Friday, November 25, 2011

Money Talks

Just so you know, I wanted to post this really nasty post that I drafted last night and then decided against it. I am done being negative. I have a lot of opinions about a lot of things and I have decided to be a lot more selective with the ones that I share. I am happy to share if I am asked. I just don't want to share if I don't think it is appropriate to share.

Is this a sign of growing up? I don't know. I know that I am judgemental and I judge a lot of things all day every day - but most of these things are private. There are some that I share with my closest friends. I don't see why I should share to everyone all the time. I mean, there are things that are appropriate to share and there are things that are not appropriate to share.

Now onto business.

Yesterday I met a financial planner. Yes, I know, I am financially literate, I understand all things financial - except for derivatives - but for some reason I feel absolutely inadequate when it comes to investing. I can manage my money - budgeting, mostly - but when it comes to investing, I am so clueless it is actually not funny. I lost a lot of money in the GFC - and it was a very expensive lesson. I lost a lot of money through mindless shopping and I am pretty sure it is a pretty expensive lesson too - I just never quite tally up all the numbers.

Back to the financial planner. These breed make so much money out of people - the figures that she quoted are no joke. And just like everything else that involves money going out of your pocket - it becomes serious. It is like a job - it involves money exchange, so it becomes serious. If money is out of the equation, I am pretty sure it is not going to be treated with the same degree of seriousness. Or at least, you would not make time for it as you would do had money exchange been involved.

I don't know how much research she has done about me, but let me say that she was impressive. She impressed me - and I am not easily impressed. I guess when you want to make that much money with people, you would have to be that impressive. Yes, she is passionate, I get that. I like that she is passionate. But what I would like to know is how good she is when it comes to meeting my financial objectives. And I think my issue is not so much about how much I have for investment - but rather how I am going to invest and how to maximise the returns with what I have right now. And this return is never guaranteed.

So essentially - what is it that am I paying for?

For that amount of money, I could go for a financial planning course and become a financial planner myself? I am not thinking of a change in career because quite frankly I don't want to start from the bottom yet again, and I prefer to advance in my current career rather than being over-qualified to do something else. In this case, I don't think I will be, but I can never predict market sentiment when it comes to these things.

More importantly - what do I stand to benefit from this spending? I don't mind paying for the advice insofar as it is a good advice. I don't mind paying for something that is going to generate me a lot more money. The only problem is this - it is a well documented phenomena that financial advisers do not always beat the market, only 3% of them do. The chance of the planner that I saw being this 3% - I am not too sure.

To what extent should I believe the academic literature that basically said that 97% of financial advisers are useless? I don't know. But the odds are against me in this case, so I am inclining towards believing it just to err on the safe side.

So all of these consideration, plus talking to a couple of people I trust, so far leads to a conclusion that is leaning more towards the negative rather than affirmative. It is a lot of money to produce a 60 pages or so documents that I may or may not even read in detail, and then the execution of the plans may not even yeild the highest rate of return, because this is not guaranteed. I am more than happy to share the return with you once it passes above a certain stage, taking into account my risk-free rate. Quite unfortunately, the arrangement does not work this way.

In an ideal world, the ROI would be guaranteed and the commission would be paid as a percentage once a certain threshold has been reached, and the principal would be protected. This world we are living in right now is not ideal so we are left with whatever it is we have right now. A certain someone thought of this investment strategy which she claimed would earn her lots of money and then asked me if I would like to put my money there. I said sure. And then she asked for commission straight away. Are you fucking kidding me? How about you perform first and then ask for your bloody commission.

The lesson from all of these - when it comes to your money, the only person you should trust is yourself. No one cares about your money the way you so. Sort of like no one cares about your life like you do.

Now off you go and have a better life.

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