There are not many financial advice authors who come right out and tell readers, “You have probably been fed investment propaganda that makes stockbrokers a lot of money in commissions while taking it out of your pocket.”
But that is exactly what Mark Matson does. He is the founder and CEO of Matson Money and the author of Experiencing the American Dream: How to Invest Your Time, Energy and Money to Create an Extraordinary Life. His company was one of the first registered investment advisers to reject a commissions-based model, which Matson viewed as “structurally incompatible with investors’ interests.”
“Our mission,” Matson says, “is to help protect your hard-earned money from speculating and gambling through education and training.” Matson discusses road blocks that prevent so many people from being able to experience the greatness of America: “A potential to reach your goals, whatever they may be, that is the heart and soul of the American Dream.”
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
A theme repeated in this inspiring and practical book underscores, “Making money is important, but unless you live your life with purpose, thinking of others, being there to help, and have a sense of generosity, no amount of money will make you happy.”
Not only does Matson help to steer us away from costly financial traps, but he provides a road map to living a better life.
We discussed three red flags that can lead to financial insecurity.
1. Not talking about money as a family, which creates vulnerability
“Surprisingly,” Matson observes, “so many people grow up in an environment where money is taboo, not to be discussed. We call that the ‘no-talk rule.’ This attitude stands in the way of attaining what the American Dream offers and creates a vulnerability, getting trapped into speculating and gambling, mentally living in a world of scarcity, because money has a negative connotation.”
2. Getting bad advice: Stock picking, market timing, trusting a guru
Matson shares the destructive advice given to him by the president of a brokerage in his first job as a financial adviser: “Try to pick the right stocks that are going to make a lot of money. Do market timing — getting in and out of the market at the right time. And if you’re not good at it, find somebody else who has a good track record and trust them with your client’s money.”
Now, how often do you find a financial adviser who admits they were wrong? Matson does: “I did all those things, and it was an absolute disaster! We didn’t know what the best stocks were in advance, what the market was going to do, and trusting someone that had a good 20-year track record had zero correlation to doing well in the future. All of this is gambling, trying to predict which stocks are going to be best in the future, no matter who you trust your money to. These are dream-killing events.”
3. Thinking commission-driven brokers care about you
“‘Look, this isn’t working,’” he says he told his employer. “‘Our clients will never reach their financial goals if we keep doing this with their money.’”
And the response? “‘If something you sell them doesn’t work, just sell them something else. If you lose them as a client, just sell to someone else and earn more commissions.’”
Two parts to a prudent portfolio: Investing principles and emotional fortitude
So, how do we get away from commission-driven investing that can cost us dearly?
“The first step is understanding the principles of academic investing, establishing your portfolio and having the emotional fortitude to stay with it and remain disciplined over a 30- to 40-year time frame,” Matson notes. “But the mental side — emotions — is critical and where people go wrong, even if they have a good model. Our instincts lead us to panic, sell when things are down and buy when they are up — the exact opposite of what we should be doing. And then there are many dangerous, subconscious biases. For example, the ‘herding bias’ that is great for zebras but bad for investors.”
He explains how that becomes so destructive: “Herding is disastrous for investors. If everybody is doing something, we feel safe if we do that, too. ‘Oh my gosh, everybody’s getting rich on bitcoin. It is so easy. I don’t want to miss out, so I will buy bitcoin.’”
Another example: “The market goes down, and everyone sells, keeping their money in cash, so we feel comfortable doing that, too. And the list goes on. There are over 185 biases people have which can get in the way of sound investing.”
Beware of toxic investments
Matson wants readers to understand the Bigger Fool Theory, or a sucker born every minute. “Bitcoin is the perfect example of total hype, as there is nothing there,” he observes.
He also points out the enormous risk of keeping all your retirement funds in your employer’s stock, known as having a concentrated stock position. “Think of Enron. Think of banks that fail.”
Experiencing the American Dream is a gift to its readers, as is its author.
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
Related Content
-
Where to Retire: Living in Portugal as a US RetireeLiving in Portugal as a retirement landing spot has abundant advantages, but do your homework and due diligence first.
-
A Social Security Storm Is Gathering: Here's Your Safety PlanIf Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
A Social Security Storm Is Gathering: Here's Your Safety Plan
If Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
What a Second Trump Term Means for Investing in Water SafetyA new administration focused on deregulation could change the scope of today's water protections. So, what does that mean for the investors who support them?
-
2025 Stocks Forecast: What Stock Pros Expect This YearThe jury's out on the 2025 stocks forecast: will investors enjoy higher interest rates that dampen the market, or another year of double-digit returns?
-
How to Avoid These 10 Retirement Planning MistakesMany retirement planning mistakes are easily avoidable. Here are 10 to have on your radar so you don't end up running out of money in your golden years.
-
Before the Next Time Markets Sink, Do Your Lifeboat DrillsAn eventual market crash is inevitable. We can't predict when, but preparing for the ups and downs of investing is imperative. Here's what to do.
-
What Are Passive Income Strategies and How Can I Use Them in 2025?An extended period of rising prices has everyone looking for a little more cash to make ends meet.
-
Do Wildfires Have You Worried About Your Insurance Coverage? Here's What to DoWith the California wildfires causing billions of dollars in damage, now is a good time to assess your homeowner's insurance and ensure it covers disasters.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
