Don’t leave your financial future to the “experts”

Some things should never be entrusted to others.

Choosing your home. Raising your kids. Managing your health. You’d never delegate such things to someone else and walk away, no matter how skilled the “expert” is.

By Vita Nelson, Editor, Moneypaper

When it comes to the really important things in life, you’ve got to do it yourself. That includes financial planning and investing for your future.

It’s a fact: Placing your finances in the hands of others adds an extra layer of risk to your investments. Here’s why.

First, you have to spend time selecting a professional you trust: a broker, a money manager, or a financial planner.

But how can you be sure you’ve made the right decision? Until it’s too late, you won’t know.

Most brokers and money managers are rewarded for the commissions they generate, not for the quality of their recommendations or the service they give their clients. Bad advice, conflicts of interest, and outright fraud are common.

But let’s assume the best possible outcome: You choose a broker, fund manager or other advisor who is both highly qualified and honest. Even so, your “expert” will never understand your needs or care about them as much as you do.

And you’ll pay that pro 1.5-3% of your money in fees and commissions—sometimes hidden fees you don’t even know you’re paying. Consider: If a fee of only 1% is deducted from a 9% annual return, the time it takes your money to double increases by a year.

No matter how you slice it, a fundamental conflict exists. Your goal is to maximize your investment returns. The professional’s goal is to maximize the fees and commissions he generates from your account.

That may be why brokers and fund managers tend to sell more often than individual investors. Frequent selling generates commissions for the pro—and onerous tax consequences for you. Short-term gains are taxed as ordinary income, not as capital gains. That means as much as 40% or even more of your gains go to taxes.

You can avoid these problems and do better on your own. How? By investing directly in the Dividend Reinvestment Plans (DRIPs) offered by top-rated U.S. companies.

Although a new idea to many people, Direct Investing Plans have actually been around since the 60’s.

That’s when the SEC approved their establishment, for the primary purpose of allowing employees to inexpensively and efficiently purchase stock in the company they worked for. And when some of America’s finest companies opened up DRIPs for their employees, they also made the option to invest directly available to individual investors. But the SEC attached a stipulation:

Companies can offer these plans, but they can’t advertise their existence. So they’ve remained under-the-radar. Wall Street has no financial interest in promoting them because they miss out on transaction fees and commissions when clients invest directly.

I’ve been educating small investors on direct investing since 1981 when I first discovered them. I’ve actually been in the financial industry since 1960 when I made a market in municipal bonds at two Wall Street firms. Since then, my passion has been helping small investors get the same advantages as the big guys on Wall Street.

That’s why I became so enthusiastic about dividend reinvestment plans. These plans make it possible for small investors to enter the market on a level playing field.

By eliminating fees, the small investor can build a diversified portfolio and affordably invest small amounts to build wealth efficiently. With DRIPs, the small investor can benefit from time-tested strategies like dollar-cost averaging—strategies that had previously been reserved for wealthy investors.

Hundreds of thousands of investors prove it every day. Investors like Eileen and Gerard Connolly of Jupiter, Florida. The Wall Street Journal featured their success in a recent article. They started investing directly 15 years ago with the purchase of just 1 share of stock in Kellogg, Coca Cola and Johnson & Johnson. They made small investments when they had a few dollars to put away, and seemingly by miracle, they now have accounts worth more than $64,000.

Lynn Shaner of Katy, Texas summed it up this way, “Purchase good quality dividend-paying stocks on a regular periodic schedule and reinvest the dividends. This is the single best investment advice I have come across in 30+ years of researching investment strategies.”

Your financial security is too important to leave to the “experts”. Surprisingly, it can actually take less of your time to handle your own investments. You owe it to yourself to take a few moments and find out more. Check out the research at www.drp.com today. Be sure to pick up your complimentary copy of our just-released report just for visiting the site.