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Tags: investment | advice | Billionaires | stocks

Taking Investment Advice From Billionaires

Taking Investment Advice From Billionaires

Trevor Gerszt By Tuesday, 05 April 2016 07:09 AM EDT Current | Bio | Archive

A staple of cable financial television and websites is investment advice from experts; guidance that’s often highly-charged and time-sensitive. 

What it’s sometimes easy to forget is these experts are usually millionaires, some even billionaires. A lot of what you hear is good advice, particularly if you also happen to be rich, and can afford to invest like they do. But if you’re more in the middle-income range “millionaire investing” might not be for you, particularly if your main objective is building a secure nest egg for retirement.

First, if you’re saving any money at all towards retirement, good for you! That puts you ahead of 25 percent of all Americans right out of the gate. If you’ve accumulated more than $50,000 you’ve surged ahead of sixty-four percent of your peers! These days it takes a lot of sacrifice to save money period, let alone to have any available to invest.

Remember Most Talking Heads Got a Good Start

One of the most frequently invoked names in investing advice is Warren Buffett. Make no mistake, Mr. Buffett worked hard as a young man, even hustled door to door as a kid, and now gives away much of his wealth to charity. But his father was also a stockbroker who had his own brokerage, as well as being a Congressman.  Young Warren Buffett had the opportunity to attend top business schools back east; great places to network.

We’ve all heard about the “small loan” Donald Trump got from his dad, and how the billionaire Koch brothers inherited a small fortune from their father as well. There’s an old joke around Wall Street that if you want to make ten million dollars, start with a million.

Can You Absorb the Hit?

The main difference between you and the wealthy investors you see on television is they can afford to take a big loss. Several of these “rock star” investors, experts who frequently appear on financial television shows, lost billions betting on Canadian pharmaceutical company Valeant. Names like John Paulson, Bill Ackman and mutual fund manager Robert Goldfarb are familiar to anyone in big finance, and all of them lost a ton of money in Valeant. One could argue it takes a certain amount of hubris to invest in a company with a business model of buying the patents on affordable drugs and then jacking up the prices. One might even suggest they deserved to take a beating on that one. Yet even after all the losses, most of which they’ll deduct, they’ll still have more money than they can spend in a lifetime. The difference between them and you is their investments aren’t a matter of survival.

They Get Great Deals You Can’t

The wealthy also get deals that aren’t available to the rest of us. At the lower end of the scale, people like you and me are called “retail” investors. If that makes you suspect there are “wholesale” investors, you’re exactly right. Extremely wealthy individuals and large institutional investors like hedge funds, pension funds, insurance pools and Berkshire Hathaway get a better deal than the rest of us. They get to buy stocks at favorable market prices that sometimes include options that put them “in the money” before the ink is dry on the deal. So when one of these investors goes on television and says XYZ stock is a great buy, remember it was a much better deal for them than it will be for you.

We’re Not Investors, We’re Savers

Most of us can’t afford to “bet huge” because we simply won’t have enough years to rebuild our savings if we end up losing it all. Sure, even as a small investor, you want to put your money to work, but you have to hedge against a major loss, especially if you’re in your forties or beyond and retirement is edging closer.

So it’s better if you think of yourself as a saver rather than an investor, because that’s the reality. While you still might have a percentage of your wealth in the stock market, that portion should diminish over time, and drop dramatically when you get into your 50s.

As you get older, your money should shift toward bonds, liquid hard assets like precious metals, and cash. The big players you see on television can afford to take a loss if the market tanks. But if you have too much in stocks too close to retirement, you may have to stay on the job another five or ten years when the next recession strikes — and for many, staying put won’t be an option. For others, health issues will force them from the ranks of the employed whether they’re ready or not.

Absolutely, much of what Mr. Buffett and others have to say on television is good advice, but always remember: You’re not them, and you can’t afford to invest like they do. You have to be more cautious, even if that means accepting lower, steadier returns. It also means hedging what bets you do make with tangible assets that conserve the buying power of your savings, like physical gold and silver coins in a gold IRA.

While many on the financial television started out working nine to five – or later – for their living, unlike us they don’t have to anymore.  But what you can learn from such success stories is that keeping an eye on your needs and goals, and not being distracted from your objective by what someone else is doing, is the surest path to financial victory.
Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau. To read more of his work, Go Here Now.

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A staple of cable financial television and websites is investment advice from experts; guidance that's often highly-charged and time-sensitive.
investment, advice, Billionaires, stocks
Tuesday, 05 April 2016 07:09 AM
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