Long Term Investing Is a Sucker’s Game

A friend introduced me to his long time buddy who is considering retirement now. We have an interesting talk over the evening and I have learned some very disturbing development in the financial industry. This is not a good sign for people who consider themselves conservative investors.

A Lifetime Saver

This new friend of mine is a dentist at early 60s now. He has always been a saver. He put aside a portion of his earnings in both good and bad times. The money saved up are put in to mutual funds on bonds and stock markets. He does not spend above his means and work hard everyday. His goal is to be able to retire by 65 years old and start to enjoy life as prescribed by government propaganda.

He has been listening to financial advisors at the bank all his life. He thinks he is in good hands assuming everything is fine as every time he calls them, they tell him his portfolio is doing alright. He accepted the preach by the financial industry that if you stick to the long term plan you will come out ahead.

He lost majority of his lifetime savings as of last week. He found out about the situation right after new year. Not only the supposed gain is not there, the money he faithfully put into his retirement account has took a haircut. His dream to retire at the age of 65 is now shattered.

Is it his fault to trust these so-called financial advisors? Well, according to the bank, it is. There is no wrong doing at all found on the actions taken by the financial advisors because they are pushing the financial products for the bank after all. The argument is that my new friend accepted the recommendations of these advisors over the years.

Well, if someone were investing savvy, they would not need professional help, isn’t it?

No Skin In the Game

As oppose to say that it is my friend’s fault because he should not be this naive, we have to look at the root of this issue. Namely, there is no risk involved for the financial advisors and the banks for giving out bad recommendations. Who wouldn’t focus on generating more business for themselves?

After the conversation, I actually contacted several friends in the industry and they confirmed to me that many financial institutions are pushing their financial products again for several years already. Obviously most of these funds are doing badly as they are just gimmicks to lure people to buy what is hot at the time. I thought the banks have learned their lessons but I guess bottom line is more important than integrity.

My old friend introduced us because he wants me to manage part of his friend’s remaining savings like what I am doing for him. I politely declined because it takes a long time to build the trust between people. It takes even more time to understand what I do as there are so much misunderstanding about day trading on index futures and forex. I ended up recommending books for my new friend to read and ask him to build up his investment knowledge so that he can better manage his money going forward.

Being Knowledgeable About Investing Is a Necessity

If you have money saved up for retirement, it is important to regularly check on the performance of your portfolio. The current market environment is making long term investing on everything riskier than ever. Staying on top of your hard earned money is very important. Even if you are no expert in investing, you can still learn something about money management so that you can be more protective of your money.

And do not say you do not have time for this. Make time because your future financial security depends on the efforts you put in today. After all, it is your responsibility to take care of your money,  not the banks or their financial advisors.

Don’t be the sucker in the investment game.

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