During a recent, in-person session with a private coaching client, the topic of retirement preparation and planning made its way into the conversation. I ran a quick “diagnostic check” by asking a few questions and reviewing some of the client’s financial statements including her investment holdings and retirement accounts. Everything appeared fine until I began dissecting the various positions within her IRA (Individual Retirement Account).
The tone of the meeting quickly turned from pleasant to somber as I explained why the long-dated bonds in her retirement account were a poor investment choice given the current economic climate (and she had a lot of them in there).
I clarified that, “When interest rates are artificially low and are practically guaranteed to begin rising within a few years, locking yourself into long-term corporate bonds is generally not a prudent move.”
She gave me a look of frustration and concern. This was an educated, professional person with years of schooling and work experience. However, she never learned how to properly manage her finances and employ her money. She was blindly following the advice of a well-meaning financial planner that was obviously leading her astray.
In reviewing and reflecting on that session, I can’t help but think that by commanding a basic level of investment education, she could have easily saved herself from some potentially costly financial moves as she approaches retirement within the next few years.
TRADITIONAL EDUCATION VS. INVESTMENT EDUCATION
In school, we learned about ancient Mesopotamia, frog anatomy, and where igneous rocks come from. Let me ask you, how much of that information are you readily using today to advance your life? Any of it?
Traditional education provides you with a knowledge foundation and prepares you to join the labor force. In contrast, investment education teaches you how to get your money working for you. Traditional education can make you a living, but investment education can make you a fortune. And for that reason, I’d advocate that investment education is absolutely imperative.
Will you allow me some room to be brutally honest for moment? Money can be a tricky SOB. If you don’t learn to employ it as your servant, it can easily become your master and dictate numerous facets of your life.
What I find utterly perplexing is that many of us attend school for 15 years (or longer) to become formally educated so we’re more attractive to employers, thereby allowing us to find a job and begin earning a living. But that’s where it all stops.
We went to school, we found a job, we worked hard, and now we have some money. The problem is that once we have some money, we have absolutely no clue what to do with it other than spend or save.
During all those years in school, no one is teaching us what to do with that money once we have it in our possession. As a result, we usually succumb to the marketing messages that are constantly bombarding us, or we just look around and duplicate the actions of our peer group. We’ll often end up turning our hard-earned money over to a financial advisor that loads us up with costly, subpar mutual funds (because, hey, that’s what everyone else is doing!). You give them your cash, they dump it into mutual funds, and then they proceed to extract hefty management fees from you for years to come regardless of your portfolio’s performance.
This is NOT financially intelligent. Following the status quo rarely is. The answer is to become financially educated.
ACQUIRING INVESTMENT EDUCATION
The more educated you are as an investor, the higher the returns you’ll earn, the less you’ll pay in taxes, the greater the financial fortress you’ll have surrounding you, and the more flexibility you’ll have in your approaches. You’ll also have a sense of reassurance and confidence during periods of economic unrest and turmoil.
A big part of investment education is learning how to profit in all market conditions. If you only know how to make money when markets are going up, then that means you’re dependent on some outside catalyst that’s beyond your control. Market movements are a function of supply, demand, geopolitical forces, economic fundamentals, monetary policy, and a plethora of other factors. Do you have much control over those variables? Nope.
So with so much to contend with, doesn’t it simply make sense to acquire investment education that covers strategies for profiting in up markets, down markets, and markets that are trending sideways?
With an advanced traditional education, your earnings will probably max out at a few hundred thousand dollars a year, you’ll pay a hefty amount in taxes, and someone else will be controlling your time and income potential. In contrast, with a superb investment education, your earning potential is unlimited, the tax laws are skewed in your favor, and you have a tremendous amount of control over your time and income.
As we discussed in the blog entry “So, What Exactly Is Investing”, investing is simply the art of making money with money. And investment education teaches you how to do exactly that – make money with your money. The class may have been missing from your high school curriculum, but it’s never too late to start learning. The knowledge will benefit you for the rest of your life.
Those are my thoughts. Feel free to share some of yours below. Thanks for reading and as always, make it a great day.
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