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Why I never give financial advice to strangers in restaurants.

While in northern Michigan over the July 4th holiday, I ordered a carryout dinner at a local restaurant. Naturally, I was wearing a mask, but when the hostess asked for my name, another pick-up patron said he knew who I was and immediately blurted out a series of questions.

What do you think about this stock? How about that sector? He essentially wanted my opinion on what may well have been his entire portfolio. I was momentarily at a loss for words.

Keep in mind that he was a complete stranger. I didn’t know anything about him, so I respectfully declined with a good-natured smile.

I was actually familiar with all the investments he mentioned, but I wasn’t familiar with the most important things of all. Who was he? What were his goals? His aspirations?

When I discuss investing, I believe it’s important to know a person’s background, including marital status, health, family situation, income, risk tolerance and more. Knowing someone’s situation is critical.

For example, are there any short-term needs such as a down payment on a house? If so, perhaps the money should be sitting safely in the bank rather than in an investment whose value could tumble in the blink of an eye.

Maybe there are mid-range needs like funding a child’s education. If so, those dollars might best be put into an education fund commonly called a 529 program.

Then there’s the universal need: Retirement. I have to know if someone is participating in an employee retirement plan. If not, they may be missing out on a significant employer match. 

More often than not, I’m apprehensive when people wear their investments on their sleeves. Some stocks may carry some social status, but there’s a difference if you bought XYZ stock at $50 per share as opposed to $10 per share. Especially if the current share price is $40.

In other words, nobody should brag about any particular investment, especially in this rapidly changing world. If you’re going to invest, I suggest you have a plan, a financial blueprint.

Our local auto companies don’t just turn on the assembly line and hope they end up with a complete vehicle. They follow a blueprint. Without a financial blueprint, an investor could end up with a dozen or so speculative stocks and not have a clue about the risk he or she is taking.

There’s a significant difference between speculating and investing. Speculators tend to be frequent traders, while investors think in longer time horizons. In this COVID-19 environment, with so many working at home in front of their computers, I think the line between speculating and investing is becoming a bit blurred. I believe many impulsive trades are being made.

As an advisor, when somebody asks me what I think about their investments, I have a laundry list of questions I need answered before I can offer up any opinions or suggestions. If our paths should ever cross, I believe I’m a friendly, approachable person capable of carrying on an intelligent conversation.

The only thing I ask if you really want my opinion regarding your investments is that we schedule a meeting. Because in my humble opinion, off-the-cuff suggestions more often than not miss the target and can produce more questions than answers. Any questions?

Know Someone?

E-mail your questions to kenmorris@lifetimeplanning.com 
Ken is a registered representative of LPL Financial. Securities and financial planning offered through LPL, a Registered Investment Advisor, member FINRA/SIPC. Ken is Vice-President of the Society for Lifetime Planning in Troy. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Investing involves risk including loss of principal. No strategy assures success or protects against loss.