How to Talk to Your Clients About Investment Myths
April 27, 2022
It’s likely your clients have heard plenty of investment advice from the news, well-meaning friends and even social media. But that advice can be riddled with myths that can actually hurt their financial portfolios. Here’s what to look out for.
Investment Myth #1: It’s All About Timing the Market
If your clients are convinced that timing the market is their ticket to success, remind them that investing for the long term is their best bet. Stocks have averaged an annual return of 10% since 1926, so while it’s sometimes hard to be patient with the long game, it’s the smartest play — even when the market is volatile. It’s also impossible to perfectly time the market and missing just a few days of the rally can have a significant negative impact on their portfolio.
Investment Myth #2: Sell When the Stock Market Is in Trouble
When stocks plummet over a short period of time, clients may become anxious and consider dumping their investments so they don’t continue to lose money. The fact of the matter is, even when the market seems to be at its worst, it always rebounds — and selling when prices are low turns a paper loss into an actual loss.
Investment Myth #3: Gut Investments Are Good as Gold
If a client believes they should invest in a certain stock simply because they feel it in their gut, you may need to steer them to a more responsible investing strategy. Remind them of the benefits of their diversified portfolio that aligns with their risk tolerance – and the thoughtful approach that has gone into building that portfolio.
This is also an ideal opportunity to teach them about the power of index funds and index exchange-traded funds. Since index investments rely more on the overall performance of the market instead of just one or a few stocks, they’re typically a safe bet for investors.
Investment Myth #4: I Don’t Have Enough Money to Invest
Many clients mistakenly believe they have to be rich to invest. But the truth is, even small amounts of money can go a long way when invested as part of a well-designed investment strategy. If your client’s employer has a 401(k) plan, they can start investing immediately, even if it’s as little as 1% of their overall pay. If a workplace plan isn’t an option, encourage your client to set up an IRA and begin investing small amounts regularly. You can help them develop a plan to increase their contributions so they can start investing for a comfortable retirement.
When Trust Matters
At Farm Bureau, we believe in “A Plan for All”, or in other words there is tremendous value in a financial plan and a diversified portfolio for all clients. As a Farm Bureau Wealth Management Advisor, you’ll be part of a network with more than 500,000 clients who trust Farm Bureau with their family’s futures. Connect with the Regional Manager in your area about becoming a Farm Bureau Wealth Management Advisor.