The Investment Answer
Learn to manage your money and protect your financial future
Authors: Daniel C. Goldie, CFA, CFP
& Gordon S. Murray
“The Investment Answer”, is described as a book that takes five key decisions that every investor needs to make in the book the author spoke they were former brokers that had invested their money and had no idea when he came to paying fees certain investments or other rules that they had to go by the main author had read a lot of books in his day and never found one that quite answered all the questions that he learned to 20 years’ experience so the purpose of the book is to do just that to show the everyday investor the five key decisions that every investor needs to be successful and to prosper The book contains five chapters and each chapter is dedicated to each decision and is broken down to why it is important in the things you need to know. The five key decisions are: do-it-yourself decisions, asset allocation decisions, diversification decisions, the active versus passive decision, and the rebalancing decision. Each chapter looks at each of these decisions and analyzes all of them The first chapter is called the do-it-yourself approach or decision this is extremely popular and many different industries such as home repair and renovation, decorating, self-publishing, and fashion. Now all this is true as stated quite clearly that in finance the odds are stacked against you to do it on your own completely. The authors compare it to asking a doctor when it comes to making medical decisions insulting someone else when you’re making financial decisions now with that being said is up to you what you are investing in and not investing in but having guidance in seeking out advice is only going to help you in the long run. With that being said the next part of the do-it-yourself is broken down to retail brokers. The first thing that is spoken of as talking about a brokerage account. A brokerage account is where your broker will act as an agent for his firm and in this capacity your brokers first duty is to the firm and not to you even know you are his customer. The stockbroker may often offer stock tips here and there but this is just because of his business and generating trades and getting commission however it is important to keep in mind the broker is working for the firm. Remember the more you trade the more your broker makes off with.
Comparatively there is something called in independent fee-only advisor which are always legally required to act as fiduciaries to their clients. This means that they must put their clients’ interests first they are independent and the only they should be closely aligned with their clients and generally are free from a lot of the conflicts that brokers face. Remember you’re in control but want to make sure you are getting good consultation.
The next section then breaks down how to select an independent fee-only advisor. It just gives general narratives for how you can select one and starts with knowing their investment philosophy personal connection with the advisor their education their experience their business structure their services offered and what type of current clients that they have.
This is a very important part when it comes to do-it-yourself investing. It allows you to make decisions on your own and be comfortable with the things are investing in, but at the same time get knowledge from someone who has been in the field for some time and knows what they are doing. It is recommended, while not for every investment, but for the majority of investments you should be consulting with someone if you are putting any sum of money into an investment and you want even a little extra insight.
The next chapter, or the second decision, is known as the asset allocation decision. We have spoken a good bit in class about asset allocation and the importance of it in growing wealth. The book explains with asset allocation there are two…