Let’s say you and your closest friends all grew up in the same place. You went to the same schools, and then got similar jobs. You now all live in similar neighborhoods and have kids the same age. You’d think that whatever your friends are doing with their investments would also be good for you, right? I used to think so. I would ask my friends what they were investing in, and align my strategy with theirs.
But despite your similarities with your friends, this is a big mistake. Letting your friends or family direct your entire investment strategy doesn’t take into consideration your needs, your specific career or your life stage.
If you copy your best friend’s investments, that doesn’t take into account the fact that she and her husband might make more or less money in the form of bonuses or property appreciation; might have different dreams (to move to Paris or start their own farm or sail around the world); and might have family members to support. You also might not be aware of how many income streams they have or how much risk they are taking in their investments. They might not share with you when they’ve lost money. They may also have different tax burdens than you, or have citizenship issues to consider. They could have had a planner create their investment strategy before key milestones in their life like buying a house or having a child, which totally change the big picture. There are a myriad reasons why one investment strategy most definitely does not fit all.
We also all have our own money fears, money practices and money lineages that we inherit from our families. That experience changes how we think about money and risk.
You want to make sure your investment strategy works for you.
Copying someone else’s investment strategy might feel like a quick fix. But doing so might not be in true alignment with your values or your life goals.
I understand that a lot of people put off thinking about investments (boring, tedious, too technical). Quick fixes are fine in many areas of life, but not for investments. You want a strong and comprehensive financial plan to protect yourself and help you reach your dreams. When you work with private bankers and insurance agents, you need to ensure that they understand your needs. Just taking a simple risk profile test and then accepting auto-generated investments will not serve you well.
Here are some recommendations that will make financial planning easier for you.
You can use workshops or courses or sign up for a robo-advisor with a financial planning services.
- Use financial planning templates. Don’t just go to any website that sells these for cheap. It’s worth your time and dollars to purchase a high quality product so you don’t end up using templates for someone younger than you, or much older than you with different needs. Do a thorough search. We have templates on our website for our clients.
- Find a few like-minded professionals to help you and meet with each one before hiring. Just like when you search for a doctor or hire a business associate, you need to find someone who speaks your language, and make sure they are a good fit. Private bankers, insurance agents and financial mentors have expertise in different areas. For example if you want to create a trust, make sure your private banker has that experience.
- To make your final hires, vet your top choices thoroughly. Make sure your research your financial planner’s background. Scour their website, look at reviews, talk to other clients. Check out their training and their experience. Ask yourself if that mentor understands you and if they have shown you respect and kindness. Tap into your intuition to see if you are comfortable with your choice.
Like the toughest subjects in school, investing doesn’t have Cliff’s Notes. And copying your friend’s answers won’t earn you a good grade. You have to do the work yourself, while also to taking the time to work with some good tutors (financial mentors, money coaches, private bankers, financial advisors). But when you develop your own personalized investment plan, you can be sure that you have done everything you can to set yourself up for success.
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