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Why a
"Fee-Only" Practice?

about Ofps

Principles of
Wealth Accumulation

a Financial Planner

Truth and Fiction
about Wealth

Money is the root of all evil. FICTION

Money is not the root of all evil. It is not necessarily even the root of some evil. Money is a commodity and as such it is neutral, neither good nor bad. However, scripture reveals that "…the love of money is the root of all kinds of evil," (emphasis added). That's the original quotation (as found in our Bible, anyway). Check it out in First Timothy 6:10. This statement has merit.

Money should not be loved. It's not worthy of love. People, animals, flowers, ideas, music, art, fine wine --- those things are worthy of love or at least a little "like." But not money.

Money can not buy happiness. MOSTLY TRUTH

Money can give you financial security, but not necessarily happiness. Of course it is true that money can not buy happiness directly, but it might buy happiness indirectly by allowing freedom from drudgery work, or allowing a better standard of living. But even this doesn't work for everyone. Many people who win the lottery are in a state of euphoria but a few years later they are right back to being about as happy or unhappy as they were before their windfall. And on top of that, often the money is all gone.

There is an increasing body of research in neuroscience to indicate that a person's propensity to be happy is genetically driven. In fact, according to a University of Minnesota study, 80% of the variation of differences in people's happiness can be attributed to differences in their genes and only 2% is attributable to their income level (the remaining 18% is attributable to other sources). In other words, some people were born to be happy and others not. But free will still enters into the equation. Abraham Lincoln said it best: "Most people are about as happy as they want to be."

If you want happiness, don't seek it directly. That's futile. Happiness comes from inside you and is a result of what you are and what you do, not what you have. Our favorite quotation on the subject expresses it beautifully: "Happiness is like a butterfly. The more you chase it, the more it eludes you. But if you go peacefully about your business, it comes to sit quietly on your shoulder."

So be happy. But also remember the words of investor Warren Buffett, "Happiness does not buy money.

Investing in stocks is like gambling. HALF TRUTH

We can just hear some of our financial planning colleagues shouting, " DID YOU REALLY SAY THAT THIS IS A HALF-TRUTH AND NOT PURE FICTION?" Yes, and we stand by our statement, because some so-called "investing" in common stocks is gambling. In the 1990s on a dotcom stock's message board we frequent from time to time, a message was posted by a newcomer stating, "Hi, everybody. I just bought 100 shares of this company. What do they do?"

Everyone knows of a person who got a hot tip from his brother-in-law about a stock that was going to quadruple in three weeks, bought a few hundred or a few thousand shares and then watched in agony as the price dived never to recover. That's gambling, just like the lady who wanted to know what business the company was in after she had bought the stock. People who are serious about wealth accumulation through ownership of common stocks do extensive research on what they are buying, carefully measuring risk with potential reward. Or they hire people to do such research. That's investing, and it's a lot different from gambling.

We know people who will spend hours pouring over issues of Consumer Reports before they buy a $20 jug of laundry detergent, but who will put several thousand dollars into a stock they know nothing about. We recommend that people who want to gamble go to the gaming tables at Las Vegas. Have some good food and drink, see a few shows, lose some money at the tables, and come home having had a good time. Just keep gambling separate from investing.

Young people should invest in stocks, older people, in bonds. HALF-TRUTH

Whether to invest in stocks or bonds depends on many factors other than age such as risk tolerance, time horizon, and income needs. Yes, some older people need the steady income provided by bonds, but others have generous pensions which when added to their Social Security give them more than enough current income. If they were not invested at least partially in common stocks they could be missing opportunities for great accumulation of wealth.

You need to be lucky to be rich. HALF-TRUTH

Some people are lucky to have chosen wealthy parents. Others are lucky because they won the state lottery. Luck is good, to be sure. And you are better off with it than without it. But intelligent decisions about investing can go a long way into changing bad luck or no luck into good luck.

In financial planning, we apply our knowledge and intelligence to our research efforts. This is called "due diligence, " and it's amazing how this due diligence can change a person's luck. Just keep in mind the quotations of these two leading sports figures: Golfer Gary Player said, "The more I practice, the luckier I get." And the legendary Vince Lombardi stated, "Luck is what happens when training meets opportunity." You can make your own luck just the way you can make your own happiness.

You have to have money to make money. HALF-TRUTH

Of course, if you start with a lot of money and invest it wisely you will probably make more money than someone who starts with nothing. But even persons of relatively modest means who have the discipline to spend less than they earn and invest prudently over an extended period of time can accumulate significant wealth. There is no secret to this. It's called living within your means and having a financial plan to accumulate wealth.



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22 Running Bear Ridge Road   ·   Blue Ridge, GA 30513
404-374-3048   ·

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