July 18th, 2010 | 
Category: I hope the title caught your attention because that comment certainly caught mine when a co-worker mentioned it was its financial advisor’s comment on picking mutual funds. I took some time to write an email and provide some guidance on material to educate this co-worker. I was careful not to suggest any conclusion as I did not want to be responsible for any decisions. The individual clearly stated to not follow investment markets. From the comments written, it felt like the advisor is either not competent or taking advantage of this investor.
It was clear this co-worker was involved in mutual funds and had some understanding of such investment. I stayed away from discussing dividend investing or DRiP as I just wanted to help this investor better deal with this financial advisor and immediate needs. As such, I mentioned the Couch Potato strategy and suggested some readings on it. I suggested that the financial advisor should know about it (while thinking that if he/she doesn’t, it’s time to fire that advisor!). This co-worker wasn’t familiar with index investing and was pleased to hear about it. The Canadian Couch Potato will have a new reader soon.
It was a conscious decision of mine to not mention any other investing strategies since I don’t have any information on the desire and ability of this investor. I wanted to avoid information overload and I believe there is also a trend in how most individual learn about investment and investing. Here is what I think the progress of investment knowledge is.
- Interest paying investments – high interest saving account or GIC
- Stock market – I believe most people know about it but the cost of entry is usually high
- Mutual funds – Marketing and advertisement push this one to the front
- ETFs – Exchange Traded Funds are relatively new and are gaining in popularity
- Options trading – This is a really advanced trading strategy with high risk
- Dividend investing – DRiP investing tends to be free of cost if you do your research
I am not sure how fast most investor go through those steps though.
Readers: What do you think the steps of investing understanding are? How would you organize the steps? Any steps missing?
