Getting Rich Vs Staying Rich
Lot of us think making money is very difficult to compared to managing it. Time and again lot of rich people who become wealthy lost it all in no time. For example, professional boxers, NBA Players, Hollywood movie stars, wall street hedge managers. These professionals make tons of money, earning is not an issue. But they also lost them in big time, filing for multiple bankruptcies.
Why does it happen?
What is the problem in holding on to those billions? Even a conservative return on investment would be enough for them to take care of their life style expenses. Isn’t it?
I don’t have an intelligent answer to this situation. Common sense tells us that they must be spending multiple times than their earnings to get into this situation. Or they may be gambling too.
In my opinion, life is about controlling your risk. Take where you need it and avoid where it should be. I would say same thing about money.
Lot of investors have the problem in understanding their own risk profile and decide what is good for them.
A good professional will be able to guide them, looking at their situation from outside, without any emotions. He can suggest proper portfolio based on risk assessment and allow them to manage it.
DIY investors (Do-it-yourself) investors don’t have this advantage. Choosing a good mutual fund alone is not financial planning. But DIY investors believe that is what they need to do. They think becoming rich or staying rich is about choosing right mutual fund. This is very wrong.
Planning for life goals and achieving them on time by controlling the risk is the ultimate objective of financial planning. Very few can handle this challenge on their own. Many of them will be doing themselves a favor finding a good professional to guide them. Money mistakes can be very costly. No point in regretting about them at the age of 75. Right advice at right time is important than saving few thousands in professional fees.
On this subject, there is an interesting article I came across, I share here. You must read. A very different take on the subject.