Investment Advice Pet Peeves

A rant from Barbara Stewart is worth its weight in gold.

Living

Barbara Stewart
September 28, 2014

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  • I try hard to be a positive person but every now and then I just have to rant! Peeve #1: Just because someone is on the radio, television or in the newspaper, it doesn’t mean they are qualified to give investment advice Our industry is not well-regulated in this regard. The media always needs content to publish or air, and of course the strongest personalities make for the best entertainment. But who protects the consumer? It is one thing if someone exciting is trying to sell you soap but the consequences can be more serious when they are selling you investment products or ideas. Unfortunately when it comes to investment advice, it is “buyer beware”. There are a gazillion so-called accreditations and designations but they all sound the same to the average person. Some financial courses require three weeks (or less) of study and some require three years (or more) of study! There are only a handful of truly professional designations that self-regulate properly: I have the CFA designation myself, so think it is best. Of course there are some industry veterans who don’t have a professional designation but do have the credibility and track record to offer sound advice. Your best bet is to Google the name of the person and do your own online research – it only takes 30 seconds. Peeve #2: One size fits all! I cringe every time I hear sweeping statements about what investors should do based on their age. Have you heard the Rule of 100? Take a hundred, and subtract your age, and that gives you your optimal stock asset allocation (the rest being in bonds and cash.) A 30 year old would have 70% in stocks, and a 80 year old would be only 20%, and so on. It isn’t even a good rule-of-thumb: many younger investors are highly risk-averse and prefer to own only short-term bonds, and many older investors have the majority of their portfolio invested in stocks because they want to grow their wealth for the next generation. The time horizon for investing is indeed a factor that goes into an investment strategy. But a specific investor may have multiple time horizons to consider: retirement, buy a vacation house, gift money to a child or grandchild, etc. A proper investment policy includes many inputs such as: return requirements, risk tolerance, time horizon, liquidity needs, tax considerations, legal constraints, and unique preferences. Age is just one number among many. Then there are the headlines that offer us generic advice such as “everyone should have a balanced portfolio”. Says who? Someone who doesn’t know a thing about you! And how on earth would they know what type of portfolio is appropriate for your particular situation? Looks can be deceiving and talk is cheap. Be careful who you take advice from. Via 24 Hours