It isn't really about the investments

September is always a busy month for financial advisors. Everyone has returned from those last vacations of the summer, kids are back in school and there is a general sense that it's time to get back to work. At this point in the year, we usually get a lot of interest from people who have steeled themselves to face the investment questions they have been putting off: should I own these bonds? Is this a good stock still? What about this mutual fund? Should I have bought this annuity? And over and over again, I find myself explaining that it isn't really about the investments. By which I mean that I can't answer any of your questions about whether an investment is "good" until you've answered some questions about what you are trying to do with it. And that's the really stuff part about buying, selling and managing investments. There are some truly crummy investments out there, but for the most part any given investment is "good" for somebody. It's just a question of whether that someone is you.

Let me give you an example. We invest most of our clients' money in a long list of stocks or index funds that are designed to move with different portions of the economy. A so-called U.S. "mid cap" index fund should reflect how well the stocks of our large (but not enormous) publicly traded companies are doing as a group. We like this type of index fund strategy because, historically, it has allowed investors to take advantage of the growth in U.S. markets over time (and it's relatively cheap to do!). But that growth in "mid cap" companies over time might require a long period of time—years, in fact. What if you might need that money three years from now? What if your investments are in a 401k that doesn't have a "mid cap" fund? Or, what if you know you are only going to look at your investments every couple of years? What if your job hinges on the health of these same "mid cap" companies? In all of these cases, I might recommend that you avoid one of my favorite investments. They can be just as bad for your strategy as they are great for someone else's.

I write this blog so that you can better understand the often intimidating world of investments and consumer finance. You need to financial understand the tools that are out there if you are going to make the most of what you have and what you earn. Never lose track, though, of the fact that these are tools. And just as the best drill in the world is a lousy tool for fixing your tv set, the best investment in the world could be exactly what your financial strategy doesn't need.