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Investing For the Uninformed and Uninterested

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boats Recently a relative asked for advice on investing. It seems that he has saved little and is preparing for retirement and maybe getting married.

My wife asked him to go and look to invest in index stocks. I added that he should buy it regularly monthly.

Sometimes, I wonder whether advice like this helps at all.

What happens if the relative’s index stocks fall for a year? Or two? Or like what happened to the S&P 500 for the decade of 1999-2009? Which gave a negative return in case you didn’t know.

Advice is sometimes like a double edge sword. If you give it even with the best of intentions and not because some advantage like commissions are to be given to you, it can end up harming the person receiving the advice.

What if the time frame for investment for the relative changes? Would he give up investing entirely? If the market drops to the bottom like March 2009, will he have sleepless nights?

My wife did tell him to read up about index funds and recommended him some books that she found useful to read.

I guess the recipient of investing advice has work to do too. To expect to just be a good investor from advice and hearsay is asking for trouble. So I hope that this relative of mine will listen to the advice of my wife and read about the investment before plunging in.

With the correct mindset and some clarity of what he is about to do, it is more likely that he’d end up okay rather than one of those who swears off investing.

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1 comments:
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sgfinancialfreedom said...
February 23, 2010 at 3:53 PM  

Perhaps that is why many people are unvilling to give investment advice.

Even when my own family members ask me, I sometimes refuse to comment as what I buy or recommend might not be suitable for their particular situation.

At the end of the day, a fool is soon parted with his money. People have to learn about personal finace themselves and stop relying on the wisdom of those around them. They need to learn how to make their own informed decisions.

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