Oh, dear. Get a load of this recent news story: Federal investigators looking into a South Carolina economics professor and money manager reportedly found some $134 million missing from his managed funds. After the Securities and Exchange Commission tried to contact him about this, he apparently checked himself into a hospital, allegedly suffering from amnesia.
If you don't live in South Carolina and you don't have an economics professor managing your money and you don't even enjoy reading offbeat stories, what does this have to do with you? Well, bear with me -- the tale does contain some lessons.
For starters, it reinforces how good it can be to manage your own money. You shouldn't do this, of course, if you don't know a money market fund from a junk bond fund or a price-to-earnings ratio from a stock price. But you really don't have to be super-schooled in investing in order to do well. (Remember that this economics professor, who was surely fairly well educated in finances, doesn't seem to have been a terrific investor.) For many, if not most, of us, a simple broad-market index fund, such as one based on the S&P 500, can be sufficient. It will instantly invest you in 500 of America's biggest companies.
Another lesson is that if you do take investment advice from others, do so cautiously. Consider any possible conflicts of interest. If a money manager is taking a percentage or two of your assets each year, regardless of how good the performance, is he or she really motivated to increase them as much as possible? If someone is recommending that you invest in certain products, such as annuities, is he or she getting a commission if you do so? Look for advisors who are independent, whenever possible. (Our Stock Advisor newsletter may be of interest -- it has racked up impressive gains, and we only profit from your subscription, not your investments. Try it for free.)
Be wary even of brokerages, if yours is urging you to buy this and sell that fairly frequently. Such activity will generate commissions and profits for the brokerages but may not serve you well. This is why we've long preferred brokerages such as E*Trade
And finally, if your investment advisor is showing signs of forgetfulness, it might be time to bail out.
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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.