I’m Sorry, Dead Horsey
I promised myself not to beat this dead horse any further this year, but a fateful conversation with a trusted friend yesterday tempted me back down this road.
"Travis, just got done meeting with our financial advisor. It's been a great year!"
"That's awesome! Tell me about it. What did he share that makes you so excited?"
"Well, first, our investments are up nearly 18% in the last 12 months!"
I tried to maintain my poker face, but as my wife Sarah can attest, I'm terrible at it. My friend could immediately tell I had a cringe-meets-disgust expression.
"What? He said 18% is pretty good. And since the market is supposed to go up 7-8% per year, that's really good, right?"
He showed me his account statement, and we confirmed he did, in fact, receive approximately 18% over the last 12 months. Without saying a word, I opened my online account and showed him this:
34.4%. That's what my investment account received in the last 12 months (12/1/2023-11/30/2024). My friend couldn't believe this. "How the #$!@ did you get that??!?"
I explained this is how the U.S. stock market performed over the last 12 months. Intrigued, he had lots of questions:
"Why did I only get 18% if the stock market got 34%?”
His financial advisor puts him in garbage and crushes him with fees.
"If I had about a half million in my account 12 months ago, how much did this cost me?"
About $80,000 just this year alone.
"How hard is it to invest in something like you're talking about?"
It's one of the easiest things we can do. There are index funds that give you about 4,000 companies in one single investment, with almost zero fees. Vanguard and Fidelity have great options, as do most people's 401(k)s.
"Is it guaranteed?"
No, it's a mess. It's a bumpy ride and can feel miserable. But the market has returned more than 9% over the last 150+ years and more than 10% over the last 100 years.
"Will I lose money?"
Nothing is for certain, but the U.S. stock market has never lost money over a 15-year period.....ever. So, considering this friend is 30 and can't even touch his retirement assets for another 30 years (age 60), that doesn't feel too risky to me.
"How often should I be making changes to my investments?"
I haven't made a single change in more than 15 years.
"How do I know when to sell?"
I've literally never sold anything, and will never sell anything until I need it someday.
"We really like our guy, though. We'll probably just keep him."
OK
We all have the right to do whatever we want with our money and investments. But I believe information is power, and people deserve proper context. It's so disheartening to see family after family unknowingly lose hundreds of thousands (or millions!) of dollars for no good reason. They deserve better. You deserve better!
Perhaps it's time to check your statements again.
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