By
-- John Churton Collins
Advice. We giveth it and we taketh it.
We're all dependent on it. Parents are the first providers of advice, teaching us right from wrong, and showing us how to walk, talk, hold silverware, and go potty. As we grow up -- accumulating new knowledge and developing personal tastes and beliefs -- we strive to become our own advisers, often discarding earlier advice for our own improved models, or spending $100 per hour for the advice of a therapist to replace that of a parent.
Advice has been around a long time. The first "known" case occurred in the Garden of Eden, where Adam and Eve were told they "may freely eat of every tree of this garden; but of the tree of the knowledge of good and evil you shall not eat, for in the day that you eat of it you shall die." Sounds like a must-avoid scenario.
The serpent had some advice of his own for Eve: "You will not die," he counseled. Eve then "saw that the tree was good for food," and since "the tree was to be desired to make one wise, she took of its fruit and ate." Bad advice from an apple-touting snake.
Eve didn't thoroughly investigate the source of her advice. Who was this reptile? What background qualified him to offer suggestions? Perhaps if Eve had done some research, she could have avoided the first mistake in the pursuit of wisdom.
An in-depth understanding of an adviser's background is important. Advice is given based on the beliefs, experiences, and opinions of the adviser. We can't lose sight of that.
If we are getting advice from Dear Abby, we have a preconceived notion of her qualifications based on her reputation and name. However, names can be deceiving. Ms. Van Buren says she chose her professional name based on "Abigail," the prophet from the Old Testament's Book of Samuel, and "Van Buren" from Martin Van Buren, the eighth president of the United States, because of its "aristocratic, old family ring." By giving her a cachet of authority, the name may have contributed to her success as an advice columnist -- but a name that sounds good is hardly a reason to trust someone. Far too often it works, though. Sometimes it's all one has to go on.
Another limitation to advice is that, no matter how tailored it is supposed to be, all advice is generic in the sense that it may be widely applicable, but might not necessarily fit your life. While it's certainly reasonable to seek advice (in fact, it's hard to avoid it!) it's up to each individual to gather all the information available, learn as much as possible, and then make decisions using reason and intellect. (Perhaps Julius Caesar should have done a little checking around when he got that advice about the Ides of March.)
Let's say a a guy on the radio says ABC Corp. is the next great thing. You buy ABC and up it goes. Good call! That kind of advice works for everyone, yes? Not necessarily. You need to know how ABC Corp. fits into your overall portfolio and investing goals. How long should you hold ABC? One day, two days, one month, or five years? If it goes back down, do you sell or hold until it recovers? If you have purchased a stock based on someone's advice, you don't have the answers. And where will he be when you need to know?
Advisers, like all investors, have winning streaks. But even Joe DiMaggio had slumps. And when an adviser's suggestions don't pan out, where does that leave you? You may have done a lot of investing, but you will have learned very little in the process. I heartily agree with Ann Coleman's statement in this space last night: "It's better to make your own mistakes than to let someone else make them for you."
Still, it's hard to shake off the assumption that an adviser might know more than you. And she often does. But that doesn't mean her advice is right for you. If you receive financial advice from a professional, spend time reading about the companies or funds he recommends. Spend time learning about the options available to you and researching the history of the stocks or strategies recommended. And most important, check out the history of that adviser!
The key is listening to advice and considering all options before acting. What's right for you may not be right for some other person. How else can we explain all the people we DIDN'T marry who ultimately found an appropriate mate?
Don't get me wrong... I LOVE advice! The more, the better. It provides much-needed perspective. But I use it as information, not instruction. Advice shouldn't be The Answer, but it's great for clarifying the questions that need answers. Always remember that the only person suffering the financial consequences of bad advice will be you.