Financial Advice: What everyone is doing wrong?

A man who takes advise from someone who doesn’t seem to have satisfied his reason will soon drown to the dept of darkness.

When it comes to Financial Advise only two things matter the source of financial advice and how you use it. But, before we move into details let’s understand the outlook of financial advice. Financial advice is basically a piece of information that helps you make more money with your money. The end goal is to increase your wealth whether it is by saving taxes, reducing your expenses, getting you better deals or investment ideas. All these things are part of financial advice. Youngsters after watching a few videos from warren buffet and some other rich people about assets start to look outward for advice as to where they should put their money. Earlier, financial advice was limited to only the richest people. But, today you can find numerous blogs, videos, and all forms of content about finance. But, still professional advice will cost you good some money. Now let’s look into the building blocks of finance and where things go wrong and how you can do better in your financial journey.

Source

Almost each one of us who has ever started the financial journey is the culprit of taking advice from friends and family. What else were we supposed to do anyway? When you start your financial journey you don’t have any clue and these are the people whom you ask for help whenever needed. And there is nothing wrong with doing that mistake in the beginning. But, things get worse when you are 2 years mature into the financial world and are still taking the advice of a friend who himself has no clue what is he doing. The only reason you are still taking advice from people who don’t have a clue about finance is because you are too lazy to educate yourself. Because, once you know the basics of finance you will immediately understand your goto friend doesn’t have a clue of what he is talking about. Now, comes scenario 2 where the person you are taking advice from has a proven track record of investment and has quite an intuitive portfolio of assets producing good returns consistently.

Such friends are good to have but you shouldn’t not really upon them. Instead, use them to learn finance. It doesn’t matter how good of a friend he/she is after some time they will see you as a burden. So, better get trained by them before they think of you as a burden. And there are scenario 3 friends who are aspiring financial planners and are using you as an experiment for their trades to build confidence. Just like I use my close friends. Such friends can be very beneficial and destructive if you are not careful. You should always take advice from a man of reason. What do I mean by that? If a person doesn’t know why he/she thinks a particular trade is good or not why would you risk yourself in it? And even if they give you their perspective of things you should do your own research. At the least look at the basics. Just like my close friends do, whenever I give them advice they verify my information and do their own R&D before putting their money in. And that’s why I consider them smart and good experimental material. The key takeaway from these two paragraphs is always to take advice with reason.

Application

Application is another crucial aspect of the financial world. You recently found a groundbreaking research paper that lists exactly which stocks are going to touch 52-week highs in the next 7 days. But, without checking the date of the research paper you go and buy. The research paper was 7 days old so, you bought stocks in an overvalued zone which puts you in a very dangerous zone. In another scenario, a friend gave you a tip to buy M&M at 1500 with a target of 1600 and a stop loss of 1460. You bought M&M at @1530 and didn’t set a stop loss the stock fell 100 points the same day. You will lose quite a handsome sum of money. When it comes to the application of a tip you must follow exact details. If there is a stop loss there is a chance of trade going negative and if a stop loss is not there you enter the dead zone. That’s it for today. Stay tuned for more finance education.