Why Never and Always Are Bad Investment Words

When searching for advice, many people want to be told that they should “always” do this, or “never” do that. They tend to gravitate toward absolutes. Why? Because doing so simplifies the solution, and it takes the guesswork out of the decision-making process. 

This can especially hold true in the complicated field of finance and investing. You may have heard someone say that you should “never” buy a certain financial product, or, going the other way, that “XYZ financial instrument is perfect for everyone, no matter what!”  

So I’m here to tell you that there’s virtually no case where either of those words of advice are true. 

When I say “financial products,” I’m referring to things like stocks, bonds, insurance policies, annuities, mutual funds, ETFs, CDs, money markets, and so forth. These are all (essentially) tools that are designed to perform one or more specific functions. Bonds and CDS are generally designed to give you more stability and safety, while stocks are by nature risky, but have the potential for much greater return. So there’s a function to each of these tools. 

It may be helpful to compare these financial products to the tools you have in your garage. A garden rake performs one set of tasks, while a hammer performs another.  

So if, for example, you need to put some nails through a piece of wood, you’d probably consider buying and using a hammer to get the job done quickly and efficiently.  If you tried to use the garden rake to get that job done, though, the rake would be useless.  

Does this mean that garden rakes are bad and no one should ever own one? No! They’re great for getting leaves off the lawn, and maybe moving some dirt around. But if your goal is to get some nails into a piece of wood, the hammer is clearly the better choice in this case. 

But if you happened to run into someone who only sells hammers, they might be inclined to tell you that a hammer will work for all jobs and all goals, and that everyone’s tool shed should contain nothing but hammers. Whether you’re nailing two boards together, or you need to remove the leaves, or you want to paint your living room, they’ll tell you that a hammer will do it all.   

Okay, obviously this is a comical example, but it does prove my point. If someone has a vested interest in selling you one specific financial instrument, they may try to steer you toward that particular instrument without giving any thought as to whether it’s the right tool for the job you need done.  They may also try to steer you away from something that may, in fact, be beneficial to you.  This is the danger in listening to anyone who speaks in absolute terms of “always” and “never.” 

This is why it’s so important to know what your financial goals are, as well as your risk tolerance, before you buy and use any type of financial product.  If that product (or “financial tool”) isn’t going to give you the results you want, then you probably shouldn’t own it.  Why pay for something that you don’t want or need?  On the other hand, it’s also important not to simply dismiss a particular product or financial instrument without having first considered whether it has any potential benefits to you – benefits that may help you manage your goals a little more easily.   

The products I mentioned earlier — CDs, insurance policies, stocks, bonds, annuities —  there’s nothing inherently wrong with any of them, in and of themselves.  You just need to consider whether owning one or more of them will potentially give you what you want. Know your goals, know your risk tolerance, and then decide from there. 

We help our clients make determinations like these every single day at Lucia Capital Group. How can we help you the most? Just give us a call.