Become An Empowered Investor
The following is excerpted from The Empowered Investor, the soon-to-be-published book by Andre Shashaty, principal of 360 Investment Advisors. The book will be published January 1, and is available for the special pre-publication price of just $15, plus $5 for postage and mailing for the print version. To get on the list for pre-publication orders, email your name and address to Wendy Chaney at firstname.lastname@example.org.
Picture yourself on the terrace of a five-star hotel overlooking the Grand Canal in Venice, sipping a cappuccino, and making investments on your laptop that generate enough gains to pay for your trip before you fly home.
Choose a tropical beach, a yacht in the nearest harbor, or the comfort of your own den if you prefer. The point is that there is more potential for individuals to control their own financial future today than there ever has been. Individual investors can easily do things that our parents could not hope to do:
· Avoid getting ripped off by the excessive fees of giant institutions
· Get instant access to a massive store of information on stocks and bonds; and
· Successfully trade securities at low- or no-cost from anywhere in the world.
In addition, individual investors have access to alternative investments that were previously only available to specialists and professionals, such as participation in short-term consumer loans and commercial real estate ventures.
That is probably not a surprise to you, but have you taken full advantage of all the changes and new options? Have you broken free of the old system of costly dependency fostered by the big institutions? If not, then you need to read this book.
Investment advisors, giant banks, and Wall Street brokerages have been giving people lousy advice, making bad stock and mutual fund picks, and charging high fees for that “service” for the better part of a century now. They are working even harder today to increase their profits from individual investors. That’s no secret. What’s shocking is that so many millions of American keep putting up with it.
Too many individual investors are like inmates of a giant prison who don’t fully grasp that their jailers are gone, and the doors and gates are all unlocked. They are so used to being held captive they stay in their cells out of force of habit. They complain about bad service and poor results but they do nothing to change how they invest: They just keep relying on the same people hoping something will change as if by magic.
This book is for people who are ready to take control of their own investments and tell the big investment houses and globe-strangling banks to stop ripping them off.
It is a call to arms for beleaguered investors who have had enough. It’s a guide to joining the revolution, and taking charge of your own financial future, whether that means being a smart consumer of professional advisory and brokerage services, or making all your decisions yourself, using low- or no-cost on-line trading platforms.
It’s a guide that will help you become one of the new breed of investors, the ones who don’t fall for the deceptions, half-truths, and false promises of the investment industry – and don’t overpay for services that are most often mediocre and sometimes terrible.
This book is your invitation to become what I call an empowered investor.
I call it empowerment because it offers a clear alternative to the confusion and helplessness many people feel when faced with the complexity of the markets and the greed of large institutions. It offers an alternative to dependency on high-priced investment advisors and brokers. It gives new hope to those who see investing as traumatic and confusing, and who settle for miniscule yields on bank savings accounts and money market funds.
Being empowered means controlling your own destiny, and helping your dependents and heirs be prepared to carry on without you as smart investors in their own right.
It Is a way of life that can free you from frustration and save you money on fees. It can pay for your trips to Europe, a boat, a home (or two), or your kids’ college tuition – or all of the above. But it goes beyond that. It is also extremely satisfying to be confident in your own ability, to understand the markets, and to declare independence from investment service providers who never quite live up to their sales pitches and promises.
How do you become empowered? First of all, you have to recognize the dangers of passivity.
There’s nothing wrong with using professional advisors or good brokers with reasonable fees, but it’s a huge mistake to put blind faith in them and passively accept whatever they say. It’s sheer folly to keep overpaying big institutions for bad service and poor returns on your money.
I know, there are dozens of reasons why some people find it hard to pay sufficient attention to their investments. Chief among them is the self-defeating belief that someone else (a supposed professional) knows how to do this stuff better than they do, especially if they did not go to business school or aren’t great at math.
That’s malarkey, says the guru for the self-directed investor, Benjamin Graham. “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework,” wrote Graham in his seminal 1949 book, “The Intelligent Investor.”
Almost anyone can become empowered to some degree – if they are willing to apply themselves, overcome their inhibitions, and stop being easy prey for scammers and smooth-talking sales people.
If you have rock-solid faith in big financial institutions to take care of your money, this book will challenge your beliefs. But there is help here for you too. You don’t have to rethink your entire approach or fire your advisor to move toward empowerment. Making a few tweaks in your approach can make a huge difference.
If you are overwhelmed with work, parenting, or caretaking for a parent, you probably don’t think you have time to be proactive about investing. Maybe you should think again. I lay out simple steps you can take that won’t burn through the hours but will allow you to get a better deal from the people you are paying to help you invest. This includes a look at new services that deliver very valuable investment services for very low fees.
If you think you know it all and need no help, congratulations. But I respectfully submit that you might learn something in these pages despite yourself. Read a few chapters. See what happens.
On the other hand, if you are disappointed with the returns you are getting, or if you suspect that the companies you’ve paid to help you are not earning their fees, then you’ve come to the right place. If you are tired of being deceived by the investment industry and are finally ready to stand up for yourself and your family, you will find lots to like in these pages.
