Why you should invest?

After watching both the Democratic National Convention and the Republican National Convention, two things come to mind.  First is relief; the relief that we don’t have more than two parties. Second is the realization of how lucky I am to live in this great country.  Warren Buffett, the  82-year-old man that is worth just over $44 billion has been quoted as saying, “ I won the ovarian lottery, I was born in the 1930s, I was born white, I was born a male, I had all kinds of luck.” Well I too won a lottery, only I won the parental-judgment lottery.

My parents were neither Mr. and Mrs. Ward Cleaver nor Mr. and Mrs. Howard Cunningham, but my mother was a Cuban national working at the U.S. Embassy in Habana (or often called Havana), Cuba. My parents took me when I was three and half and my brother at 18 months out of Cuba and joined my maternal grandparents in Miami, circa 1960. Talk about great timing. My mother was the first embassy employee to ask for and be granted U.S. residency. I remember all the packing and the flight from Habana to Miami, where I drank all the tomato juice I wanted. Without apology or pretense, I confess I am a capitalist, by nature and nurture. As a Capitalist there are only three things to do with money; spend it, give it away or my favorite, invest it. My first column, “Why Money Matters,” gives you an opening to my mindset.

Assuming you have decided to invest your money, this column is for you. If, like me, you hear from people that this is a great time to buy a house or condo, see my three-part series renting versus buying, mainly because prices are so low that they cannot imagine prices going any lower. Anyway, I can assure you prices always go lower. A low price is not the reason to buy. Look at the prices of some Wall Street’s  darlings like Netflix, Groupon and Facebook. I had a business partner that used to say, “The price of a stock will continue to go down until it starts to go up and then continue to go up until it starts to go down.” He was pretty smart that way. The reason and the time to invest is that one is ready to make an investment and not that they are ready to make a bet.

An investment is a commitment of money over time and a bet is the placement of money for a moment in time. I believe this is the time to invest in the stock market, albeit investing the money in your IRA, your 401(k) or your personal account. The time to invest is never obvious; it is always riddled with doubt. This time is no different. Here is what Warren Buffett said about the 20th Century: “In the 20th Century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.” As a financial advisor for almost the last 20 years of the 20th Century, I assure you I never heard, the “all clear” signal.

Hence I conclude that there will always be reasons not to invest and rarely are there obvious reasons to invest. Then why invest? The first reason is because it is your duty. It is your duty as a capitalist to make your money make money. As Gordon Gekko said to Bud Fox in Wall Street, “Money never sleeps, pal.”  I do not pretend that investing is easy nor for the faint of heart, but investing is simply a duty, more fun that taking out the trash and as not as much fun as spending or giving your money away. Once you decide you are going to invest, then decide where you will invest. Will you invest through a bank, an online firm, through a friend or friend of the family, through a brokerage/financial service firm or will you invest by yourself? If you are going to invest through an online firm or all by yourself, you can stop reading now.

If you are going to invest through a bank, a brokerage/financial service firm or friend of the family I recommend you follow the following steps:

1. Make sure you trust and understand what your investment strategy will be and how and when it will be implemented. If the answer is, “No” or “I don’t know,” then stop.
2. Open your statements and review the monthly activity. What monies went in and what monies went out?
3. Review your stock positions; do you understand them?
4. Track the progress of your investment. Selling your investments just because they went down is as wrong as selling them because they went up. The object is to make money.
5. For the love of God, meet with your financial advisor at least once a year.

Here is my suggested meeting frequency:

• $10,000 to $25,000 — annually
• $25,000 to $50,000 —  semi-annually
• $50,000 to $100,000 — quarterly
• $100,000 and above — monthly, whether in person or via phone.

I have clients that I talk to weekly, some that I meet with monthly and some that I communicate through a combination of conference calls, email and personal meetings.

I hope this helps in motivating you to get invested and if you are invested I hope it helps you  stay invested.

The opinions and recommendations expressed herein are those of Mr. Garrido and do not necessarily reflect those of the firm and are subject to change without notice.  This information is not to be construed as an offer to sell or the solicitation of an offer to buy any securities.  The information contained herein has been derived from sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be a complete analysis of the security, company or industry involved.