This past weekend Saturday Night Live officially celebrated 40 years of history, and in honor of this, Time.com shared some of the best SNL skits about money. Whether you are an SNL fan or not, you will find humor in these skits that range from a bank that only makes change to the best personal finance book that should exist in real life.
What struck me about these skits, other than the fact that they were funny, was that they held an immense amount of truth and wisdom regarding the financial services industry. As a financial advisor, I think that one of the biggest problems I see with clients is that they overcomplicate their money. They assume that money and especially investment decisions require years of training or advanced degrees to figure out and if they don’t have them, they can’t be successful.
Often the best financial advice is the most commonsense approach.
I’ve met with clients who own investments and have no idea how to explain them. When I ask why they own them at all, people will routinely share that the previous advisor said it represented a great addition to their portfolio and they should own it.
Well, the investment may represent a great diversification tool; however, if you have no idea how and why it’s beneficial, don’t buy it.
When the financial crisis of 2008/2009 occurred, there were a number of investors who bought auction rate securities or variable rate demand notes. They assumed that the investment was a short-term play because that was how the advisor explained it; however, in reality they represented a more complicated structured investment that could (and did in many circumstances) become highly illiquid. You couldn’t get out.
Once these investments became illiquid, many individuals experienced financial stresses due to the fact that they never planned for this potential scenario, even though it was a possibility. The solution? If investors took the time to really understand what they purchased to begin with, they may have avoided these problems completely.
I know that most people want to maximize their investment portfolio by any means possible; however, I don’t advise doing this by checking your commonsense at the door. Yes, you may lose out on some returns here and there by avoiding certain investments; however, over the long run, you will come out ahead because you will understand what you are doing.
What’s the best commonsense investment advice you have received? What’s your favorite SNL money sketch?
Photo: David Shankbone (original photo cropped)