From the book The Big Investment Lie by Michael Edesess published by Berrett-Loehler Publishers, San Francisco, 2007. If you go to a financial planner, at some point there is a fee involved and similar to every other sales, sometimes the smart thing for a financial planner is to sell you the expensive items. There is value in the financial planner, but deal with them in the understanding part is a sales process.

Mr. Edesess has come up with 10 Commandments for Smart Investing.

6. Don’t pay anyone to pick stocks for you; there is no reward for the cost and risk. If you pick stocks, which can be a very good thing, the other person should be asking how does the stock fit into your comfort level and is the position relative to your holdings within reason.

7. Avoid hedge funds like the plague.You likely have read some of the owners of the hedge funds have made lots of money. Part of the reason is the high fees they charge the clients in both up and down markets. Are the clients making more money to justify the fees? If you pay fees which are near credit card interest rates, how much are you making?

8. Know the risks of investing; take only the risk you are comfortable wth. Most companies that deal with financial planning will have you sign a form about what investments you are comfortable with. Your investments should stay in that category, for most people relatively low risk, low fees is best.

9. Keep fees and taxes as low as possible; they can swamp your investment returns. The purpose of investing is to gain more, however fees and taxes have an influence. It is entirely possible to keep fees low as well as to ensure whatever the politicians decide – the method of earnings should be weighted in that direction. Dividend income is taxed less than interest income, if you have more dividend income you keep more of your money.

10. Invest only in true low-cost index funds. Index funds work because the stock exchange removes the “losers” and replaces them with “winners”. Over time, the winners will do better than the losers. The big issue with index funds is time has to go by, which means if you need to sell on a regular basis index funds are not ideal. However, if you are in the work place, they can be be one of your major holdings – ensure you check out the fee, it should be near 1% for the cost of managing the fund is low. Many companies offer mutual fund matching investments for their pension plans, ensure the options include an index fund.

There are more questions than answers, till the next time – to raising questions.