The Blind Leading the Blind

11 September 2019, 5:04 am

In an effort to avoid failure, newer investors often seek the opinions of those around them to help instil much-needed confidence to act. This can lead to an even worse feeling of fear, as the answer is more often than not more questions. Knowing this can stop inaction ruining your future. Let me explain.

Jim (name changed for article) recently came to me for help, he had been ‘invested’ in CASH since he turned 41 – earning little more than 2.5% net of tax for the entire time on average. He was now 50 years old and every time he got close to investing, he was given questions that challenged the income generating investment he was looking at from helpful ‘friends’ – and family – who were trying avoid him suffering a loss at THEIR relationships expense.

I’ve found that friends and family don’t want to take responsibility for another friend or family members investment choices, mostly in case they are wrong and the person asking loses money on the venture. I’ve seen this exact thing hundreds of times, and almost every time we find out that the person giving friendly advice, wasn’t a successful investor, but a concerned family member or friend. Who in fact also had a severe knowledge gap when it came to giving advice in that area or navigating financial markets. Everyone has knowledge gaps, some bigger than others, however, if the potential investor chooses someone unfamiliar with the investment they are assessing, the result of the query is further confusion and the chances the person will get on and do something for their betterment becomes much less. In the worst instances, the family member or friend (unknowingly) costs Jim a pretty fortune, as NONE OF HIS INVESTMENT OPTIONS GET TO A YES EVER!

The typical way this goes is: someone, like Jim, is advised to do something by a service or product provider, which invests money for a prospect of a future gain. This gain may or may not be given in a realistic and presented in an easy to understand format, and as a result of unanswered questions, lack of trust or a severe lack of confidence, the person ‘asks for help’ with getting to the decision if, or not, to proceed. The results of this are more often than not a disaster, because the people they ask for ‘HELP’ are not a paid professional from the industry, with experience in dealing with exactly the types of investment that are being assessed, and instead are people whom the potential investor trusts would know some valuable clues as to what to do.

Friendly advice, in the long term, is binding the potential investor to a future of potential inaction. Inaction with investing for income is like not drinking enough water when running a marathon. Despite seeing the results short term of not taking on the water, you are a bit lighter and not at all parched, the person asking the query runs past the drink station (or investment) because of their friend making them uncertain, unaware of the long term consequences (2-3 hours or in Jim’s case years later) where dehydration takes the person out of running the race (or a healthy retirement) all together.

So next time you get asked for ‘help’, from a would-be investor, tell them they should ask someone who’s qualified (if you are not) to help and if you are the one asking, just verify the experiences of several whom have proceeded and get to the truth through verification of what the salesman has said to you – if they are honest, you will see it in their results, if it’s a shiny new thing and going to lose you money it will show up, just by ‘LOOKING AND NOT JUST LISTENING’. Don’t put your finances in the hands of people who don’t want to take any risk on you. You need to take a risk to get a return, Risk and Return are related, as you would know.

If we measure the risks properly through ‘DOING OUR OWN RESEARCH’ and then get on with it, we can mitigate the loss that inaction brings and not end up like Jim losing over a hundred thousand dollars in potential growth, from no matter what he bought instead of leaving his money in cash because he had some friendly advice to ask more questions….

I hope this helps you be a better investor.

Thanks and regards

Adam Carmody