We are told our entire lives to go to school, get a good job, save for retirement in an IRA or 401k. If we are really lucky we may need to hire a Financial Planner to help us with all our "extra" money. Having spent some time in the financial industry, I know first hand that it is less than perfect. Financial entertainers get paid big money to "entertain" you. Financial Planners get paid money even when you lose money. They get paid just by having your money. Life Insurance guys get paid big commissions up front.
I hear a life insurance guy on the radio rip on Dave Ramsey like he's a couple cans short of a 6-pack. Then I hear a Financial Planner rip on the life insurance guy because he's the scum of the earth and in it for big commissions. Then I hear Dave Ramsey rip on everyone because they have credit cards.
None of them are affected if they are wrong or right, and what no one will tell you is that they don't really know. They think they know. They act like they know. They believe they know, but in the end they feed you a bunch of educated guesses that are all based on the same inadequate statistics. The financial planner is no surer than the life insurance guy and no less evil.
I know a lot of people will be mad at me for saying that financial planning/advising/entertaining amounts to nothing more than educated guessing.I often find that I have that effect. In fact, when you meet me you either love me or hate me. That's because I'm a know it all and I'm always right. Of coarse, most people hate me at first, but learn to love me in the end.
In college I majored in finance, and as part of my major I studied portfolio therory. I could go on for hundreds of pages explaining the faults of portfolio theory, but that is boring, it's been done before, and not what this post is about. Any way, statistics are awesome. I had the flew durring my last statistics final. I threw up in the garbage can, almost passed out AND got 104%. I learned a few things about investing from statistics:
- Statistics does NOT equal reality. A good financial planner can give you a mathematical solution to your investment problems. Statistically you will win, get a good return and die rich. That's on paper. So they will have you sign a waver that basically says if you loose all your money you can't sue. If it's such a sure thing then why do you have to sign the waver?
- There is no such thing as a sure thing. No matter how much math you do to lower your risk it doesn't mean it's safer. The only way to lower your risk is by educating yourself. Even then, there is no "sure thing," but at least you can manag your risk.
- Numbers are easy to manipulate. All you have to do is skew the sample, or use a different kind of average and the next thing you know you have the results you want. Most financial planners base their guesses on previous performance, but there are so many variables involved it is impossible to accept that as a guarantee of future performance.
- Statistics have nothing to do with what I'm trying to say.
So what do you do? Invest In Yourself. Get a Financial Survival Kit. Do your best to educate yourelf and manage your risk. The people that will succeed in this financial world, are the ones will to educate themselves and be responsible for their financial future.
As Awlays, Be Smart and Thrive
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