You know this conversation is coming up on Thanksgiving…along with the turkey, sweet potatoes and pumpkin pie. You can always count on the “money and investing” conversation with your friends and relatives before, during, or after the big Thanksgiving feast.
I know that every year, I am asked for investment advice from both friends and family that I celebrate and give thanks with on Thanksgiving Day.
I don’t think I get investment questions only because I am in the investment advice business. Instead, I think family and friends ask me “what to do” with their money and investments because they really want to know anything that can help them make better investment decisions.
We are currently in a historic period of world-wide economic and stock market volatility. Investors asking questions is a natural part of that process.
My advice is to be extremely careful in regard to any investment advice you receive this Thanksgiving holiday season in Minnesota. Here are a couple of reasons why I give you this warning.
First, you always need to remember that in most cases, your family and friends are not experienced investment professionals. These people were “sold something” by the investment advisors they currently work with. Your family and friends in most cases will feel better about what they “bought” if they can convince you to feel the same way about their investments.
Your well-meaning friends and family are absolutely convinced that whatever they are currently invested in---gold, oil, stocks, bonds,—are the best investment opportunity of their lifetime. And they are not shy about telling you to own the same thing today.
As an example, think back to the last time you had a conversation with a friend or family member who just bought a new car. Do you remember that person telling you what a great deal that they got on that new car?
Every person on earth who just bought a new car got the greatest deal in the history of the world when they bought that car. Watch out, because the same thing applies to friends and family who they tell you what investment you should own at Thanksgiving Day.
Second, always remember that you never should make your investment decisions based on another person’s investment decisions. No two investors have the same investment objectives and tolerance for risk.
Your 30-year-old sister with two children is in a completely different investment universe than your Uncle Charlie who just retired from a large Minnesota company last year.
Your sister has to make investment decisions on her company 401(k) retirement plan account, personal investment account, and college savings account. All three of those accounts require a logical and specific investment strategy to grow the assets in those accounts over the next few years.
Your sister has several more years to grow her savings and investments before she or her children will need access to the investments. She has time to grow her investments.
Uncle Charlie isn’t going to work any longer. He can’t replace the lump sum of money he has in his old company 401(k) retirement plan account. He may live another 30 years, so the worst thing that could happen to him is that he could “run out of money” before he dies.
Uncle Charlie needs to grow his investments too. But risk management and safety of principal should be his most important investment objectives.
So, on the Thanksgiving Day holiday this year, don’t shy away from talking or listening to conversation about money and investing. But just like your mashed potatoes, take any investment advice that comes your way with a grain of salt.