Milton
Thinks s/he gets paid by the post
- Joined
- Apr 18, 2007
- Messages
- 2,360
Extracted from Straight-Talk-Express: Personal Finance News from Yahoo! Finance:
Of course, the problem with the above analogy is that while the vast majority of auto mechanics have considerably more knowledge and experience about vehicle maintenance than does the average car owner/driver, that's not the case in the investment industry. Pretensions of 'professional' status notwithstanding, just about anyone can hang out a shingle and call him or herself an "investment advisor" or "financial counselor".
ince the AARP study compared understanding investments to understanding an auto mechanic, consider how this situation can play out with an investor feeling more comfortable by knowing just a bit less.
Your car is one of your biggest expenditures, one that - like your financial nest egg - you want to make last, in good condition, for as long as possible. While you can do your own repairs and know what's necessary to keep the car in good working order, most people don't change their own oil, and are better off focusing on keeping the car serviced properly than wondering about the nuts and bolts under the hood themselves.
Consumers can't afford to be ignorant about how a car works lest they wind up overpaying for repairs or simply running the vehicle into the ground by never getting it serviced. Yet they also don't need to be a trained auto mechanic.
Likewise for investors, who must know the big things - such as whether they are saving enough, how well they can sleep at night when their assets are exposed to risk, and their time horizon - but who could leave the finer points of asset allocation to a hired hand.
Of course, the problem with the above analogy is that while the vast majority of auto mechanics have considerably more knowledge and experience about vehicle maintenance than does the average car owner/driver, that's not the case in the investment industry. Pretensions of 'professional' status notwithstanding, just about anyone can hang out a shingle and call him or herself an "investment advisor" or "financial counselor".