I went cycling with my friend Chuck this week. We started in the cool morning air and headed out through Washington Fields. It was such a beautiful ride and I found myself thinking, “I sure love this bike.” I have a pretty nice road bike and though I am not a serious rider, it allows me to cover 15-20 miles in about an hour’s time, giving me both a nice workout and a wonderful way to start the day.
As we entered Hurricane, we decided to cut across a short dirt road over to the city’s paved trail. I quickly found myself struggling to maneuver my bike, with its skinny and hard tires, through the gravel and soft dirt. I found myself saying, “I do not like this bike at all right now.” My road bike does a great job on pavement but in the dirt, it is a disaster waiting to happen.
I have another bike, a hybrid, that I bought several years ago. It has large tires suitable for dirt riding, but smooth tread patterns, appropriate for the street. Initially I enjoyed riding that bike, but I quickly learned that a bike designed for both pavement and dirt, is ok for both, but not great at either.
In my recent columns on annuities, I received a response from a gentleman who said, “You clearly don’t like annuities.” I am sorry if I gave that impression as it was not my intention. My point was that all investment products have a purpose, and to get the best benefit from them, you need to first establish what the purpose is.
It is sort of like when I went to a friend who owns a wonderful cycling shop downtown and asked for his help in purchasing my current road bike. Before showing me anything, he took the time to ask me about my skill level, what type of riding I wanted to do, whether this was for pleasure or competition, and many other questions to define the purpose for which I was buying a bike. Then, when he had enough information, he walked me over to a beautiful road bike and said, “This is what you will want.”
Investments, like bicycles, are merely tools. Using a great tool for the wrong job can be disastrous. Tools that purport to be “all-in-one” like my hybrid bike, often do multiple things ok but nothing really well. Tools that are very specialized for one purpose, can be quite useless doing something else, much like my road bike in the dirt.
Some investing tools seek capital appreciation while others are designed largely to protect principal. Others focus on income. There are also hybrid investing tools that may offer to do multiple things at once. Investors should first establish what it is they need an investment to do, then choose the correct tool for the job. More likely than not, as with bikes, they will find the solution lies in using several useful tools to accomplish their goals.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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