You Lack BASIC Financial Knowledge

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Thanks to the Dodd-Frank Act, the U.S. Securities and Exchange Commission (SEC) conducted a study of the existing level of financial literacy of retail investors. To no surprise to us at Snider Advisors, the study found most investors have "a weak grasp of elementary financial concepts." This is the biggest reason we made financial education a critical component to our approach to investing. (If you are interested in the full report, you can find the 200+ page document here .)

The retirement system in America has changed. You can no longer expect a pension from your employer. That means the responsibility for your retirement shifted from employers to employees. Unfortunately, our education system was not included in this monumental change in retirement planning. In our schooling we are taught basic skills to help us lead productive, successful lives. However, no one ever teaches us about spending, saving, and investing. Everyone needs to actively seek out this knowledge or you will be part of the financial illiterate.

Our brains are not wired for thinking about the future. For thousands of years, humans woke up each day with the goal of finding food and feeding themselves and their family each day. Preparing for a long winter was their idea of long-term planning. Retirement did not exist nor did the possibility of living until you were 100. As a result, evolution created numerous behavioral biases that consistently lead us to make incorrect decisions when investing.

All our flaws have created an opportunity for someone else to profit. Complex products, high commissions, and good salesmen have lead to a successful financial services industry and a generation of unprepared, doomed retirees. They prey on the naïve and uninformed. Hidden in unread legal documents and fine print, investors rarely find the transparency and disclosures necessary to fully understand their investments. Finally, conflicts of interest between buyers, sellers, and intermediaries are simply swept under the rug.

The road to financial success is difficult. We enter the journey without the basic knowledge necessary. Our training was built for a completely different battle. And finally, the road is lined with pot holes and dead ends. However, by recognizing your short-comings as well as seeking a trusted advisor to guide you on your journey, you can be successful.

The intent of this article is to help expand your financial education. Although the information included may be relevant to your particular situation, it is not meant to be personalized advice. When it comes to investing, insurance and financial planning, it is important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Investment objectives, risks and other information are contained in the Snider Investment Method Owner's Manual; read and consider them carefully before investing. More information can be found on our website or by calling 1-888-6SNIDER. Past performance is not indicative of future results.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Retirement

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