Fire Your Financial Adviser

I wonder how many people actually listen and act according to the advice of Financial Advisers or so called Investment Experts. Some people believes that these financial experts are worth listening because of their in depth knowledge of financial products and markets.  I met one financial adviser recently when I was in my friend’s home to catch up with him. So this financial adviser couldn’t help but started to give me some advice on financial matters. Perhaps he is really passionate about his job or otherwise trying to pitch a sale.

This financial adviser told me that this is now the right time to put money in stocks because stocks are now relatively cheap. I told him that when stocks are cheap, they have the tendency to become cheaper real soon. He told me that he sees the US economy will be recovering and the Asia’s economy is strong. I share a different view from him. I explained to him that the consumers spending in US is still weak and millions of Americans are still out of work. Many companies in the US are still not hiring workers because of  poor demand for their products, as a result of a cut in consumers spending. I do not see banks lending money as they did before, where it is so easy for companies and people to get loans by just signing on the dotted line of a loan agreement. In fact, there are now extra precautionary measures that makes the banks tightening their lending practices. Banks is in the business of lending money. And if the banks do not lend money to companies, the economy simply cannot pick up as fast as it was before.

My friend joined in and told me to buy gold, as gold prices has not shot up to the roof and is still have the potential to climb higher.. I told my friend that I do not have the practice of predicting the market – be it stock or gold. My view is that gold has enjoyed some very impressive bull runs and when prices get over inflated relative to the actual value, the bull run will run out of steam and prices must then fall. Then the financial adviser told me that I am being quite negative about investment and have shut my eyes on opportunities. I told him that on the contrary, I am open to any sound investment advice. I gave him an example of my investment strategy right now. Stocks are cheap, and yes it will get cheaper. Putting money in the stock requires a prudent approach. My view is that I will put money in buying stocks from utilities, energy, transportation and telecommunication companies. These companies are very strong financially and they are doing very well even during this difficult recession period. What’s more, these companies are paying good dividends to shareholders annually.

In this difficult times, the most important strategy in investment is to preserve your capital So when financial experts comes to you and tell you of great investment opportunities, take it with a pinch of salt. Is he looking after your best interest or simply looking at his own interest, and how much commission he can earn from you?