Archive for March, 2010

What, me go to an investment advisor?

March 26th, 2010

I’m my best investment advisor
I’m good at handling invest¬ments. Anyway I don’t have time to go to a professional. But read this: a re¬cent Northwestern University study that showed that about two-thirds of participants in a survey thought they were managing their money a whole lot better than they really were. Overconfidence made these investors ignore the reality that their invest¬ments weren’t as strong as they thought.

Overconfidence
Whatever the reason that brings overconfident inves¬tors to an investment advisor, once in the conference room the overconfident investors tend to have distorted expec¬tations of their advisor. Ad¬visors who recognize this be¬havior will spend ex¬tra time with these clients explaining what’s realistic to expect, and help clients un¬derstand the metrics that can reasonably be used in deter¬mining investment success. If you or your spouse feels a little too confident in your ability to manage money, take a humbling look at all of the Wall Street experts who lost billions last year and take stock of what you have that they don’t.

Under-confident
On the other hand, under-confident investors know that they don’t know it all. Many times I’ve heard people say, “I don’t know much about money, but I have a knack of picking winners.” I like their vote of confidence but none of us has prophetic vision.

The future
So when people suggest that they can predict the future, I get a little skeptical.

Over¬confident advisor meets under-confident investor
What happens when an over¬confident advisor meets an under-confident investor? Unfortunately, this isn’t the opening line of a joke, but a recipe for financial disaster.
Try to identify where you and your advisor fit on the confi¬dence spectrum, and then as¬semble a portfolio that will work for you. Take a long, hard look at your assets, in¬come, and goals, and then get to work on putting together a rational, reasonable, finan¬cial plan.

How I do it
I started with an advisor. I joined one of these stock advisory services and read their tips avidly. I didn’t have much to invest but whenever I saw a tip that was within my reach I bought those shares. When the recession started I watched the value of my portfolio dropping each day. I understood then that my share advisory service was not operating properly in the falling market. I sold a few stocks at a loss and began buying low priced shares. As soon as I made $100, I sold and put my meager profit into buying another low priced share. I picked the shares by price and not by anything else.

My system worked
I bought Ford Motors at $3 and sold them at $4. I bought them again at $3.50 and sold them at $4.50 each time chalking up a $100 gain. My portfolio which had dropped dramatically stalled and then began to climb slowly. I quit my advisory service and started reading the papers, buying and selling on educated tips. My system worked fine.

Tags: Ford Motors, Investment, Investment Advisor, Overconfidence
Posted in Economy, Finance | No Comments »

A healthy man and his healthy bank account

March 25th, 2010

Health is not all about money
I went back to the gym this morning. It’s on the top floor of the mall across the street from where we live, convenient, clean and a nice clientele. I had been a regular there for some years and didn’t think it really did me any good other than keeping the guilt down. When the recession started and I lost a few of my writing clients and my income dropped drastically, I cut back on as many expenses as I could. The gym was first out of the window. Other things followed quickly until I was on an even keel.

The monthly payment problem
One of the problems of joining a gym is the financial side. I have no complaint about the monthly cost, but rather about the ‘contract’ that you have to sign. The contract is usually for a minimum of 24 months and payments are made through your credit card, making it virtually impossible to cancel. Whatever happens, the payments go through on the specified date every month. You get up feeling tired and don’t go, that’s your problem. You feel like dropping out for the winter – that’s your problem. If you take a holiday or become ill, you bring a copy of the air-tickets or hotel booking or a doctor’s letter and they credit you with the missed weeks or months.

You are locked in
I hate the “locked in” feeling of such a contract. Another place that I gave up on was the art school and my painting group there. It was just plain expensive but here the deal I signed was for monthly payments via the credit card, only for the months that I attend. No long term contracts.

Back to the gym
I was wrong about the ‘no benefits’ from going to the gym. After I stopped going there I began walking in the streets and I quite enjoyed the change in scenery and faces. I soon began to find excuses not to walk. After a month or so I wasn’t walking at all. Then I found myself short of breath whenever I had to walk. I panted up a single flight of stairs and worst of all, I found myself walking unsteadily, like an old man, weaving my way down the sidewalk. That decided me.

Walking lessons
Some years ago, a young man appeared in town and offered free walking lessons. We would meet at 8 of an evening and he would lead a group of 20 people through the streets in single file. Often he would stop and take a critical look at each one of us as we passed him. He then came over and explained how we were walking, why it was wrong and what we had to do to correct it. I remember his lessons very clearly and I still walk to his specifications. So here I am, back in the gum and getting fitter every day.

Tags: Bank account, Healthy Man, Payment Problem, Walking Lessons
Posted in Finance, Personal / Internet | No Comments »

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