Investing in your future

I am now 35 years old and the last three years have been a huge time of upheaval for myself as well as my family. I left a career path I had been on since I was a legal adult and look to forge a new way forward. I had an idea of what I would do, but circumstances dictated otherwise. So over the past six months, as I toyed with the idea of starting this blog, I have been taking over the running of my household and the finances. I started looking into what it means to invest and how our current investments served our long term goals. I won’t say in six months I figured out investing or even trading in the stock market. I am a novice and I study the subject every day and will continue to learn, but I realized one thing quickly, our investments were not performing at a level that would get my family where we needed to be. So, I started working even harder and analyzing the track our investments had taken over the past ten years and realized one truth.

There is no one more invested in your future financial freedom than you.

Photo by Min An from Pexels

When you look in the mirror every morning, you are the only person with access to your finances who really cares about your financial well being. You might say, well I have a great financial advisor that I talk to every quarter who sends me Christmas cards and lets me know what they are doing everything they can to provide you with the lowest risk and highest reward possible. I am here to say that you are not setting yourself up for success. By passing the authority to someone else you are effectively removing the one person who is only thinking about your money. That advisor, let’s assume they are genuinely talented and care for others, has around 50-100 people they are looking after.

Let that sink in a minute.

There are 50-100 people that they are reassuring in the same way they are you, that they are taking individual care of their account. In an 8 hour day there are 480 minutes, so the best you could hope for on average would be about 10 minutes of thought given to your unique account. I don’t know about you, but I spend more than that everyday reading junk news on Facebook or looking for hilarious videos or memes. I will go so far as to say there is not much more that can be done in that time (assuming no breaks) than check the status of your portfolio, log any major movement and prepare for a call that quarter. This leaves out any time needed for reading emails that came in that day, or looking at guidance from corporate (assuming they work for a brokerage firm), and let’s not forget the most important part where they are finding and meeting with prospective customers to increase their portfolio because that’s how they earn their money.

Now this is not a post aimed at financial advisors, please don’t misunderstand me. I think they are wonderful people who do an incredibly hard job and most care very deeply about their client base. The problem is that they cannot add enough hours into the day to tend every customers needs to the level they want to. The best hedge fund managers in the world spend a minimum of a few hours a day researching, checking performance, and coming up with new ideas to increase the profitability of their fund. That is people who are managing ONE fund, and the money they get is from people who are buying into the fund, which is a ONE size fits all plan. Financial advisors cannot do that, because unless you have $2 million of LIQUIDITY (sorry, houses don’t count) you cannot be a part of a hedge fund. These souls have to tailor a plan based on your investment objectives individually. How can they possibly do it?

It comes down to mutual funds, without the time to monitor individual security positions for every client and often rules from the firm they work for, they have to invest in mutual funds. So from the beginning they are required to take an up front cut of your money (generally 1%-2% a year) and you have the pay the fee from the particular mutual fund which can range from lows of .25% to over 1%. There are reasons your advisor has to take an up front cut that I won’t get into here, but just know it is a federal guideline that this is how you must do business. So, good or bad years your money is already taking a percentage hit from about 2-4%, even if your funds lose money.

Now mutual funds differ between brokerages so I won’t go into them in depth, but just suffice it to say that most brokerage firms have their own or their “preferred” funds that their advisors put your money into. Will this be enough for what you want to do in retirement? I don’t know the answer to that question, but you do.

Go back to your annual statements and look, you will see the amount of growth per year of your account. It is simple math to do a 10 year look and see how your portfolio has performed. You may be very surprised at what you see. If you invested in an S&P 500 index fund for the past 10 years you could expect about 15% and this has been a long run bull market of almost historic proportions for the past 10 years. The NASDAQ was even better. Use those as very beginner benchmarks to measure your performance against. I’ll tell you before factoring in inflation our 10 year average had been between 4-6%. If your advisor is doing 15% or better please stop listening to me now and go ahead with your bad self! I can only speak from my experience and others I have run across. America alone added 675,000 NEW millionaires last year, you can do the math for ten years.

Photo by David McBee from Pexels

Now you may say, $1 million dollars isn’t what it used to be and you would be right. In the future it will take significantly more to retire comfortably, but we can surely agree it’s a starting point. Why do I say all of this? Because it was within the past few months I realized where I wanted to be in the future and that by just leaving my financial future to someone else, I’d likely never make it.

So I began simply by listening to a podcast. From the podcast I picked up books about investors who I agree with. From those books I graduated to finding courses on stackskills and Udemy when they went on sale. Some of you may say, “Well sounds like you are well on your way to becoming an unsuccesful day trader.”, and you’d be half correct. I am on my way to being able to intelligently invest my own money, which coincidentally with a little bit of reading and research led me to some very nice returns on investments made over the past 9 months. My track record is not complete or long enough to tell a success story, no. It is however a start and has opened my eyes to the possibilities that exist to take care of my money in a way that I can feel comfortable with. I live in this Corona virus age with everyone else and my portfolio has been rocked on bad days, just like everyone else’s, but the difference is I have the confidence in my attention to detail and care for my money to not worry about it.

Photo by Burak K from Pexels

I highly encourage you to start with a podcast or a Udemy course on the very basics, just understanding how to navigate the market and what the things you see on the screen of CNBC mean. There are a number of courses on sale at Udemy and other places that for around $10 will give you a starting point. There are free podcasts out there on Spotify and other services that will guide you through an education about investing. I could name my favorite, but as I’m not sure how much appreciation they would have for being mentioned in this truly novice article I don’t want to disclose yet. I am actually attending a seminar this weekend by the host of one of these podcasts I listen to and I hope to ask some questions about their early episodes which I think may help a number of people. Maybe in my next investing post I will mention them by name as I lay out my personal approach to investing.

I hope you will take that 10 minutes your advisor has to give your account every day and start to learn, what I love about Udemy courses is that the classes are often 5-10 minute blocks. Put a book about investing on your reading list (after checking out the author and their track record) and chip away at it slowly. It may not interest you, as it does me, but it will make you so much more informed and powerful when it comes to your financial freedom. I hope this has helped you and if you have any individual questions, please feel free to send them on to me and I will do my best to point you in the right direction.

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