20 Ways the Investing Industry is Trying to Scr*w You

Is the Investing Industry Trying to Scr*w You?

Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. He said,
“Look, those are the bankers’ and brokers’ yachts.”
“Where are the customers’ yachts?” asked the naïve visitor.
–Ancient story

I started this website to give you a cheap alternative to build wealth with investing. I’ve done all the hard work for you. I’ve read the research, invested my own money, and tried various approaches. I’ve lost money investing in high commission, broker peddled products. I’ve lost money buying and selling stocks. Yet, in spite of these setbacks over the years, I’ve been quite fortunate to invest through thick and thin and build up a retirement portfolio which should last until my spouse and I die with some left over for our heir.

Over the decades I managed to study the investing field in depth and garner an MBA in finance as well.

This isn’t an indictment against every corner of the investing industry, but…. consider the possibility that there are ways that the investing industry is trying to scr*w you.

I say our investments should last because no one knows the future. Argentina has double digit inflation. If the U.S. ever experienced that type of inflation then my money, and yours would go a lot quicker. And if the Zombie Apocalypse hits, all investment values might go to zero. But, baring those unlikely events, the well researched, tried and true investing principles, if applied consistently should help you build up your wealth so you can stop worrying about money and concentrate on doing what matters to you.

The Investment Industry Commercials

This is a long way around introducing you to the ways that you can build wealth through investing, avoid falling for financial sales pitches, and have a lot of time left over to enjoy your life.

I notice, when watching CNBC or CNN, there are an abundance of commercials for the kindly advisors wishing to put your financial future right.

Fidelity has a green line you can follow which will lead you on a path to riches.

Both Charles Schwab and TD Ameritrade have new plans to refund fees under certain scenarios. Well what about investing on your own so you hardly have any fees in the first place? Ever thought of that one?

My contact at TD Ameritrade, where we have a discount brokerage account, has tried to get me to try one of their “specially vetted” advisors.

I realized that I’ve never talked in detail about the ways the investing industry is trying to charge you for high priced services, which you don’t need.

Every time my friend Catrina’s (not her real name) money manager offers her baseball game tickets I cringe. Who do you think is paying for those tickets? Why she is, of course. If she wasn’t paying the money manager 1.25 percent or more for the company to “manage” her investments, she’d have plenty of extra money to pay for her own baseball tickets.

So before you decide who you’re going to turn you hard earned retirement, or long term savings dollars over to, consider whether you need to turn the money over to anyone. And this is not to imply that no one should ever get investing guidance from someone in the financial industry. I’m simply suggesting that you contemplate the possibility of going it alone. Or, if you do decide to use an advisor, at least choose one of the lower cost providers. And above all, understand what you are paying for.

If you could manage your money yourself, with a little bit of study, would you be interested in saving yourself one percent or more per year? That money adds up over time.

20 Ways the Investment Industry is Trying to Scr*w

Let’s take a look at the ways financial companies are costing you money.

1. Selling you products you don’t need.
2. Advising you to buy or sell individual stocks and bonds and collecting a commission on either side of the trade.
3. Denying you information about your average annual return compared with a particular benchmark.
4. Charging excessive fees to manage your money.
5. Recommending exotic hedge fund investments.
6. Suggesting you switch from a self-managed IRA or investment brokerage account to one of the company’s “expert” managers.
7. Not understanding your long and short term goals.
8. Promoting high fee annuity products.
9. Suggesting insurance as an “investment”.
10. Recommending timing strategies to “beat the market”.
11. Offering high commission mutual funds which could be replaced with no load mutual funds or ETFs.
12. Making you believe that investing is complicated.
13. Failing to explain the risks of the investments the advisor is recommending.
14. Not informing you about the historical asset class returns.
15. Not clearly explaining the differences between individual stocks, bonds, mutual funds, and ETFs.
16. Not returning your calls if you don’t have a lot of cash.
17. Not explaining how the advisor is compensated.
18. Not making transparent the fees in your accounts.
19. Not helping you understand asset class valuations.
20. Failing to offer you access to low fee index mutual funds.

So before you turn your hard earned money over to an expert, consider spending a few hours reading about investing on your own. You may be better off taking charge of your own investments.

Do you manage your own investments or hire a “pro” to handle your long term money?