What’s more important, the investment or the investor?

Investments are Neutral

A lot of times individuals come to me and say “What is the best investment?”  Or they ask me a vague question such as, “Should I invest in stocks, bonds, gold, real estate, businesses, etc?”  My answer, “For your particular situation, I don’t know.  In order to know, I’ll have to ask you a lot more questions.  I need more information.”  There is no best investment.  In other words, what are the financial objectives and destination. 

While most people focus in trying to find the best investment, true success comes when you realize that all investments are neutral.  It is neither a winner nor a loser for any one person.  In fact, two different people can be set up in the exact same investment – one might come out with huge gains and the other end up broke.  What must be clear from the outset is the particular situation and the long-term objectives of the investor.  Only then can you get proper guidance on what investments will work for you. 

“I Want to Invest in Real Estate”

Let’s look at a case in point.  An individual came to me and wanted my assistance.  His plan was to begin investing in real estate.  When asked why he wanted to invest in real estate his answer was, “Because there are some great deals out there now.”  He’d been reading about how you can pick up repossessed houses for deep discounts. 

Of course that was true, but then I had to ask him again, “Why do you want to invest in real estate?”  I presented the same question and he gave the same answer a few times before he realized that his answer wasn’t really a solid answer at all. Finally, he said, “I want to invest in real estate because I want to retire in five years.”

We were getting closer!  My next question: “Why do you want to retire in five years?” We kept drilling down with more specific questions, it was finally revealed that he needed $3,000 a month to supplement his income so he could retire and stay home and help raise his grandson. That was, at this point in his life, his  definition of a rich life.

YES!  Now we could begin to map a course for him to reach his goals and objectives.  The value of this interchange was that the type of real estate he had been considering would have been totally wrong for him, and if he had used it he might never have reached his objective. 

This happens all the time – people hear something on the news, or read it in the newspaper and they’re ready to base their investment strategy on something that “sounds good.”  It’s a backward (ineffective) approach to build an investment strategy.

 Keep Asking Why

 Let’s go back to the analogy of using a GPS to map your road trip.  Choosing an investment program before you are clear on your objectives is like starting out in Atlanta, GA and you want to go west to San Diego, CA, but you start heading north toward Buffalo, New York because you heard on the news it was a great place to visit.   It makes no sense.

The best way to map your investment strategy is to ask yourself “why” until you can’t ask it any more.  That’s when you will find out the true motivation that is big enough to move you toward your desired destination.


About Beau Henderson

Beau Henderson is a financial advisor, author, coach, radio personality, and CEO of RichLife Advisors. He has helped over 3,000 clients to not just improve their relationship with money, but to live the life of their dreams.

11 Comments

  1. Sharon on November 28, 2010 at 8:05 pm

    Isn’t it interesting how people ‘react’ to what they hear in the media? If people would just take a breath at times and sit back for a bit, I wonder if there would be such a jump in the stock market? I like your question of asking people why they want to retire, because it is only through stopping and asking ourselves why we want something that we can really become clear on what is important to us.

    Sharon Worsley
    The Life Solutions Expert™
    http://www.sharonworsley.com/blog



  2. Dinyah Rein on November 29, 2010 at 9:43 pm

    I love how you illustrated pressing in to the “why?” I think all too often, in investing and in so many other areas of life, we stop before we get to the real answer, the one which really points to what would be the best route to get there. Even the idea of “financial security” or “more income” aren’t really great answers, in that they don’t provide a clear destination, and so the path remains murky. I find this to be important in my work with my clients as well, and welcome the opportunity to apply it to my own financial planning!

    CoachDinyah
    http://www.coachdinyah.com



  3. Susan McKenzie on November 30, 2010 at 10:05 am

    Beau… wow!
    This makes so much sense! And you’re taking the approach of really caring about your clients’ needs and desires, not just giving them the latest tips and advice. With everything in such a state of transition, it really is hard to know how to invest… this article is very helpful! Thanks 🙂



  4. denny hagel on November 30, 2010 at 10:20 am

    This article is so timely for me…my husband and I were just having this exact conversation!! You have given me some wonderful tips to keep us on the track we desire! Thanks Beau!



  5. Victoria Gazeley on November 30, 2010 at 2:41 pm

    Such practical advice. We usually look at our financial picture through a ‘what’ lens, and not a ‘why’. The ‘why’ is so critical! Thanks for the fabulous advice!



  6. Lily Iatridis on November 30, 2010 at 5:26 pm

    My goodness Beau, I sure wish my husband and I knew you before we made some diastrous investments 4 years ago. We took the advice of a trusted friend who was working for what turned out to be a very untrustworthy group. Your individualized, customer-centric focus sounds like you truly want to create a win-win for those you serve.



  7. Dr. Scott on November 30, 2010 at 10:04 pm

    I like this Beau… you must define your “purpose” (your “whys”), before beginning any investment strategy.



  8. Dinyah Rein on December 1, 2010 at 12:26 am

    “Keep asking why” is such great advice! I am struck by how important this has been in my own life, and in my work with clients. Not only in regard to financial decisions, but everything – career choices, relationship, even something so simple as time management. When you really understand the objectives, it opens up a whole different way of looking. There’s so often that why we think is the answer, but without digging deeper, it doesn’t provide clear direction or sufficient motivation. Thank you so much for that.

    Dinyah Rein
    http://www.CoachDinyah.com



  9. Beau Henderson on December 4, 2010 at 5:48 pm

    You are right Sharon. It really comes down to people looking for a magic bullet instead of a path that fits the individual. I’ll take a good investor over a great investment anyday…



  10. Beau Henderson on December 4, 2010 at 5:51 pm

    Thanks Dinyah, We are sleep walking through life unless we have the clarity to know where we are going. I always ask myself which is greater the price of doing the work now, or the cost in the future of not doing it. You nailed it that it applies to every single aspect of our lives…



  11. Sean Smith on December 20, 2010 at 9:03 pm

    So true. It reminds me of the Cheshire Cat in Alice in Wonderland. “One day Alice came to a fork in the road and saw a Cheshire cat in a tree. Which road do I take? she asked. Where do you want to go? was his response. I don’t know, Alice answered. Then, said the cat, it doesn’t matter.” Choosing a path before a destination is not only crazy, it’s dangerous!



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RichLife Advisors, LLC provides investment advisory services through Fiduciary Capital, Inc. Beau Henderson is a licensed life insurance professional in GA, SC, TX, CA, IL, KY, OH, MI, PA, MD, and NY.

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