Aaron Katsman 58.
(photo credit: Courtesy)
In a recent financial poll taken by a local Israeli newspaper, various
individuals were asked about their investing habits. One of the most shocking
facts revealed by the survey was that investors had absolutely no idea what they
were investing in, with which firm, and how much they were paying in fees. In
addition, investors typically had no idea how aggressively or conservatively
their money was being invested.
Unfortunately, the results of
this poll are not very surprising. As a financial adviser, I often meet clients
who think they understand what they own and that their investments are
conservative. But on reviewing their statements, we often find a vast difference
between what the client thinks he has and the facts on the ground.
example, a client may say he is “a risk-free investor with a conservative
Then we find his portfolio is solely invested in stocks, and
during the course of the year the portfolio has moved up and down more than 20
Another common occurrence is with retirees who manage their own
money. They tend to invest solely in dividend-producing stocks. Then they are
surprised to see that when the market drops, so does the value of their
portfolio. Remember: All stocks can substantially drop in value. There is no
such thing as a “safe” stock.Who is at fault?
I think both financial
advisers and clients share the blame. Financial advisers have an obligation to
explain investments to their clients, and they should give them enough time so
that they understand what they are investing in.
On the other hand,
ultimate responsibility lies with the client. It is always worthwhile taking the
time to understand where your money is being invested, and you should always ask
questions until you are totally clear about what you are investing
Before you meet with a financial adviser, broker or any
other investment professional, it’s a good idea to map out your monetary goals.
For example, it is worthwhile working out how much income you need to supplement
current National Insurance Institute payments, social security or any other
pension fund, to meet your fixed expenses.
Although an expert will help
you decide how to invest your savings, you should first have a firm handle on
your short- and long-term goals and needs. Do you have children or grandchildren
to marry off? Are your elderly parents in need of care? First you must determine
your own budget needs and your ability to tolerate risk, and then ask your
adviser what kinds of investments would best fulfill these goals. Use your
adviser as a sounding board. He can tell you if your goals are realistic; if
not, you can work together to come up with achieveable goals.Understand
When it comes to making decisions, focus on the whole range of
the investment’s characteristics rather than simply on hopes of a high return.
You have to understand the cost, degree and nature of the risks, investment
goals, performance history and any special fees associated with an investment
before you decide to purchase it.
One should also never assume that an
investment is federally insured, low risk or guaranteed to deliver a certain
return. Find out all the necessary information – and then make sure that you
understand it properly. Then you can check it against your own goals and risk
profile to see if the recommended type of investment is a good
Continued cooperation with your financial adviser will only help you
in your efforts to make sure your investments remain consistent with your goals.
Periodically reviewing your portfolio with him is a good way to assess whether
it is still consistent with your needs.
On the same note, make sure that
your investment strategy remains current. If there is a change in your financial
situation, consider whether your strategy needs to be
Remember: Ignorance isn’t bliss. Know what investments you
have and why you have them.
firstname.lastname@example.org Aaron Katsman,
a licensed financial adviser in Israel and the United States, helps people with
US investment accounts.