It pays to invest in some financial know-how

Individuals hold ultimate responsibility for their personal finances. Improving personal knowledge of finance is likely to be the best investment an individual can make.

Financial newsletter writer and ‘gold bug’, ‘Uncle’ Harry Schultz is something of a legend in the monetary world. The American’s financial, stock-trading and philosophical newsletter has been published ten times per year for more than 40 years and he has written more than 20 books about money-related topics.

As might be imagined, such a career has involved a number of breakthroughs and developments which have come to shape personal finance. Almost single-handed, he pioneered investment seminars, the financial newsletter industry and the idea of internationalisation of one’s affairs.

One of his theories is applicable to everyone and worthy of reflection. It is this: there is only one person in the world capable of putting your financial interests first, no matter what. That person is you.

No matter who you speak to or take advice from, be they a family member, professional adviser, employer or friend, everyone has an agenda, no matter how slight. This agenda can, and often will, harm your decision-making process.

If you take professional advice, then commissions and sales targets can get involved. Hard though it may be to stomach, there are many firms which offer near identical advice for many different situations because ‘this is what we sell’. There are also some which offer only the product that pays the highest level of commission.

I re-learned this lesson only recently. A friend asked for a second opinion as to whether a recent investment recommendation was suitable for his needs. I am sorry to say that the only relevance I could think of for the product was that it paid extremely well. Otherwise, the recommendation seemed to me to be unsuitable and overly complicated.

The added complexity meant that the potential client could answer only yes or no and had precious little information to base this decision on. In short, the adviser was taking advantage of my friend’s lack of specialised knowledge simply to earn the maximum commission possible.

From family and friends, there is far greater potential for well-meaning but poor-quality advice. Though personal finance issues are discussed online, in newspapers and on television, the subjects are almost always far more complex than they first appear. When combined with most people’s dislike of discussing their finances in exact detail, confusion reigns.

For an individual to make accurate financial decisions, it is important that they have access to impartial information. To achieve that, the individual needs to have at least a rudimentary knowledge of financial subjects. Unfortunately, most people do not have this.

While I recognise that it is easy for me to tell the world to learn, the reality is that the basics of finance are not very complicated. Finance can appear to be daunting and elitist, but it is generally the regulations and tax rules that are complicated.

Obtaining some basic knowledge will take some time and effort but is likely to be immensely valuable in the years to come. If it only protects you from making a highly costly mistake, it was worthwhile. But, if you can also use this knowledge to improve your current situation, it could prove to be an excellent investment.

• Further reading:

The internet is revolutionising personal finance just as it is changing many other industries,. Information now flows more freely and at far lower cost than before. Just by looking at a few websites, it is possible to find more analytical information than any normal person could possibly need.

A great place to start is www.financialsense.com - an American investment analysis site which receives contributions from independent newsletter writers. Access is free and topics range from global stock markets, currencies, commodities and economics to geopolitical analysis.

Another favourite site is www.321gold.com which is more specialised. Editorials usually relate to gold, silver, currencies, economics, inflation and energy.

• Stuart Langridge is an independent financial adviser.

Individuals hold ultimate responsibility for their personal finances. Improving personal knowledge of finance is likely to be the best investment an individual can make.