This is a question that I think everyone who has money to invest for whatever reason needs to ask. Your answer will help you decide what types of investments and investment advisors you might want to use.
I invite you to read on and at the end of this post I’m going to bet that you’ll find the answer to this question.
Do you think it’s possible to beat the market?
This is the big question. If you believe you can beat the market, what besides your gut tells you that this is true? If you tell me that it must be true, consider this. Very few professional managers ever beat the market.
If you’re trying to beat the market, you’re not an investor, you’re a speculator. Not that being a speculator is bad. It’s just that many speculators wish they had been investors when they look at their investment returns after several years.
Let’s face it, most professional investment managers never end up beating the market in the long term. If you believe that statement (and it is true) what makes you believe you’ll be able to beat the market.
This is a really important question I would like you to answer.
Are you able to spend several hours a week examining investment options?
If you decide that being a speculator is for you, you’re going to need several hours a week to research where your money should go.
I want you to answer this question, do you have an extra four to ten hours a week to manage your investments? If the answer is yes, then being a speculator might be an OK decision for you. If the answer is no, think about being an investor and let the market work for you.
Do you want to work with an advisor or make your own decisions?
If you really want to be a speculator, you likely won’t need an advisor. But, you’re going to spend several hours every week looking at your investments. An advisor provides investors many services that you as a speculator might not value.
On the other hand, if you see yourself as an investor, an advisor is a logical person to work with. Your advisor can help you choose long-term investments that have a track record of working to achieve your goals. Your advisor can help you stay the course when the market turns goes south. Your advisor can help you not get too excited when the market is doing well.
You get to decide which type of investor you are and then choose who if anyone can help you reach your outcomes.
What is the time frame before you’ll need your investment cash?
Sometimes you might think you’re forced into being a speculator. Your timeframe is short and you haven’t saved enough money. Or at least this is what you might think.
If you haven’t saved enough money, the decision on whether to be an investor or speculator isn’t a good question. It’s when you need the cash and what type of *asset allocation model works best for you.
I know you might think timeframe has a lot to do with your choice of investments. The easy answer is it does. As you can probably tell by know I think being an investor is a much wiser choice. In my world the choices we would help you make is how much of your money would be in stocks, bonds and cash. Over time that has proven the most important decision to make. It’s something we help our clients make and I hope it’s something you’ll take seriously.
It really comes down to your own belief system.
How you invest your money always comes down to your own belief system. If you really believe you can beat the market and you’re willing to spend the time to do adequate research you might develop a very rare skill.
If instead you believe that markets are really hard to predict and want to use a low cost solution that gives you a good chance to match the market, then being an investor might be the best choice.
It really comes down to having a conversation with a qualified investment manager. That conversation can help you decide what type of investor you are and the best way to reach your goals that make you comfortable. After all, it’s all about making your life better.
I invite you to have a conversation with us. It won’t cost you anything and it might help you decide whether managing your own investments or working with an advisor is the best path for you. I believe it’s that type of decision that will make your life better.
*Using asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.