Money Smart Athlete Blog

Successful investing and financial myths

The main concept of successful investing is to grow your savings to a level where the interest from your investments will generate enough funds so that you can lay back and live the life of your dreams.

If you’re reading this article, it means that you want to learn the critical rules of the game, so that you are never the victim of those people in the investment world who are looking to take advantage of you and your money.

Tony Robbins the “financial guru”, focuses on the importance of being aware of the rules before you get in the investment game. Let’s set out these myths as described by Tony Robbins, so you can better protect yourself.


Myth 1: Invest with us, we’ll beat the market.

There is no such thing! An incredible 96% of actively managed mutual funds fail to beat the market over any sustained period of time. The best you can do is ‘avoid putting all your eggs in one basket’. A portfolio of low cost index funds is the best approach for a percentage of your investment because you don’t know what stocks will be ‘best’ going forward.

Myth 2: Our fees? They’re a small price to pay.

With an average cost of owning a mutual fund of 3.17% per year, that fee might be eating up 60% of your potential returns over time! By simply removing expensive mutual funds from your life and replacing them with low-cost index funds, you will have made a major step in recouping up to 70% of your potential future nest egg.

Myth 3: What you see is what you get in returns.

Time weighted returns assume that investors have all of their money in a fund the entire year and don’t make any withdrawals. In reality though, investors typically contribute throughout the year. If they contribute more when the fund is performing well and less when it’s not performing, they are going to have a much different return than what is advertised.

Myth 4: I’m your broker, and I’m here to help.

Brokers operate in a ‘closed-circuit’ environment in which the tools at their disposal are pre-engineered to be in the best interest of the investment house and not the investor. To receive conflict free advice, you must align yourselves with a fiduciary. A fiduciary is a registered investment advisor who gets paid for financial advice and by law he must remove any potential conflict of interest and put the clients’ needs above his own.

Myth 5: Your retirement is just a pension plan away.

Pension plans are not the safe retirement plans they seem to be – they can carry high fees, and the benefits of tax deferral of the standard pension fund might not be worthwhile compared to low cost index funds.

Myth 6: Target-date funds: just set it and forget it.

Despite being the fastest-growing segment of the mutual fund industry, target-date funds (TDFs) may completely miss the mark. Though sometimes they are a good option compared to an investor picking his/her own asset allocation, TDFs are only as good as the fund manager picking the asset mix. They can also carry heavy fees that severely dilute gains over time.

Myth 7: I hate annuities, and you should, too.

There are different types of annuities each with their own unique characteristics. For example, some annuities offer a death benefit guarantee that your heirs will get back the original deposit amount. Other annuities invest in low cost index funds with no surrender charges.

Myth 8: You have to take huge risks to get big rewards.

This is definitely not true! If there is one common characteristic of successful investors, it is that they don’t speculate with their savings, they strategize. What one can do is search for opportunities that provide unequal risk/reward. Risk a little, make a lot!

It is obvious from the above that there are a lot of financial myths out there, which is believed can have a detrimental effect on your investment plan. Always make sure that you evaluate any information received in connection with investing, so that you benefit from such information.

If you need any help in dispelling the financial myths that go around you can get in touch with us at [email protected].