Nov 28, 2019
Hi everyone, this is Dan Thompson with wise money tools. Welcome
to another video or podcast, however you listen to us. You know, if
you look around there's a bunch of different financial advisors and
they're kind of divided, if you will. You know, on one hand, you've
got the advisors that are all about selling you. You know, mutual
funds, maybe some stocks, nothing they sell has guarantees. And
what they do is they rely on past history or past performance to
kind of entice you into the investments are working with them. Now,
these advisors use words like diversification and asset allocation
and dollar cost averaging. And you know, it there's no surefire way
that makes money. But they say to kind of make you feel all warm
and fuzzy, as if you're actually avoiding risk and they quote, you
know, past performance And averages, like their actual returns.
So again, you kind of supposedly feel good about risking your
money. Now this group is made up of what I call traditional
financial planners and investment advisors. Then on the other hand,
you've got advisors who are geared more towards what are referred
to as safe money guys, these guys are, you know, safe money
investments, little to no risk, sometimes tax advantaged and income
oriented. You're gonna find bonds, annuities, life insurance, you
know, with a main emphasis in this group of safety. And they use
the safe money arguments that losing money has a greater impact on
your wealth than rate of return. So for the last 35 years, been in
the investment world. It's been interesting to hear both sides of
this argument. And believe me, I've heard both sides, many, many,
many times over.
So in 1986 when I started with This big firm, it was all about
investing and managing money. And after the dot com crash in the
late 90s, early 2000, it was evident that these guys really didn't
know what they were doing the amount of risk that people would
take. And really didn't understand what they were invested in or
why they were invested in it. Well, it just proved to be not a very
long term oriented solution. So one of the ways I can kind of tell
you if people know what they're doing. If I ask a few simple
questions, like, Where's your money invested in right now? And they
may say, Oh, it's in a mutual fund. And I say, do you know what
fund it is? And they may or may not know the name of the fund. I
say, do you know what they invest in? Usually, they have no idea.
This is where you kind of get a blank look.
And I asked him, Why did they pick that particular fund? And
oftentimes, they say, Well, I looked at the history and had the
best return and I say So how does that do when the market you know,
has a downturn or some sort of a recession comes along? And again,
they typically have no idea? Well, you get the idea. Most people
are blindly or what I call speculating into these mutual funds.
It's not really investing. It's nuts how little the average
investor knows with what they as to what they have, and why they
bought into it. So around 1996-97, I started looking around for a
better way I needed to find a way that my clients could actually
come in and come out ahead after these markets take, you know, some
big hits. So I did a lot of work on the safe money side.
But I realized that these guys didn't really have the complete
answer either. They work mostly of fear telling you to run as fast
as you can that it's just too dangerous to invest in the kind of
the Wall Street way. They warn you of market crashes and
recessions. All of what your true but again, it's based mostly on
fear. So the risk guy says that if you're too safe, you're never
gonna make money. And the safe guy says that if you're in a stock
market, you're gonna lose money someday. So which side is right?
And Why is it so confusing? Well, let me tell you what I found.
Both sides are wrong. Okay. I'll tell you why. First, let me
clarify this. Let's first kind of determine who's who, let's call
the one side that wants you investing all your cash into the market
all the time. We'll call those our risk advisors.
They will call the other side who never want you to invest your
money and they keep it safe. We're gonna call those guys the safe
advisors. Well, let me tell you why the risk guys are right. Well,
kind a right. I think it's important that you have the capacity to
grow your money, but as safely and with as little risk as possible.
However the way risk advisors want you to invest and how they
invest your money, and the fees they charge, well, this is where it
goes all wrong. The bottom line is, they really don't know how to
invest. Right now the risk guys, man, they're all crowing like
roosters, markets have been going up for several years. They look
like they're just the greatest stock or mutual fund pickers in the
world. Because again, the markets just up, up, up.Right. Well, who
knows how much longer it's gonna last?
It might have a little bit to do with what the elections turned out
like next year. Well, when you see your statements right now, at
least at this point, the risk guys might look like they are right.
Conversely, the safe guys are telling you that the markets are
volatile, and when they come crashing down. You're gonna lose a
boatload of money and you should protect your money and buy safe
investments while you can. Well, the bottom line is exactly the
same as the risk advisors. And that is that the safe advisors
really don't know how to invest and grow your money either. Neither
side really knows how to invest. Oh, sure they know how to throw
your money in investments, but they don't know how to invest. Let
me tell you a true story. When I started way back in the day, like
I said about 1986, I was on the risk side. I was, you know, excited
to learn how to invest.
