For certain financial professionals, there’s one particular question that’s decidedly unwelcome, and it tends to come up in various social settings: “Do you have any hot investment tips?”
No. The answer is always no.
For financial advisors and similar professionals who feel this way, investing, while necessary, may not be particularly exciting or bring them much joy.
These professionals know how to invest, and they care about doing it right. But to them, and maybe to you too, investing is just a tool to help people achieve their most meaningful goals. And helping people define and achieve those goals is what makes the job so rewarding.
There’s nothing wrong with this — in fact, whether you’re managing your own finances or working with someone like-minded, this may be the healthiest way to think about managing your money.
It takes courage to rebel
Prioritizing goal setting, and the ongoing meaningful conversations required to set and improve those goals, over detailed attention to the stock market may seem like a reasonable and obvious thing to do, but the financial services industry struggles with this.
For decades, stockbrokers have made more money when their clients traded stocks, which in turn encouraged more trading and investment strategies. Many financial planners base their fees on the assets they manage for their clients, and conversations tend to center around how (and how aggressively) they invest those assets.
So it takes a lot of courage for financial professionals to duck the investment conversation or admit that the markets are lackluster.
“There definitely seems to be a risk in saying something like that in the paper,” says Danica Waddell, a Seattle financial planner who first spoke out loud at the prompting of psychologist and executive coach Joy Lele. She and Dr. Lele were walking home from a conference dinner when Dr. Lele asked her what she disliked most about her job and what drained her most energy.
Tenacity is also necessary for any individual trying to make it financially in this world. You have to cut through the noise of everyone making loads of money with Nvidia and the hottest stocks and funds.
But how do we do this?
Dullness is a virtue
“I think investing should be boring,” says LeeAnn Miko, a financial planner with offices in Oregon and California. “You don’t want to put too much emphasis on investing.”
The key idea here is to take advantage of what’s available from different markets: stocks, bonds, real estate, etc. This means buying a mutual fund or exchange-traded fund that holds all the securities in a particular segment. So a fund that tracks the S&P 500 stock index would hold all 500 of those stocks.
If you can tolerate risk, hold more in stock funds and less in cash or other assets, but avoid placing too many bets on a few individual companies or one segment of the market, because a wrong guess can quickly erode your net worth. teeth Just a guess.
This approach has many advantages: These market-tracking funds have low fees, and the overall portfolio fluctuations are typically smaller than individual stocks. Over the long term, this approach may produce better returns.
Joy comes from a variety of conversations
Buying boring market-tracking index funds has become known as passive investing, a moniker that makes sense given that it’s common to vow not to jump in and out of the market when things go south. Instead, you stick to a policy, like investing 80% of your retirement savings in stocks for the first 25 years of your career.
The great thing about this approach is that you have time to ask yourself and your advisors more targeted questions: What living circumstances would make me happier? What would my elderly relatives want from you, and how much would you be able to give them? How can I best help my grandchildren? But asking and answering these questions is the opposite of being passive.
“We’re ensuring that people are proactively planning for the things that matter when they express their deepest, most cherished desires in life,” Miko said. “If you don’t know what your money is for, how can you create an investment strategy?”
Mike Zang, a financial planner in Lee’s Summit, Missouri, doesn’t often discuss things like interest-rate forecasts with people he meets at social gatherings: “I’d rather hear about their first financial memories, how partners handle money together, etc.”
This is a bit of an odd request to make of a stranger, but it’s okay with a friend. For those without professional financial access, a good friend might reach out and try to help if they sense the right conversation starter.
“I want to know what their ideal life looks like now and in the future, and make sure their finances can support it,” says Ms. Waddell, who recently spoke with a client who thought working as a therapist might have been a better career choice.
Is it too late for someone in their 40s to change jobs? Probably not. And what about other big life transitions?
“There’s going to be one or two things that are pretty significant,” Waddell said, “and for most people, it’s not going to be an investment.”
