As an investment manager, people often ask me basic money questions. What they really need to do is talk to a driving instructor.
Money questions are often really life questions. Yes, there are technical issues with annuities and corporate finance; faithful followers of these comments probably know more about municipal budgets than the average MBA. But life is a complex picture. Money is just a part of that picture.
There are certain truths in our lives that money illustrates. The fact that it is mostly held by outside parties who provide a regular accounting means that it’s hard to lie to yourself about it. If you’re not setting money aside for larger goals, it will be hard to reach those goals. If you are saving, you should be able to see regular progress.
But the critical factor is to get started. That’s where the driving instructor’s advice comes in: “If you leave late you’re going to get there late.” You can’t make up for a late departure by speeding and running red lights. And you can’t make up for a lack of savings by investing overly aggressively. Higher returns require higher risk. Always. If you started saving late, chances are you’ll just have to save a little longer. Don’t risk destroying your nest egg in an effort to make up for lost time.
We can’t change the laws of physics, and we can’t change the laws of finance. Don’t ask your car to make up time, and don’t ask your investments to mend your finances. It’s just asking for trouble.
Douglas R. Tengdin, CFA
Chief Investment Officer
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