It all depends on you. This is not a book full of get-rich-quick fantasies or simplistic formulas for making money without any effort or risk. There’s no hiding the fact that smart investing takes time and effort, and a commitment to improve your skills and stay informed. And there’s no escaping the need to balance risk and reward.
Forget about getting rich quickly. The goal of this book is to help you develop an approach to investing that is rewarding and sustainable for the long term for you and your family.
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If you see this idea of empowerment as something optional, that you might get around to at some point in your life, I need to stop you right there.
No one needs to tell you that investing successfully is harder than ever, with global economic and political uncertainty, absurdly low interest rates, and volatility in stock markets around the world. There’s no sugar coating the harsh realities for investors.
That’s why it’s so important to be proactive or as I call it, to be empowered.
First, you have to stop getting ripped off by high fees and blatant frauds of the people like Bernie Madoff, or the thousands of other schemers who are still roaming free, looking for victims. They are everywhere, and the money they suck out of investors’ pockets makes it hard to realize good returns on your money. It’s like trying to swim with an anchor tied around your legs.
Second, you have to stop wasting time trying to get good service and good investment results out of people who just don’t care about how well they do as your broker or advisor. Sometimes I think investment practitioners spend most of their time learning how to sound concerned about you while still managing to do as little as possible for you.
The truth is, if you are investing small amounts of money, and that means anything up to $2 million or so, your chance of finding professional help of decent quality are just about nil. Even at $5 million, you are still going to be assigned to the most junior people at the big institutions. It’s only when you get to $10 million or so in assets that you become interesting to the best and the brightest in the business.
Finally, when you become proactive and assert your own judgment, a whole new world of investment possibilities comes into view. It doesn’t have to be high-risk stuff, like trading options, although they are not as scary as they seem. There are plenty of ways to earn a good return that you can find on your own but which advisors and brokers will not mention to you, ever. They are one-trick ponies for the most part, and in these times, you need every trick you can get.
The desire to put off learning about investing is understandable if you don’t have a big nest egg yet. But If your parents are affluent and reaching old age, think about what happens when they die. It may seem like a distant eventuality, but once it happens, it will be too late to learn how to invest wisely.
Investment sales people will start circling your parents’ estate within weeks of the funeral. If you have not already begun the process of empowerment when that happens, you will be ripe for the picking, and your parents’ money could end up benefiting bankers and lawyers more than it helps you and you and your kids. I know. I’ve seen it from close range.
There is no deadline to complete the process of becoming empowered. But there is an urgent need to start it.
In case you’ve forgotten, dozens of big investment houses and mega-banks have shown their true colors in the last two decades. They paid fines, settled lawsuits, and made legions of lawyers rich finding ways to circumvent regulations governing them. They always find a way to keep making money off of individual investors like you without providing good value in return.
Government has put in new rules to help protect investors. But those protections don’t reduce your need to be vigilant, not at all. First, the rules will be far more helpful to you if you know what they are and how to use them proactively. The government, even at the best of times, doesn’t do a very good job of enforcement.
Second, laws are just as easily repealed as they are enacted, and the investment industry is always trying to roll back consumer protection laws. The new president elected in 2016 is expected to be very friendly to bankers and investment banks, so you must be prepared for new consumer protection initiatives to be abolished.
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I wrote this book because I wanted to share my experiences with others who are searching for the right approach to investing.
When I scraped together my first $50,000 in savings, I did what millions of people do at that point in life: I entrusted that money to a main stream Wall Street brokerage firm. The broker promised that he could get a better return for me than I could get on my own. But all he came up with was a certificate of deposit at the same rate of interest I could have obtained at my own bank. I demanded my money back with no deduction of fees. He added no value, doing nothing at all I could not have done on my own for free.
I figured that was just one bad experience. So, as I accumulated more investable assets, I continued to look for professional help, thinking someone else could do a better job than me. After trying several financial advisors and getting involved with two very large bank wealth management operations, I finally realized that I was wrong. I could not only do as well as any of the professionals, I could do better.
I learned to make my own decisions and have been an active trader using Schwab’s on-line trading platform as well as an active investor in income-producing real estate.
I never looked back. I don’t claim to be an investment guru and I don’t say that I made absurdly large gains with no effort. I worked hard, I studied the markets, I diversified my holdings, and I’ve done very well. Best of all, I have not had to pay fees to anyone for doing a mediocre job and avoiding my phone calls.
You can do it too. This book will show you that taking charge is not as hard as you think. It will help you overcome the emotional and psychological barriers holding you back. It is your road map to the terra firma of self-directed investing.
Even if you feel you are not ready, if you’ve had financial responsibility thrust upon you suddenly, this book will put you at ease.
Yes, it’s work. It’s time-consuming, too. But you will quickly discover what a pleasure it is to feel that you are no longer a victim, or a sucker, and that you no longer have to pay someone a percentage of your assets every quarter for doing very little. Over time, you will discover the satisfaction of being in control of your own destiny.