Every year or two, a new round of worries crops up. Some of them are real—the war in Ukraine, inflation, politics—but a surprising number are not. The challenge, of course, is telling which is which.
One good approach is to figure out what the agenda is for those reporting the worries. If they are trying to sell you something, that is a clue that you should take a closer look. If they are sharing "knowledge" that only they have figured out, you want to ask why (in the age of the internet) only they know this. If they claim that you must act quickly on whatever it is, question why it is so urgent that it can't be checked.
Today, I’d like to provide a summary of the latest round of worries showing up in my emails from advisors and clients. In all cases, one of the three filters above shows why they are not as big a problem as presented—and why, when you look at the details, there is much less to worry about than some would like you to believe.
Do You Own Your Investments?
Let’s start with one that is showing up in multiple media, including a documentary, which is that you don't really own your investments. That somehow if they are held in "street name," they can be taken away by the broker or by the government. Not true. If you bought and paid for the securities, according to Fidelity Investments, they are held in segregated accounts that can’t be used by the broker/dealer to finance their business. It is your money, and they are your securities.
The exception is for securities bought on margin, where the broker does have a lender's security interest and may use that as security for their business loans. This is something to keep an eye on, but it is your decision to margin your securities and, even more, to work with a broker that does that. For the record, Commonwealth and our clearing firm do not pledge even your margin securities—so you are safe here.
So, why are people calling this issue out? Generally speaking, as in most cases like this, they want to sell you something. Usually, it is gold, but it could also be bitcoin. Offering alternatives to the regular financial system by someone with a vested interest is a common pitch, with the end goal of getting some of your dollars.
Will the Dollar Be Replaced by Digital Currency (and Other Fears)?
Other examples include the fear that the dollar will be replaced by digital currency. “Find out by subscribing to our newsletter, which you will pay for in dollars.” Another is that the U.S. dollar is going away. “Get our report on how to protect yourself, just pay us in dollars.” Then there is the fear that the Fed is privately owned, which isn't true. “To learn more, pay us in dollars.” You get the idea.
Now, some of these issues have some truth behind them. That can make them more credible but still not right. Here at Commonwealth, we take issues that come up seriously and investigate them. But if they don't check out, we don't worry about them. We also have the benefit of having done this for a long time and have seen most of them before. But even there, we take a fresh look when warranted, just in case.
Focus on Real Worries
So, feel free to ask. But know that, if it is in the press, we have likely heard about it, checked it out, and either determined it isn't a real problem or, if it is, are preparing for it. There are lots of real things to worry about. Let's stay focused on them, not on the false worries.
The information contained in this email message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution, or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held Registered Investment Adviser-broker/dealer. He is the primary spokesperson for Commonwealth’s investment divisions. He is also the author of Crash-Test Investing, a must-read primer for Main Street investors seeking to help insulate their portfolios against a market crash. This post originally appeared on The Independent Market Observer, a daily blog authored by Brad McMillan. Forward-looking statements are based on our reasonable expectations and are not guaranteed. Diversification does not assure a profit or protect against loss in declining markets. There is no guarantee that any objective or goal will be achieved. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance is not indicative of future results.
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