or plus 25%
In other words, ‘tis a dog’s breakfast.
Various investments are just as complicated. Creating good financial plans is complicated.
And matching types of investments to personality types is a tricky matter.
Interpreting investment and financial news is frought with danger. You have to recognize what is propaganda and what is information. What is hype and what is data. And what is important and what is tripe.
Now, why do people avoid advisors like they do AIDS? Some simply want to save money. They hate the thought of paying somebody to do something they could do. Ah well, we can all change our oil and fix our garbage disposals and reshingle our garages if we set our minds to it.
Many fear that advisors will do them dirty. Either out of their own ignorance. Or out of malice. Or out of carelessness or incompetence.
This is a legitimate worry.
But tell me please: Is there a service you buy today in which you don’t run the same risks?
Tell me you really understand all your insurance. Tell me nobody ever gets the shaft from an insurance sales guy.
Tell me you have never heard of a house designed by an architect that is a piece of crap.
Tell me no doctor makes mistakes. No surgeon uses poor judgement. No dentist is careless.
Tell me no lawyer does a dis-service to a client.
Tell me no builder makes a mistake. I will show you work done on my roof and chimney.
Tell me you run no risks when you hand your car or computer to people to repair.
Whenever we pay someone to provide a service we run a risk. We have to use our judgement, check with people who came before us. And pray. We have to be prepared to change providers when somebody screws up.
My guess is that financial advisors are as good and bad as people in various fields.
When you face the jungle of choices and opportunities and tar pits that fill the investment world, you will do well to consider seeking some good advice.
From Tom ... as in Morgan.
For more columns and for Tom’s radio shows (and to write to Tom): tomasinmorgan.com.