‘I have RM 50,000 in cash. What should I invest in?’

This is a common question on investing. But, the thing is, ‘What answers do you expect?’. Do you intend to receive specific advice? Or, are you game in to learn? The first is about financial advice. The second is about financial education. Here today, many people think that they are the same. But at its core, they aren’t. So in this article, I like to share 4 differences between the two and hence, enabling you to choose which of the two is more suitable for your investments. 

1. What is Financial Advice and What is Financial Education? 

Advice is about telling people what they should do. 

For example, if I say, ‘You should buy A Bhd at a specific price at a given time.’, it is financial advice. This is because it consists of a specific instruction to buy, sell, or hold a specified asset at a specified price and time. Also, this applies to other types of assets such as unit trust funds, ETFs, real estates, and cryptos. 

Education is about skill-learning and accumulating experiences. 

For example, let’s say, you are interested in investing in stocks today. Hence, my questions to you are, ‘Are you a good stock investor?’, ‘How do you identify one good stock from a pile of bad stocks?’, ‘How do you know when you should buy, hold, or sell stocks?’, and so on and so forth. If you find it difficult to answer the questions listed, it is obvious that you lack financial education. 

2. In the Event of Investment Losses

People who want financial advice could react quite differently from people who want financial education, especially in the event of an investment loss. 

For instance, people who want financial advice might not necessarily take 100% ownership of their investment decisions. If they bought a stock after receiving a tip or an advice from a financial planner or investment guru, they might choose to blame or even curse the planner or the guru. But, at the end, the financial IQ that they have remains the same as they did not learn much from their loss. For them, they may even repeat their losses by asking for advice from another guru or expert in investment matters. 

Meanwhile, people who seek financial education will take 100% responsibilities and ownership of their decisions. They understand that mistakes are chances to learn and improve. Instead of blaming, they might ask questions, go for classes, conduct post-mortems in order to strengthen their investment systems. In such instances, every mistake made would result in more education and experiences accumulated, which in turn, could grow the person’s financial IQ, which is his or her ability to make smarter financial / investment decisions in the future. 

3. In the Event of Investment Gains 

The ones who receive financial advice may develop a ‘false confidence’ towards their capabilities to invest if they make gains out these advice. 

Why is this called ‘false confidence’? 

Let me explain. 

Supposedly, a dumb guy bought a stock based on a stock tip posted on YouTube by an investment guru. That stock appreciated by 50% in 6 months. To him, that dumb guy may feel lucky. But, the question is, ‘Did the guy learn any skill, which could allow him to replicate this 50%-gain feat again and again in the future?’. It is obvious that the answer is nope. 

He may be fortunate. But, he remains a dumb guy. 

In contrast, let’s say, a person learns how to invest, develops his game plan, and invests accordingly. Of which, he profits from his investments. Now, in this case, he has the ability to increase his profits from investing as he possesses the skills and the mindset for doing so. Unlike the dumb guy, this person does not need a tip or an advice because he has a system to invest profitably independently.

4. The Route Towards Replicable Investment Successes

Which is better: Is it having financial advice or being financially educated? 

Personally, while getting financial advice might seem ‘fast and convenient’, I still prefer financial education. Take investing as an example. Yes, it is possible for us to take 1-2 years to learn about it. But once we’ve acquired the necessary skills, we no longer need to rely on tips and recommendations for our investments. In fact, these skills that we acquire could serve us for a lifetime. So, the question is this: 

Would you invest 1-2 years to acquire investing skills that serve us a lifetime? 

Or, would you prefer to chase after investment tips for a lifetime? 

I would leave you to decide which of the two is better. 

Conclusion: What is KCLau.com? 

In short, I believe you can see the fine line between the two. 

Here, KCLau.com is a financial education platform, not a financial advisory firm. Our core passion is for you to learn skills and be financially educated so that we decide for ourselves what is most suitable for our financial lives. But then if you feel that you require specific financial advice, it would be better for you to seek yours from a licensed financial planner and not one who is financially illiterate. 

How could you start? 

Well, you can check out any one of the three free trainings as listed below: 

Link: How to Accumulate Wealth and Live Free? 

Link: How to Make Massive Profits from Stocks Safely? 

Link: How to Build a Stock Portfolio that Pays Increasing Dividends?

Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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