Thursday, 22 October 2015

My two cents about financial advice

Sometimes you ask yourself if you can do it or you really need professional help? I was lucky enough to study economy for many years, but not all are so fortunate. Of course, every skill can be learned. The problem is that a lot of the people i know lack basic financial education. And they need some advice. Here is the trick. Everybody got an opinion. My uncle Paul try to give me advice all the time, yet he is barely end his meets every month. My postman told me he know a lot about investing. Everyone know. But not every one apply. As Cicero said "Advice is judged by results, not by intentions. If we listen to some others much more clever than us, here are the financial advisers not to be trusted on the long term.
1. People who lack necessary qualification and proven results.
2. Someone who build his wealth in another business or real estate, because stock investment is something different.
3. Authors and writers, because they are better at writing, not investing.
4. Academics, because they have some interesting theories, but their experience lack the practice , and real life is reacting in a surprising way sometimes.
5. Someone who is selling investment products, because the inherent conflict of interest that biases the advice you receive (true for most stock brokers and financial planners).
6. A person who made his wealth through marketing investment advice instead of actually investing

The best recommendation is given to you by proven actual results, and often you can see the FIRE in their eyes. I hope this helped you now, as it would helped me 10-20 years ago, when i did so many mistakes. The trick is to always check who are the best in the field, and to learn from them. Aim for the stars. If your adviser will tell you how can you lose your money first, before you find how you gain more, then he/she is a good one. If is telling you about the risk management and preserving capital, personalized to your needs, you already feel like winning the lottery.

 Questions to ask first, before you ask someone to help:

1: Is the adviser already successfully doing exactly what he is advising you to do?

2: Is the adviser still “walking the talk”, or is he just “marketing the talk?”

3: Will the adviser provide documented proof that his advice works?

4: What is the adviser background, education, training, skills, and experience?

5: Has the advice been tested and proven successful through multiple market cycles?

6: Does the advice provide a balanced viewpoint with both positive and negative attributes or is it a one-sided sales job?

7: Does the advice over-simplify the inherently complex nature of investing in an effort to make the sale?

8:Is the advice personalized to your needs or is it generic?

9: Is the advice a complete investment process or a half-truth?

10: Does the advice focus primarily on risk management and capital preservation?

11: How is the adviser compensated? What are his conflicts of interest?

12:  Is the advice based strictly on facts or does it include meaningless opinions?

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