You can’t turn on a radio or TV these days without hearing someone telling you what to do and what not to do with your money.
“Sometimes the amount of information available on investments and financial planning can be overwhelming to someone trying to decide which steps to take with their own financial plans,” says Brad Stonecipher, executive vice president and managing partner of Peachtree Planning Corporation’s investment department. “Too much information can be harmful to even the best investors and the wrong advice can be devastating to an individual’s hopes of reaching a dream or goal.”
Smart Business learned more from Stonecipher about how to find an investment strategy that’s right for you and what products are getting a bad rap.
Are talk shows putting out incorrect information?
It’s not that the information you hear from a talk show host or read in a magazine is incorrect — it just might be entirely the wrong advice for your situation. A host’s goal is to attract a broad audience so they can sell advertising. The host may recommend a strategy that works for 75 percent of his or her listeners, but what if you are in the other 25 percent? Financial planning is not one size fits all. Each person has different needs and goals, different tolerances for risk, and possibly different tax consequences for their actions. I cringe whenever I hear someone make an absolute statement telling you to ‘always do this’ or ‘never buy that.’
For example, if you have a portfolio that is 60 percent equity and 40 percent bonds and you pay out an income of 4 percent annually, you have more than an 80 percent probability that your money will last for more than 30 years.
If you used that plan to retire in 1984, then you are probably in your late 80s with more money than you started with. If you did the same thing and retired in 2001, you are probably entering your 70s with the real possibility you may be out of money before you turn 80.
How can too much information be a detriment?
It is not necessarily too much information as too much negative information. People have a long history of making poor financial decisions when they are afraid. Combine that with a news media that finds it much more profitable to publish a negative story than a positive one and it is not hard to understand why the average investor has such a poor track record.
The news media would much rather inundate us with stories of greedy corporate executives taking large bonuses than a story of a young widow who doesn’t have to sell her home or take her children out of school because her financial planner made sure her family had a plan in place to ensure she was properly protected.