Which Car Would You Take?

Here’s a hypothetical scenario for you:  You are given a choice between using Car A or Car B to drive from Los Angeles to Las Vegas.  You know nothing about the cars, but you may ask only one question.  What question would you ask in order to make the right decision for you?  Many people would ask “how many miles per gallon does each one get” while others might ask “which one is faster.”  While these may seem logical questions to ask, would it matter that you choose the one with a better MPG, but failed to ask about the condition of the tires (they’re bald), the leaky radiator, low oil level, loose battery cables, or the malfunctioning air conditioning?  Yes, this is another of my infamous analogies, and it does relate to financial matters.  So please indulge me for a moment and follow along.

Many investors–when given a choice between investment companies, strategies, policies, or plans—look only at the cost.  Now don’t get me wrong—I save money wherever and as often as I can.  But what relevance does ‘cost’ have if the strategy is all wrong?   The old saying “penny-wise, pound-foolish” is exactly what many do-it-yourselfers are doing by focusing solely on cost.  Maybe you’ve been caught in the trap whereas you tried to save a dollar by purchasing a cheaper alternative for a home project, but ended up buying twice as much just to accomplish the same results as “one” of the original parts could have.  Cutting unnecessary costs is smart, but getting the biggest bang for your buck is smarter.

I frequently have conversations with my clients (and prospective clients) pertaining to the cost of growing their assets, insuring their families against loss, or protecting what they’ve accumulated.  When we talk about the purpose of their respective goals (i.e. retirement, college funding, etc.), people start to realize that achieving the goal (getting there) is what is important to them–not how they got there.  It is my job to ensure that we (my clients and myself) are doing everything we need to be doing in order to increase the odds of success.  Of course, I hold my clients responsible for implementing my advice.