4 Tests to Find Good Advice by Kim Kiyosaki

4 Tests to Find Good Advice

Before you invest, it’s wise to take a step back and decipher fact from opinion

If you post a simple question on social media (for instance: What type of car should I buy?) it’s amazing how many people will come out of the woodwork to share their advice. Some of that advice is based on personal preference, some is based on an advertisement they saw or a friend’s experience, and some is based on their assumption of what you want and how much you can afford. But how much of the advice is based on fact? I’d venture to guess little to none.

The same is true for most any topic, including financial advice. In the media, I often hear statements that make me pause and wonder, “Is this advice based on fact or opinion?” Statements like, “Men are better investors than women,” or “Women don’t take risks when it comes to money.” This can be especially confusing when you first set out on your path to achieving your financial dreams.

If you’ve ever watched a financial TV show, you’ve probably heard the commentator turn to his industry-expert guest and ask something along the lines of, “Do you think the stock market is going to crash? Are we headed toward another financial disaster?” And the guest confidently gives his or her reply — or rather, his or her opinion. It’s an opinion because this guest has no idea what’s going to happen. Nobody can state with 100-percent certainty what the stock market will do. It’s all a bunch of opinions based on a variety of factors and historical trends.

So when financial investment advice comes flying your way, how do you know whom to trust? Start with these four tests, which I delve into more deeply in my book, It’s Rising Time:

  1. Choose your advisers wisely. It’s easy to assume that if someone is successful, their advice must be worth more. But just because they are successful in one aspect of their life does not mean they know everything about everything. They could be offering advice based on their experiences, which may have been rare or unusual. They may have just gotten lucky. They may know a lot about X but nothing at all about Y (and Y is what you’re asking about, of course). You’ll want to ask a lot of questions before placing anyone on a pedestal, to ensure he or she is an expert in the specific area you’re asking about.
  2. Practice what you preach. We’ve all seen doctors and nurses who smoke, heard tales of lawyers who break the law, and have probably noticed a personal trainer at the gym who wasn’t in the best shape — sure, these professionals are only human, however they are not in alignment with their own brand. It’s important to determine if the expert you are seeking advice from (such as a financial adviser or real estate broker) is taking his or her own advice. In other words, are they investing in what they recommend you invest in? Are they practicing the habits and strategies they are advocating? Are they living their message daily? If a person does not follow his or her own advice, that’s a huge red flag.
  3. Consider the source. Have you ever noticed the commercials on a financial television show? The ads typically feature mutual fund companies, stock brokerage firms, and investment banks. Hmmmm, it’s no wonder that the information from these shows favor mutual funds, stocks, bonds and related financial instruments. If their number-one advertiser is a mutual fund company and their advertising dollars are keeping the media outlet (TV program, newspaper, magazine) afloat, then would they ever speak out against mutual funds? Probably not. Always consider the source before you believe the information presented to you.
  4. Adviser or salesperson? Always follow the money of the person selling you the investment. Does the person advising you have an agenda (do they benefit financially either directly or indirectly)? Ask how they are getting paid, to determine if they are on a commission. Do what you can to separate the real advice from the sales pitch.

When it comes to real estate investments, don’t underestimate the power of listening to your gut. As your knowledge and experience grow, you’ll get better at deciphering facts from opinions — and you’ll be that much closer to the financial freedom you desire.

Original publish date: October 18, 2018

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