Monday, 2 March 2009

Financial advice

Every week or so someone asks me for financial advice. It is both a good question to ask, and one that worries me.

Max Hastings' article in the Guardian today shows why. Love him or hate him, he's a smart guy, yet his investment return over 25 years is probably below zero.

He uses this information to wonder whether the approach we take to personal investment in this country works.

He asks: "When it comes to money, many of us are unfit to be let out without a nanny. But who can be trusted to push the pram?"

It is another good question. Put simply, people both wilfully ignore good financial advice and are regularly fleeced by people they should be able to trust.

The Mail, as ever, provides some real people.

Whatever the answer is, I suspect it will not satisfy these frustrated Alphaville readers. It feels like the end of days, and even a change in government appears unlikely to shift the gloom. Charlie Brooker expects a riot. I think the odds are shortening.


matt h2o said...

Funny thing is, we asked some similar questions after the tech bubble popped, but everyone - from the head of the Fed to people saving for their pensions - just went trotting off looking to another bull market to make them rich.

I think part of the problem was the misconception that deregulation would make everyone rich, rather than just those peddling dodgy investments. It was a stupid misconception to be labouring under, but labour under it we did, because that was the dominant worldview and so long as our paper assets kept growing, we saw no reason to question it.

Now, of course, we're all deep in cognitive dissonance and looking for new ways to understand the world. Blaming the bankers is wonderfully cathartic, but it's a distraction from the core lesson - which is that we all took on too much risk because we thought that we were entitled to an ever-more prosperous future, and thus that nothing would ever go wrong.

I guess the question now is whether we can come to an understanding of the world that's a bit more stable and a bit more sustainable. I'm not expecting utopia, but I'm hoping for improvement. Although I'm not holding my breath.

Anonymous said...

There is no mystery behind making a profit from investing. You sell something for more than you bought it for. A lot of shops do this every day aand investing can be this simple too.

There does seem to be a pack mentality from investors to get into something which is hitting the headlines for it super profits. A lesson to learn is this is a good time to get out.

If you keep making this mistake then I suggest you burn all your money instead or at least give it to an expert to burn. You'll then be able to claim compensation that you didn't like the way they burnt it!