Financial Wizards

A week ago, I got an e-mail from a member complaining about a financial advisor he had briefly engaged. Apparently the "Financial Advisor" (otherwise known as a "wizard") had advised our member, but when the member didn't like the advice and asked for his deposit back, the advisor said "So sorry, the money is non-refundable."

At which point the member said: "Uh. What document did I sign actually say that?"

No documents were produced, nor was any money. The member now informs me he is taking the F.A. to small claims court to get his (sizable) deposit back ...

Financial wizards have their place, I suppose. If you have no knowledge of stocks and bonds, and tend to glaze over when somebody within speaking distance talks about "asset allocation," "risk premiums," and "small cap vs. large cap," then maybe you can hire yourself a wizard who charges by the hour and will help you set up an investment program using low-cost stock and bond funds. But under no circumstances should you run out and jump on the bandwagon of an f.w. who charges one or two percent off the top and works on commission. The game is rigged enough as it is.

But fear not, for there's a one-page digital compendium* of sage investment instruction that will help get you started on the path to financial independence ... and charge nothing for the privilege. The advice offered, boiled down to its essence, goes as follows:

1. Develop a workable plan

2. Invest early and often

3. Never bear too much or too little risk

4. Never try to time the market

5. Use index funds when possible

6. Keep costs low

7. Diversify

8. Minimize taxes

9. Beware of people trying to sell you something

10. Stay the course.

In my experience, financial wizards will try to convince you that investing is complicated and mysterious, but it's neither. The only area that's tricky is the discipline part of it, the ability to not freak out when every investment you own is tanking and the only thing you want to do is bail ... just as your investments hit rock bottom. (This is almost always a bad idea, because invariably you are taking yourself out of asset classes that will soon bounce back to higher levels.)

Mostly, investing for retirement is simplicity itself. You just have to own the will to believe it and do it.

* Pay particular attention to "Implementing an Investment Plan."