October 20, 2010
I’ve had it with the oversimplification of financial company commercials. Sure, the E*Trade baby is entertaining as hell. And who wouldn’t like to trust Law & Order’s Mr. Integrity–Sam Waterston–to lead them down the righteous path to financial security? But, beyond the blatant salesmanship and entertainment value of these commercials, I’m deeply concerned the wrong message is getting through to American investors. That message: Investing is easy—if you just use OUR tools and services.
Investing ain’t easy. It never was. It never will be. And those buying into this oversimplification are headed for an ugly realization—not to mention a shortfall in their retirement accounts when they hit 70 ½.
Of course I have a vested interest in my counter message that individuals need help with investing. It’s what I do for a living. If everyone followed Sam’s advice by opening up a TD Ameritrade account, used its “easy-to-use” portfolio allocator, and researched each investment they made with its “simple” tools, I’d be out of a job.
But Sam, are you going to explain to these poor D.I.Y. saps what average margins for E&P companies are and why they fluctuate with global currency rates? Are you going to be there to explain the impact of fuel on railroad earnings and how their very own retirement plan, separate from Social Security, impacts cash flow and long-term liabilities? Are you able to model the revenue potential of the next breakthrough in diabetes medicine and how much free cash flow it will add to a company’s bottom line? Are you Sam? Do you even know how to calculate free cash flow? Well, do you Sam?!
Regardless of the tools available to investors through discount broker websites, anyone—and I do mean anyone—who doesn’t have a rudimentary understanding of finance and accounting AND who is willing to spend the time researching AND tracking his or her investments, shouldn’t go it alone. Sorry, it’s just the hard plain truth.
You don’t self diagnose a tumor. You don’t perform your own root canal. You don’t draft mortgage contracts. And you shouldn’t kid yourself by trying to invest for your future UNLESS you know what you’re doing.
I realize sharing information about your income and investments is tantamount to sharing bedroom videos for many, but think of it this way. If you don’t do it now, you’re risking a lifetime of bad investment decisions that could have you living over your kid’s garage asking permission to borrow the car to get to Thursday Double-Whammy Bingo/Taco night! Now that would make for a great commercial…