I wanted to learn how to make money for myself, and also obviously
show clients how to build their wealth do. Well, guess what?
Believe it or not, brokerage firms don't teach you how to invest.
Advisors don't ever take investment courses or classes. You know,
what they get trained on. They get trained on how to communicate
with people and how to sell the products, how to get assets under
management, get them in the door, so to speak, how to convince
people to move their money. To your brokerage firm, advisors are
not trained on how to invest. And I was really discouraged. I mean,
this is what I wanted to do. They taught us, you know, how to sell
mutual funds and how to make sure people were, you know,
diversified and all that good stuff, but they really didn't teach
us how to invest.
I never learned things like how to analyze an investment, what a
cap rate is earnings, revenue, free cash flow. And you know, other
methods that people use and investors use for evaluating an
investment. So they just basically, you know, give your money to a
mutual fund manager and hope they know what they're doing. Then
when you jump to the other side, safe advisor side once again, it's
more or less how to sell. And again, they don't know how to invest
either. They're all trained to convince you that you don't ever
want to be an investor. You want to protect your money. They
neglect to talk to you about opportunities and sound investment
practices that have proven to work for decades. And I'm sad to say
that both sides are all about getting your money under their
management. First and foremost. What I've been in search for so
many years is how to grow your money safely and predictably.
But neither side had a really good answer for this. The risk side
accuses the safe side that all they want to do is earn a
commission. And that's why they sell the products. And then the
safe side says, Well, those guys over there just want to charge you
a fee. Remember, a fee is nothing more than an annual commission,
and they don't really manage your money. What they do is send your
money off to another manager or a mutual fund, then they stack
their fees on top of it. So you get the idea. Then you can take all
the risk if you want on one side, or all the safety on the other
side. And you know what, once again, in a sense they're both right.
All right, Dan, how can they both be right? Well, it's simple,
because neither side knows how to invest. And they don't understand
money, and what I call the 5 elements to wealth.
As a result, you as a client, they never feel comfortable with the
risk you're taking or not taking. Neither sides really figured this
out. Unless you think outside the box, get away from both sides for
a while, you're doomed to fall into one of their boxes. For me, I
like this hybrid approach. After the first 15 years of being on the
risk side, seen the ups and downs in the markets, the illusion of
averages, a fact that most advisors really don't know. I came to
realize, well, you know what, this really doesn't work. Then being
involved on the safe side. Now, although you might sleep well at
night, you can miss out on some good opportunities and some years
that you could grow your money. The fact that safe advisors don't
know how to invest, they're gonna scare you with their stories so
that you run from any kind of investment risk.
So having been on both sides, listening to both sides of the story,
realizing both have flaws. Again, I like this hybrid approach. It's
a really simple philosophy isn't that hard to understand? It's
really pretty simple. I was driving the other day. And I was
listening to the radio and I listened to these two advisors who
were discussing the market. And the market, by the way, it seems
like about every other day, it's hitting an all time high. Anyway,
what was asked if someone came into you into your office today,
with $100,000, what would you advise them to do? And you kind of
hear him both, you know, thinking about it and him and then they
both agreed they would invest $100,000 right now. Because as
advisors, they can't predict where the markets going. And I thought
Wow, they'd even ask the right question. The right question is,
should I be investing right now, this is the problem with risk
advisors.
It's always a good time to buy, never a good time to sell, sit
back, take a break. Just ask your advisor right now, if you have a
risk advisor, with this market at an all time high, ask him Is it a
good time to sell. You're likely gonna hear some sort of clever
motto or slogan as to why you shouldn't sell. Ask the safe guy if
you should invest into this market. And obviously he's gonna say,
no way. Look what happened to people in a way they lost 50% of your
money. Why would you want to ever get involved with that kind of
volatility? You see, it goes back to the point. Neither the risk
guy nor the safe guy really knows or understands investing. And so
they don't put into practice again, what I call the five elements,
financial success, or the five elements to wealth. Sadly they were
never taught these things.
That's how we're gonna. And that's why, over the next few videos,
we're gonna talk about these five elements that when balanced, have
a very predictable and successful outcome. What if you could grow
and compound your money with no investment risk? And could you use
investment principles such as leverage to add horsepower to your
growth? Sound kind of interesting hope sell, because that's what
we're gonna talk about next. You don't want to miss it. Well,
that's it for this video. As always, if you have any questions,
shoot them to questions at wise money tools.com for sure. Make sure
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situation. That's about it. Until next time, take care.