The One Investing Goal That’s Important
“Wiping out the human race? That’s a great idea. That’s great. But more of a long-term thing. I mean, first we have to focus on more immediate goals.” - TWELVE MONKEYS
written by David Peoples & Janet Peoples, directed by Terry Gilliam
(3-minute read)
I was recently speaking with a friend about his Loan-out company. He was wondering how he can add more money to his Loan-out’s 401(k) instead of his Roth IRA. After explaining the benefits, I asked him if it all made sense. He said yes then immediately asked, “So… what should I invest in?”
Hoo-boy the amount of times I’ve been asked that! As per usual, I could not answer. Please don’t get mad at us when we can’t answer what appears to be a simple, straightforward question. For those of us who do real financial planning, we can’t honestly answer that without more information. I promise we’re not withholding some secret sauce from you. We’re not trying to be a slick salesperson who wants to control your money. Well, I’m not anyway; I can’t speak for those bad actors. So what gives? Why can’t we answer your question?
LIABILITY
For beginners, we don’t want to get sued. This is a long-shot given that you may have asked me at a cocktail party and we’re friends. But we’re still trained to use certain language since our livelihoods depend on it. We have state and federal regulators who oversee our industry. These regulators give the proverbial “knock on our door” every few years for, what they like to call, an Examination.
These Exams consist of opening our books, looking through our various client communications, scrutinizing our recommendations, poring over our investments, and the list goes on. They want to make sure the public is protected as best as possible. As Financial Planners, we can get fined, suspended, or shut down if we are not in compliance with certain rules.
Some of these rules involve recommending investments. If we recommend an investment that was clearly not suitable for the investor, then not only could the investor have an issue, but the regulators may have something to say too. If we truly want what is best for our clients, and real Financial Planners do, then we want to avoid giving inappropriate advice.
IT’S ALL ABOUT YOU AND ONLY YOU
So what would be considered appropriate advice? This comes back to our conversation that we had over the grill while flipping burgers. In that moment, it’s difficult to give a proper recommendation for where you should place your money. Even if you’re a good friend or family member, I need to know more about your situation.
The biggest thing that should matter to you is your goal. What is your goal for this money? That’s really the only goal that matters. Whichever one is most important to you. It doesn’t matter what I think. My goal may be different than yours. What I think is important may not be what you think is important and vice versa.
Try to control the urge of throwing your money at something you heard your friend made a killing in. Perhaps you read an article about muni-bonds being tax-free. Your co-worker has all her money in gold because she believes the economy will crash, and then she’ll be sitting pretty on piles of gold!
None of that matters. The only thing that matters is whatever you’re trying to accomplish with your money. Your goal is important, not anyone else’s. Whenever a friend tells you that “you need to invest in this,” remind yourself that you have a different goal. You can thank them for the tip, but remember for whose goal they’re solving.
There are plenty of other things to consider when investing. But always remember that your goal is the most important.
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