Blog | Paper Assets

They Love to Keep Us in the Dark

Why many financial advisors want us to remain ignorant about investing for ourselves

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When Wall Street handles our investing for us, they make a lot of money. One of the tricks they use is to convince us that we’re not smart enough to handle our own investments. By keeping us ignorant, many of these experts thrive. As long as people are handing over control of their financial future to others, then advisors such as financial planners and stock brokers will have a lot of job security.

Please don’t misunderstand me. There are good advisors out there who are willing to work with hands-on investors. It just takes a special breed of advisor because it requires a lot more work for them to give you the help you deserve.

For financial advisors, though, it’s much easier—and often professionally safer—to advise clients to conform to their company’s boilerplate strategies than to create a strategy that fits a client’s goals.

With a 401(k) or similar retirement plan, there is no individual strategizing at all. Within your plan, it’s typical that your only options are to choose from a handful of pre-made funds. That kind of push-button investing doesn’t make you smarter. Even worse, it doesn’t require any expertise from your 401(k) company.

As long as people remain in the dark about how to take care of their own money, they will probably never demand anything more than what they are getting right now. We have become trained to accept whatever these companies give us. The longer they can keep us uneducated, the more money they will make. It’s the perfect business model if you’re in the 401(k) or mutual fund business.

The truth is, it takes almost zero expertise to manage these funds since they are typically tied to the overall stock market—or a specific portion of it. This means they are betting your future on the luck of the market with virtually no additional management to protect your investment.

Our Worst Enemy Isn’t Ignorance—It’s Apathy

What may be even worse for investors is not caring about what’s happening to their account. Isn’t it a lot easier to pick up the mail, pull out another quarterly statement, shake your head again at the poor results, and do nothing about it—than to contemplate the alternative?

Because asking tough questions and doing something about it can seem difficult and overwhelming. Apathy is easy, but it can cost you a bundle in the long run.

Is it because we’re lazy? Or maybe we think that somehow a hero on a white horse will ride in at the last minute and add several zeros to the numbers on that quarterly statement? In this story, there is no savior but you. No one but you has the reasons and motivation to change the way the story ends.

If we can somehow get past the apathy that is holding us back to proactively take care of our own money, we can point ourselves toward the future we truly desire.

Ignorance Puts You at Serious Risk

The last thought I want to leave with you is straightforward: What you don’t know CAN hurt you—and probably will hurt you at some point.

This is especially true of investments. The people with the most knowledge will win the most money. The people with little knowledge will lose the most money.

Placing our money in investments you know little about, such as 401(k)s and mutual funds, means that we are giving up control. And giving up control puts us at risk.

We Can Change Ourselves

To me, it’s obvious that the best path to take is to change ourselves. Why? Because no matter how much we dislike the current retirement investing system, it’s unlikely that we can make serious changes to the system in our lifetimes. These massive institutions have almost limitless resources to keep the government from changing the rules.

The way to win is to learn to play the game a better way. Better not to worry about trying to change the game—just learn to play it well.

Yes, it’s easy to get on the blame-the-government bandwagon. It’s easy to hang out with your friends and curse Wall Street. Ultimately, though, blaming and complaining will not improve your situation. You may have a valid point and your complaints may be justified. But complaining will not help you fix your own income and retirement problem, and it does not solve your current lack of investing knowledge.

Victory comes to you personally. It is an individual battle. And you have to choose for yourself whether or not you are willing to enter that battle and win.

Original publish date: April 20, 2018

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