According to the American Marketing Association, the definition of marketing is “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Basically, the purpose of marketing is to let you know about the products and services companies offer that have value for you. The first problem with marketing is that the catch phrases are often misleading and may cause you to buy inappropriate and expensive products. The second problem is the marketing message may blind you to the reality that no product is, in itself, a solution.
Investment products are typically positioned and marketed based on one of the following qualities; safety, growth, or some combination. Safety is the avoidance of risks.
Risks are perils, hazards, or other bad things that could happen to your money. Marketing in the financial services industry is very competitive and the temptation to use catchy yet misleading phrases is rampant. A recent case illustrates this very well.
Almost every major financial media outlet has discovered a new risk to investors. Evidently there is a risk you will live too long. Terrifying, isn’t it. Google this risk and you will find articles and videos all over the web and from major respected media companies.
If living too long is a risk, you should also be concerned about the risks of winning the lottery, becoming a CEO, or discovering Richard Branson is actually your dad! There is no substance behind the risk of living too long. It’s just the marketing twist on the real risk facing investors, particularly retirees. The real risk is running out of money.
The risk of living too long is easily offset by smoking, eating lots of fats and sugar, avoiding all forms of exercise, or, if none of that works, a quick call to Dr Kevorkian the day before you run out of money. It’s quite simple to be “safe” from living too long. The risk of running of money is not so easily addressed.
To be safe from running out of money is only possible by addressing this issue early and consistently. If you want to be safe from the risk of running out of money, you must spend less than you earn, save, invest, and avoid non-mortgage related debt. You also must be willing to take some investment risk by putting some of your money in the stock market. And, if all that wasn’t difficult enough, you must have the patience to remain committed to all of these things regardless of market conditions.
Do not use investment firms marketing lingo as a source for your investment knowledge. The most difficult issue for investors is ignoring the garbage and focusing on time-tested, proven, approaches to managing your finances.