Needs vs. Wants – Are we much different from our children?
12 Feb 2014
When it comes to investing many people sound like their children: “I want to beat the market, I want to get my advice for free, I want to time the market, I want gold, I want, I want, I want…”
It all goes back to basic needs vs. wants. Everyone “wants” to beat the market or an index; everyone wants free advice, and everyone wants to time the market. The reality is, what do you really need? We believe it all starts with having a financial plan – a plan in place that establishes your unique goals and a way to accomplish them. Without a plan in place, wants will trump needs, everytime.
Having a plan in place helps you determine your specific “fair rate” of return. Do you need 5% per year, 6.5%, or even 8% per year? Again, until you have a specific investment goal to achieve each year, your default option becomes whatever everyone else is doing. Distractions will present themselves daily: whether it be the real estate bubble, subprime crisis, Eurozone crisis, or as we call it in the office “Apocalypse De Jour”.
It’s a very dangerous proposition to try to do what everyone else is doing. In addition, if you think you can beat the market every year, well than you probably need a therapist not a financial planner. It all comes down to have very specific, fair, and realistic goals in regards to your unique situation. What “cousin Eddy” did in his 401(k) last year or what your neighbor made in gold should have absolutely no bearing or influence on your ability to achieve your “true wealth”.
Remember what you need to earn each year vs. what you want are two very different desires. At the end of the day, are we really much different than our children? I hope so, but in my line of work I often wonder.
Jeffrey A. Johnston, ChFC
President of Premier Investments of Iowa, Inc.
3600 1st Ave NE, Suite 100
Cedar Rapids, IA 52402
(319) 363-3811 or (800) 383-6590
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Premier Investments of Iowa, Inc. are not affiliated.