Everyone who drives a car knows that there are periodic maintenance items that are required. The most basic one everyone thinks of is an oil change. You have several choices when it comes to getting your oil changed.
First, you do not have to do anything. You can drive your car for as long as you want and watch it breakdown someday.
Second, you can do it yourself. There is not one part of an oil change you cannot do or learn to do (don't let a mechanic know I told you that!). You must realize how much time it will take you to learn how to do it and how much time it will take you to actually do it. What tools will you need? Do you know how to use those tools? And the most important question you should ask yourself is what happens if you make a mistake.
Third, you can hire someone to teach you to do it. They will work along with you and then get in the car and drive around with you. If your car breaks down on that trip, they are stuck on the side of the road with you. Finally, you can take it to a garage and buy a one-time solution to your product. They will change your oil for a specific fee and you can drive home in 25 minutes. The next time you need an oil change, they will gladly charge you and change it again.
So, how does this relate to investing? Well, you have the same choices. Many people are starting to work with these online discount brokers they see on TV and we have started to get many questions about what we think about them.
The basic tools are there for you to use or misuse. You can do this investing yourself. But you need to realize how much time it takes, if you know how to use the tools, and what will happen if you make a mistake.
For over 25 years, we have gained the experience and knowledge from every client and prospect that has walked through our doors. That experience of knowing where the potholes are goes a long way to achieving a smooth ride.
To hear the Smart Money Radio Show segment focused on this topic, Please Click Here! (about 7 minutes long)
To hear the full Smart Money Radio Show where Bruce discusses this topic and more, Please Click Here! (about 25 minutes long)
Bruce:
ReplyDeleteYour analysis of bond fund volatility in a rising interest-rate environment is "right on." So may people live under the misconception that bond funds are safe just because the money is in highly-rated bonds. As you pointed out, interest rate risk can have a quick and significant negative effect on one's retirement assets. That's valuable educational information for the average investor.