Money and Wealth (Part 13) - Investing (Part D) - Crypto, Financial Advisors

---

 

Money and Wealth (Part 13) - Investing (Part D) - Crypto, Financial Advisors 1. Crypto A. Crypto currencies like Bitcoin, Ethereum, XRP, etc. are digital tokens which speculators trade. B. They have become popular over the last decade. C. Bitcoin was the first crypto currency and was originally created in 2009 to be a digital currency that was intended to be outside the banking system, anonymous, unregulated, and uninflatable. i. In the early days it was mostly used only by libertarians. ii. It was supposed to be a currency that would replace the dollar and could be used for everyday transactions. iii. Eventually it became too slow and expensive to be used for small transactions. iv. It was then marketed as “digital gold” and claimed to be a store of value like gold. v. It is now regulated and taxed just like any other asset. vi. It is basically nothing, backed by nothing, used for nothing, and has only gone up in price because people buy it expecting it to go up in price. vii. I first heard of Bitcoin in 2013 when it was under $100, and I have been watching it ever since. It peaked in January 2025 at almost $110k, then fell to $82k in April, and is now at $94k (as of 4-30-2025). D. Bitcoin, and crypto in general, is an extremely volatile asset, and is something that a person should not invest money in that he is not prepared to lose. i. Nobody knows what Bitcoin and other cryptos will do in the future. ii. Be very cautious in investing any serious money into it. iii. Doing so could make you rich or broke, depending on what happens. iv. “Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase.” (Pro 13:11) 2. Financial advisors A. It is wise to seek counsel when making important decisions (Pro 20:18; Pro 24:6). B. A wise man will do so (Pro 1:5; Pro 18:15). C. People who make important decisions without wise counsel are heading for trouble (Pro 11:14). D. The more important a decision is, the more important it is to get multiple opinions (Pro 15:22). E. This is important in investing and wealth management. i. “Your ability to hire high-grade financial advisors is directly related to your propensity to accumulate wealth.” (Thomas J. Stanley, The Millionaire Next Door, p. 105) ii. “…most of the PAWs [prodigious accumulators of wealth] we have interviewed make their own investment decisions. They take the time and energy to study investment opportunities. They consult with financial advisors, but ultimately their investment decisions are their own.” (Thomas J. Stanley, The Millionaire Next Door, p. 103)  iii. “Choose a financial advisor who is endorsed by an enlightened accountant and/or his clients with investment portfolios that in the long run outpace the market. If you don’t have an accountant, hire one.” (Thomas J. Stanley, The Millionaire Next Door, p. 108) F. When seeking a financial advisor, it’s important to consider that we are living in very different times than we were 70, 60, 50, 40, 30, 20, or even 5 years ago. G. If a financial advisor is blindly doing what everyone did in generations past, he may be leading you into a ditch. H. Ways to determine if you want to work with a financial advisor. i. How does he treat you and interact with you? (i) Is he there to help you understand your options and make informed decisions? (ii) Or does he talk over your head and tell you what to do? (iii)If he doesn’t have the nature of a teacher and a servant, then you should probably look elsewhere. (iv) Do you understand what he is recommending or what investments he has put you into? 1. If you do not understand, and cannot explain to others, the investments you have, that is not good. 2. If you can’t explain it, you should probably not be investing in it. 3. Does a potential financial advisor promise to put you into investments with guaranteed high rates of return and no loss of principle? a. If so, look for another advisor. b. If it sounds too good to be true, it is. ii. How much does he charge? (i) Does he charge an hourly rate for consultations? (ii) Does he charge an annual fee to manage your account? 1. This is fine, but make sure he doesn’t charge more than 1% (or very close to it) of your portfolio balance per year. 2. Anything more than that is too much. 3. If he charges 1% per year, make sure there are no additional fees for anything else. (iii)If he charges an annual fee, what exactly is he doing on a regular basis to manage your account. (iv) Does he charge per trade (every time he buys or sells anything for you)? 1. Some companies charge you every time they make a trade (buying or selling). 2. Some popular financial planning companies charge an upfront fee of as much as 5% on every fund they buy for you. 3. This is a huge rip-off. 4. You would have to get a 5% return just to break even. (v) Are there hidden management fees in the mutual funds or other financial instruments that he recommends for his clients?  (vi) Even if you are not paying these fees to him, you may be paying them to the company who manages the fund without realizing it. iii. What is his net worth? (i) Don’t be afraid to ask this question. 1. I have asked five financial advisors this question. 2. Three answered it, and two would not. 3. The answers of the three were impressive and gave me confidence in their ability to manage money and investments. (ii) If he is young, does he have a net worth over $100k? (iii)If he is middle-aged, does he have a net worth over $500k, excluding home equity? (iv) If he is nearing retirement, does he have a net worth over $1M, excluding home equity? (v) If he doesn’t have a high net worth for his age, then he is obviously not good at managing his own money―so why would you have him manage yours? (Rom 2:21) iv. Has be beat the S&P over the last 10+ years? (i) Ask a financial advisor to see a 10-year (or more) track record of his performance and see how it compares to the S&P 500. (ii) Ask him for a few examples of mutual funds he recommends, and then compare them to the S&P 500 in Google Finance to see how they performed against it. 1. Prove all things, and hold fast to what is good (1Th 5:21). 2. Don’t be stupid and just believe what he claims, but look into it to see if he has actually done what he says he can (Pro 14:15). (iii)If his track record, or the funds he recommends, did not out-perform the S&P 500, then you may as well skip paying him and just buy the S&P. v. If you don’t know much about finance or investing, talk to someone you know who does and ask his opinion on the financial advisor and his recommendations.