Following along with the blogs of financial advisors is a great way to access valuable, educational information about finance — and it doesn’t cost you a thing! Our financial planners love to share their knowledge and help everyone regardless of age or assets.
Catch up on the latest posts with this week's roundup:
How to Overcome the Biggest Financial Planning Obstacle
Think of investing like a sport. Before the horn sounds to start a race, a runner stares at the open road or track in front of them. The runner thinks about the obstacles that lie ahead. Whether it’s hilly roads or hurdles on a track. The runner knows how to overcome each obstacle to reach the finish line with a fast time. He replays his game plan in his head, and stick to it once he hits the open road.
With investing, the finish line is always different. It may be retirement or a child’s education. To finish the race successfully, you need to be committed and create a solid financial plan.
I frequently talk about how important it is for you to build up a professional network. Cultivate an Old Girls’ Club. Spend time and money to improve your career skills and connections. In fact, it’s kind of my “thing.”
The reason (I hope!) is pretty obvious: This community of people will help you grow your career, help you achieve your professional goals. This, in turn, turns into more and better opportunities, which turn into more and better money, which, done right, turns into financial strength, security, and choices.
In our day to day lives, the terms risk and uncertainty are often used in the same breath. There is a difference, though. Risk and uncertainty are not one and the same. In More Than You Know, Michael Mauboussin had the following to say about risk and uncertainty:
“To see another distinction between risk and uncertainty, we consult the dictionary: Risk is “the possibility of suffering harm or loss.” Uncertainty is “the condition of being uncertain,” and uncertain is “not known or established.” So risk always includes the notion of loss, while something can be uncertain but might not include the chance of loss.
Why should investors care about the distinctions between risk and uncertainty? The main reason is that investing is fundamentally an exercise in probability. Every day investors must translate investment opportunities into probabilities-indeed, this is an essential skill. So we need to think carefully about how we come up with probabilities for various situations and where the potential pitfalls lie.”
Mauboussin points out that objective probability is the basis for risk, but subjective probability underlies uncertainty. If you roll two dice, you can’t be sure how they will land but the possibilities are limited. The number you roll will be between 2 and 12. With casino games like roulette, there’s risk, but not uncertainty. The outcome of a war, on the other hand, is quite uncertain. We can make educated guesses, but anything could happen.
Your privately held company just gave you stock options, either in the initial offer or after you’ve been working there for a while. What do you do? WHAT DO YOU DO? (gratuitous 90’s movie reference for your entertainment)
First, a quick primer on what stock options are, to bring everyone up to speed. (Ha! “Speed”…get it? Okay, maybe you need to be at least 40.) howstuffworks.com provides the following, I think straightforward, explanation:
“Stock options from your employer give you the right to buy a specific number of shares of your company’s stock during a time and at a price [called the exercise, grant, or strike price] that your employer specifies."