As a stockbroker, I noticed something that bothered me.
I'd explain an investment to a client. I'd describe how it worked, what it was designed to do and what risks they needed to consider.
And the client would nod.
"Yes. Yes. I understand."
But sometimes, when I finished, I'd look across the desk and see a familiar expression: a deer caught in the headlights.
They'd been listening. They'd been polite. They might even have understood a few of the words I'd used.
But they hadn't really understood the investment.
And they didn't want to admit it.
I've always believed that one of the most important things a person can say during a financial conversation is also one of the simplest:
"I don't understand. Could you explain that again?"
There's no shame in those words. The shame belongs to a financial process that leaves people feeling they must understand something when they don't.
Most people have a general idea of what a stock is. Some understand mutual funds. But the financial world is full of products, strategies, fees, and risks that aren't nearly as simple as they may sound.
Nodding your head doesn't make an investment right for you. And signing a document doesn't mean you've understood what you've agreed to.
The consequences can last for years.
You might own something you don't understand, accept risks you never intended to take, or discover too late that an investment doesn't do what you thought it would do.
So give yourself permission to ask questions.
Ask what the investment actually does. Ask how you could lose money. Ask what it costs. Ask why it belongs in your financial plan.
And if the explanation still doesn't make sense, ask again.
A good financial professional should welcome those questions, not make you feel foolish for asking them.
Remember, you're the one who will live with the consequences of your financial decisions.
You don't have to know everything about money. But you should understand what you're agreeing to do with yours.
Sometimes, the smartest words in a financial conversation aren't "Yes, I understand."
They're "Please explain that again."
Richard Sowa, Founder – Read The Money Mirror
FINANCIAL DECISIONS ARE NEVER JUST FINANCIAL.
This newsletter is for educational purposes only and is not investment, legal, or tax advice.
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