Students Graduating

Give Your Graduate One More Piece of Advice

Students Graduating

The soccer games and ballet lessons are behind you, but as a parent, you may always feel the need to give advice to your children. At the same time, once they walk across that stage with degree in hand, seeking your advice may not top their list of ways to make decisions.

With your recent graduate facing life’s important financial choices, you can give them at least one more bit of valuable advice – one that is contrary to the “trust your gut” counsel you may have given so many times before. Financially speaking, trusting their gut is the last thing an investor should do.

Why? Because human behaviors are often guided more by emotion than by rational thought. And what could be more emotional than our hard-earned money? When we rely on intuition to guide investment decisions, we tend to make choices based on what the market did yesterday, what our coworkers think it will do, or on how we feel today. In short, we become active investors who change direction based on any number of factors, up to and including the phases of the moon.

Contrast that strategy with passive, or index, investing. A passive investor relies on the process, choosing an index fund using a thoughtful, rational set of guidelines… and then, essentially, ignores it. He or she has confidence in the specific rules of construction used by the fund, knowing that those rules will be followed regardless of market conditions.

The results speak for themselves. Consider the 2015 Dalbar study: over the 30-year period ending 12/31/2014, Dalbar found that the average equity fund investor realized an annual return of 3.79%; a buy-and-hold investor who placed money in an S&P 500 Index fund, 11.06%; and the Global Equity IFA Index Portfolio 100 investor 12.34%.

As your graduate embarks upon a career and begins to set aside money for the future, he or she may still seek your financial advice. The counsel you offer may help guard your child against some of the trials (and errors) you’ve experienced. A few bits of sage advice you may want to pass along:

  • Seek out knowledgeable investment education to help guide you in the initial investing years – not all advice is created equal;
  • As soon as you have that first job that offers a tax-qualified retirement plan, jump in using a passive investment strategy; and
  • Schedule a visit with your parents’ financial advisor, who understands the overall family financial picture – including the estate plan and retirement.

They no longer need you to make every decision in their lives, and you’ve guided them toward making the right ones for themselves. One more piece of wise counsel could give your graduates the tools they need to move confidently toward the future. We’d like to suggest that counsel directs them to IFA. Our focus is helping clients set an investment strategy based upon rational decision-making, not on emotion. We always encourage due diligence in any financial decision, and our industry-leading education about passive versus active investing can help your graduate shape their own successful future. Existing clients are encouraged to contact their Wealth Advisor. Because of our relationship with you, we would be happy to meet with your recent grad to discuss their financial needs and goals. If you’re not yet an IFA client, today could be the first day of a brighter future. Call us at 1-888-643-3133 (or online here) and schedule your own appointment with one of our Advisors.