Ever heard the phrase” if it sounds too good to be true, it probably is?” I hope so because I wrote about it a few weeks ago. But just in case you missed out on that, here’s another word of warning. I was reading an informative article the other day at usatoday.com entitled 10 Myths About Investing And Finances That Trip Up People that goes over a few common myths, such as buying a home is always better than renting, etc. You know, basic stuff. But we all need to be reminded of the basics every once in a while. At the end of the article in the comments section is a comment by a self-proclaimed financial planner who calls herself “sassy33″. Sassy33 states
I am a financial planner and as long as these Newspaper and Magazine writers only consult with no-load funds like Vanguard for information they are never going to be giving good advice.
If you are advised everyday that the only way to invest is in the SP500 index and that you should settle for less than average, that is what you will get - less than average. S&P500 Index return minus fees will always be a less than average return.
Let’s see, a financial advisor claiming all the commonly-taught investment advice to invest in index funds, diversify, etc is wrong. Fair enough. I bet she would be more than willing to give you “good advice”, though, for just a small fee! Or maybe a nice fat commission when she invests your money in expensive actively-managed funds with large upfront loads.
It is extremely important to be skeptical whenever somebody tries to tell you commonly-accepted wisdom is wrong. You should always ask yourself “what does this person stand to gain by convincing me of their point of view?” In this case, sassy33 stands to gain quite a bit by persuading the public they need “expert” advice to invest their savings properly. In reality, we know index funds tend to have above-average returns over the long term, contrary to what this dishonest (or incompetent) financial planner says. So next time somebody gives you financial advice, ask yourself what they stand to gain from the deal. If the answer is “a lot”, be wary.
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1 In Investing, Trust But Verify | Amateur Asset Allocator // May 11, 2008 at 12:24 pm
[...] of success are likely to be far different from your own. Of course, it’s important to do your own homework to avoid being scammed, but it’s not even a matter of dishonesty or conflict of interest. [...]
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