Garbage In, Garbage Out
Keywords: financial advisors, planning finances, financial information
It has been said that we have left behind the Industrial Age and are now in the Information Age. How true that is. Thanks to the internet, we now have huge amounts of information, all available at the click of a mouse.
A hundred years ago, people mainly had to contend with their neighbors popping around for a chat, bringing news with them. They had to decide if this was news or gossip. Then with the advent of the telephone, radio and television, all that was multiplied many times over. The internet has further compounded that problem.
I was chatting to my old granduncle the other day. He’s 87 years old, largely homebound, but quite savvy on the computer. He used to spend his time surfing the web. He said he was back to reading books. I asked him why he was no longer interested in the web. There is so much there to read, I said.
His reply ? The internet was either full of information that was no longer relevant, or just plain nonsense. I’ll admit, I was a bit startled. I’ve since been spending more time surfing around, and I think what he says is true. Anyone and everyone is an expert in something nowadays.
In the old days, you would get junk too. But usually, if you needed proper information or news about something, there were several reliable sources , where someone else may hopefully have reviewed the information first. For example, if you go to the library, the books it has have been reviewed by someone purchasing it. Certain newspapers are more known to provide reliable information than others. Medical journals are peer reviewed.
On the internet, sometimes, it is hard to differentiate real information from junk. An official looking website, someone who claims to be an authority, and suddenly, the opinion has become a fact.
I found innumerable blogs with all kinds of opinions and facts on them, with no apparent regulator. There must be hundreds of websites all providing information. There was even one that proudly announced it was providing “non-news” ! The information on wikipedia can be adjusted by anyone and put up as fact.
I read an article in a medical newsletter recently with some amusement and a little sadness. One author had written a spoof article and was quite surprised when he was later approached by people asking which journal the information was taken from and what he thought of the study ! He decided he had to explain that this subsequent article was also a spoof.
I must say it was very well-written , with a fake journal cited, lots of figures, a complete discussion of the results etc. But I would have thought a study on the benefits of alcohol prescribed to patients post-operatively would have raised some suspicions. Little things like ” We do not have approval from the Ethics Committee for this study. We didn’t think we would get it, so we didn’t bother to apply” would have tipped a few off !
So what about financial advice ? There’s obviously good financial advice, and there is bad advice. The key to knowing which is which is financial education. If you don’t know what to do with your money, many others will have lots of ideas. It is always best to be able to make an informed decision yourself.
It is not a particular investment that is risky, it is an uninformed investor that is risky. It is best that you should manage your own investments. Be an educated consumer. Find out how your financial advisor gets paid. Does he get a commission for selling the product to you. How much ? What are his credentials ? What is his experience ? Ask your advisor whether he makes his money giving financial advice, or whether he is financially successful himself, and gets his income from elsewhere.
A few additional points on when to fire your advisor. Don’t take advice from someone who insists he should be in charge of your finances. Be very careful of cold calls selling you life insurance or financial products. A good financial advisor should make you more money, not charge you money to make himself richer and you poorer.
It sounds like I’m against financial advisors. I’m not. It is better to drive a car yourself as you are in control. But for someone who has no idea how to drive a car, it is much safer to let someone else drive it. But choose your driver carefully.
Just a few more comments on financial “information” brochures, or advertisements, as they are more accurately called. They are precisely that. Advertisements. The purpose is to get you to buy the products.
Take time to find out who is getting richer - you, or the guy selling it. Learn to read the fine print. Risks and potential losses are never in bold large font right at the beginning. I’ve seen brochures which scream ” get 20% returns !!”, only to follow the little asterisk to read ” returns are not guaranteed. May sustain losses on principal sum.”
Never buy what you don’t understand. It doesn’t mean you never buy anything! It means you take time to learn before you put your hard-earned money in.
Warren Buffett, possibly the greatest investor today, says he spends a lot more time reading and learning, than buying anything. And when he buys a stock or business, he’s very confident of his choice. He puts in a large amount, and he holds it forever.
It may seem so much easier to just accept the first bit of information you get as gospel truth. But the price you pay for not taking a little time to be more critical of the information you get may be very high financially. Take time to think !
Today, we are being bombarded with information from all directions, from many sources. It’s ironic that in this age where we have more information than we can handle, many people have forgotten how to think.
Maybe that’s why my 87 year old granduncle gave up on the internet, and has gone back to reading books !
Karen Cheong believes we all have it in us to be rich - really ridiculously wealthy. We just need to learn to unleash the potential.
Find out what the rich know that the poor do not. Visit www.whymoneymatters.blogspot.com.
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