5 People You Should Never Get Investment Advice From

by MIRANDA MARQUIT on MARCH 13, 2013 of excessreturn
www.sanjosefinancials.com

These days, it seems as though almost everyone has an idea of how you can get ahead as an investor. However, no matter how good the investment advice sounds, you need to do a gut-check. Can you trust this person? And why is he or she sharing such a great tip with you?

While you can listen to the investment ideas put forth by just about anyone, it’s another thing to whole-heartedly trust someone else with your money. Before you take the plunge, carefully examine the situation and the fundamentals, and then reconsider. Here are 5 people you should be wary of when they are giving you investment advice:

1. Family ( Related Topic: What is the best investment for you? )

It’s tempting to get in on that “hot” tip that your brother-in-law is offering, or get in on the bottom floor on that “investment opportunity” Your cousin is involved with. Unfortunately, too often, your family members don’t really understand investing. Like many others, they are following the herd, and that “hot” stock may be in bubble mode.

Even worse is the possibility that your family member has been taken in by an investment scam. Going in can mean that you are caught in the trap, too. Before taking the advice of a family member, review his or her track record with finances, as well as remind yourself that your family member probably doesn’t have the know-how or credentials to be giving investing tips.

2. Strangers ( Related Topic: how to reduce debt? )

Why would a stranger go out of the way to give you great investment advice? In this category are those emails you receive about penny stocks and other “opportunities.” Also, be wary of taking advice from strangers you meet in social settings. He or she might be bragging about his or her investing prowess, but you don’t really have any proof that there is a real performance capability there.

3. Co-Workers ( Related Topic: Legal Forex Scams) 

Unless you work in the investment industry, and your co-workers are all analyzing the merits of a particular investment, your co-workers probably aren’t the best people to turn to for financial advice. Instead, your co-workers are likely just behind the curve, buying when everyone else is, and selling in panic when things go south.

On top of that, co-workers are often sources of investment scams. They get taken in by scams, and then ask you to participate. They may be in earnest about the “opportunity”, but that doesn’t make you feel better after you’ve both been duped.

4. Media Talking Heads ( Related Topic: How to reduce your debt? )

It may be fun to watch Jim Cramer’s antics, but it’s important not to take your advice from media talking heads. Financial media don’t exist to inform investors. The primary goal of the financial media is to make money; any education or useful information provided to investors is merely a side product.

One of the best ways to make money is to sensationalize things. Media talking heads try to draw you in by convincing you that something is practically full-proof, or by whipping up fear about the imminent disaster. Making investment decisions based on these extremes presented by the media can lead to big losses to your portfolio.

Take the news with a grain of salt. Instead, you are better off following your own investing plan designed for the long haul, and ignoring the noise from the TV screen.

5. Brokers and Other Wall Street Types 
( Related Topic: Risking your life with brokers and advocates)

Going to a stockbroker for advice seems like a slam dunk. After all, these folks know all about investing. Unfortunately, Wall Street types probably don’t have your best financial interests at heart. Brokers are, on a basic level, salespeople. This means that they are trying to get you to buy products that will earn them a better commission.

Whether it’s someone at your local bank, or a broker with an official firm, the reality is that these advice-givers only have to recommend something that is “suitable.” And suitably isn’t the same things as “best”.

If you want solid advice from a professional, consider using a Registered Investment Advisor (RIA) or a fee-based financial planner. The RIA has a fiduciary responsibility under the law to look to your interests ahead of the commission, and a good financial planner that isn’t paid by commissions can offer mostly unbiased advice. 

Here are a few tips to know more about independent Wealth Management

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Tips on how to save

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Modern technology helps us spend our money more easily, thanks to the instant gratification credit and EFTPOS systems facilitate. If you need to do the opposite: spend less or save, then some good old-fashioned money-saving tips might work for you.

I've trawled back to find some of the best tried and tested money management skills that should be revived. Granny managed money a hundred times better than any of her grandchildren by taking this approach:

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Spend only cash

Yes. Try a week or even a month without your credit or EFTPOS cards. Pay everything in cash and know that you've not gone into debt at the end of the month. Or if you've got direct debits set up for your rent and utilities bills and don't want to cancel them, you may want to spend cash only for non-essentials.

Put your change in a jar or even a piggy bank

At the end of each day empty the coins out of your pocket or purse and drop them in your see-through jar or piggy bank. Or give something up, such as cigarettes, wine, or even buying magazines, and put the money you would have spent in your jar and watch how quickly your jar fills with coins and the folding stuff.

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Use envelope budgeting

In the old days people received their pay in cash. Good money managers would then split it into envelopes for things like rent, mortgage, groceries, public transport or car expenses, saving and so on. There's nothing stopping us withdrawing our cash as suggested in tip number one, and splitting it into envelopes. Once each envelope is empty you know that you've spent all you can on that category and that any more expenses will have to wait until next pay. Make sure one of your envelopes has the following word on it: savings.

Go back to basics with your shopping

You don't need Mr Muscle or that fancy shower cleaner. There's no cleaning job that can't be done with baking soda, vinegar, methylated spirits, washing soda, or a combination of the above. Likewise, bypass any processed food in the supermarket. Our grandparents ate meat, vegetables, potatoes and bread back in the 1950s and were mostly healthier for it. Allow yourself just one luxury a week such as: ground coffee, muesli bars, Coca-Cola or juice, individually wrapped anything, boutique breads and so on. Not all of them.

Do your banking in person

If you've overspent it's all too easy to go online and move money from one account to another. If you have to go to the bank to do it, you might think twice.

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Budget

Oh yes. Find out how much you're over spending by and work out how much that works out per day. If you're over spending $2000(P100,000) a year that's $5.48(Approx P250) a day. There would be very few people that couldn't cut that out of their spending if they were honest with themselves. Then make a decision that will increase your income and you'll soon be saving not heading for financial Armageddon.

Be sustainable

Granny reduced, reused, and recycled without even thinking of her environmental impact. She made things last longer — even things that we consider to be disposable such as zip-lock bags. She even darned socks to give them another year's life out of them.

If you have no discipline you need radical changes to your approach to money management and granny's tried and tested ways might be the answer. There is no magic formula. You need to reach into yourself to make those changes.

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