The Sky is Falling! Protecting Yourself from "Bad Investment" Advice

The Sky is Falling! Protecting Yourself from “Bad Investment” Advice

Is there such a thing as a bad investment?  Each type of investment was created for a reason – to fill a specific need or objective.  Yet investors are bombarded with opinions about which investments are “good” and which ones are “bad.”
“Annuities are a bad investment!”
“Alternative investments are never a good idea!”
“It is not smart to invest in Leveraged ETFs!”
“You should never put money into cash value life insurance!”
Heard any of that before?  Yep, me too.  Advisors frequently comment on what is, or is not, a so-called “bad investment.”  I hear it all the time.  When I hear an advisor spout one of those common proclamations, there are three things going through my mind:

  1. That advisor is undereducated. Making a generalized negative statement about a type of investment tells me that the advisor is not educated enough to identify when certain types of investments are most appropriate.  You hire an advisor to be your financial advocate, and it should be concerning to investors that an advisor is unable to see when the use of certain investments can be of great benefit.
  1. That advisor is lazy. Are alternative investments complicated?  Yes, very much so.  These investments are subject to a different set of risks, and the recommendation of alternatives should always be prefaced by a thorough analysis and careful consideration of the client’s overall financial picture.  Of course, this takes time.  And time is money.  The sad truth is that it is easier for advisors to criticize and attack investments that they don’t fully understand.
  1. That advisor is dishonest. Is that advisor licensed to offer the type of investment they are condemning? If not, then that advisor is not only undereducated and lazy, but also dishonest.  How can you tell an investor that certain investments are terrible when you aren’t even qualified to recommend those investments?  If the advisor doesn’t have a way of getting paid for offering you a certain investment, they may try to convince you that it is a “bad investment.”  Does that sound like a conflict of interest?  It is.

So, what is a “bad investment?”  I do not subscribe to the theory that any one type of investment is bad.  In reality, the status of an investment as “good” or “bad” depends on your personal financial situation.  And, if your situation changes, an investment that was once inappropriate for you may now be the very investment that will help you achieve your goals.
The actual “bad investment” is the investment of your time and money with an advisor whose mind is closed to options that are available to you.  You are unique, and your financial plan should be too.

Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors are not affiliated.  2009 Market Street, Camp Hill, PA 17011.