One of the first lessons we hear from investment advisors is the importance of diversification. It is funny how that has come to mean “buy as many different mutual funds from me as possible – and you’ll be ‘diversified’”. If you have nothing but mutual funds and other banking and stock market products – you have effectively created “diworsification” and are taking on more risk than you need.
Here’s the thing.
Bankers and investment advisors are paid to sell. In order to create the safest portfolio possible – they will try to mitigate risk by selling you products that might not behave exactly alike in any given market. Bonds are meant to cushion the blow of any dramatic changes in the stock market but are themselves prone to wild market fluctuations.
The problem is – these investment products are all traded actively in the market, every second of every day. The stock and bond markets are not only a reflection of the strength of the underlying quality of that investment – but also a reflection of investor sentiment. If there is one certainty (beyond death and taxes) is that most investors really aren’t “Investors”. We tend to be savers of convenience and rather poor ones at that.
Have you ever wondered why investment advisors never talk to you about precious metals, real estate (real properties, not funds or stocks) and other non-traditional investments? It’s simple – because they don’t get paid.
“Fear” as in False Evidence Appearing Real, moves most of us to buy when it appears to be safe to buy (market “highs” that are way too expensive) and sell when the market appears to be risky (the market is “tanking” and not safe). Warren Buffet said – “Buy when others are fearful and Sell when others are greedy. Few of us actually take that advice. We panic and do precisely the wrong thing at the wrong time.
Have you ever noticed how many small and medium sized business owners create wealth in your neighbourhood?
Have you also noticed how well they live and yet manage their money well?
Have you ever wondered what it might be like to walk in their shoes and enjoy the benefits of the way they create wealth? You can!
Beyond the obvious reasons, including hard work and making more good decisions than bad; it takes patience and the idea that wealth creation is not an overnight event. They hang on in bad times as well as enjoy the good. You may not have had this long-term view in mind in the past and it may be what has been holding you back; like it did, me.
But we’re talking about “catch-up-investing” here - and there is a way you can benefit from these “smart neighbours” of yours and do it within a reasonable time frame.
For more on how you can invest in a variety of non-public, private equities and stand apart from the rest of the investing public – please ask including the phrase “Private Equities" in the "What caught your attention" box, when you complete the Contact Us Request for Information, formatted email.
Check out this great video