Wednesday, October 3, 2007

DANGER: When co-workers ask for Investment advice...

So If I haven't mentioned it recently, I am currently in the process of starting an Investment Club at my job with two other co-workers.

Well today, while we were talking about what books and topics to possibly discuss at our first semi-official meeting, one of the co-workers started talking about our company's 401K plan and what investments she has in her account currently.

More specifically she pointed out the fact that for the past month or so the vast majority of our 401k options went down in value. I tried to not to boast when I mentioned that my account went up up overall (mainly because I decided to get out of US stocks the moment the Dow hit the 14,000 mark the first time) . At this point my co-worker began to pick my brain about what she should invest in....WARNING!!! DANGER !!!

I tried to be vague and general just mentioning I had chosen some of "Emerging Markets" aka China & India stocks.

- but then she began to say something to the effect of "Oh well, I'll put all of my 401K into Emerging Markets then..."

At this point I tried to be general while at the same time trying to explain why it might be a bad strategy for you to put all your 401k money into any one fund/stock/bond etc. I also mentioned how important diversification is.

We were interrupted by another co-worker and I went back to my desk. But then my co-worker called my extension to finish our discussion and began picking my brain about my exact allocation - which I pretty much told her but at the same time I tried to stress "whatever you do with your money is up to you!"

I didn't go into the whole "I am not a financial planner" spiel but, on a certain level I think I should have.

Even though sometimes I feel somewhat financially savvy at times I by no means should be consulting someone older than me on how to direct their 401k allocations!

One key difference between me and my co-worker are our investment strategies. For example:
  • I am a very cautious investor and I'd be fine and dandy making a straight 7-8% return in my 401K pretty much for life
  • My co-worker on the other hand is a more high-risk investor and would get upset if she was only making 7-8% return assuming the market as a whole was making 12%.
Due to this, I'm a tad weary about other co-workers hanging on to my every word when it comes to personal finance. Although it's a nice new realm of respect, I would feel horrible if a co-worker makes some poor financial decision and then says they based their decisions on my advice or what they overheard me say.

Has anyone else had this problem at work or elsewhere? co-workers find out you're kind of a finance geek and then suddenly think you're the next Warren Buffet? Just curious.


MEG said...

It is dangerous for many reasons to give advice to your co-workers. I work at a bank, and so they're especially aware and cautious about giving "information" vs. giving "advice" and all the legal ramifications that go with it.

When I and my group of teammates were hired (together), we all sat though various seminars/explanations about our health care plan, our 401k plan, etc. Needless to say it was very confusing! No one would give us any specific advice, and the speakers always emphasized that it was "our decision" and that all they could do was give us basic factual information.

But we wanted recommendations! We were all young and single. WHAT HEALTH PLAN SHOULD WE CHOOSE?? Just freaking tell us!! But they wouldn't/couldn't. And since I'm so OCD and opinionated about these things, I became sort of the spokesperson/advisor for my team. Of course I always phrased it like "I chose this plan because..." rather than "you should choose this plan because..." My manager was very concerned and always filtered my group emails through HR to make sure I wasn't "recommending" anything--since that's not my job. Ugh.

This makes me frustrated because many people--even bank employees!--are clueless about how to choose 401k investments, how to evaluate health plan options, etc. Yet no one is allowed to officially/legally give advice or recommendations! It's absurd. Imaging how many people are completely wrecking their financial lives because of this.

Reggie said...

Thanks Meg,

I like that...

"Well what I did..."

instead of -

"What I think you should do..."

I think it's sad though that we live in such a litigious society that people are weary of giving advice when they are asked for it. It'd be another thing if someone was volunteering without invitation but at the same time no one wants to take responsibility for their own actions anymore and thus need to be led....Ok - I'll get off my soapbox now...