Saver vs. Investor, Which one are you?

Even though popular financial experts push the importance of investing as a means to create wealth, most do very little to teach people what it really takes to become a true investor.

When people hear the word “investing” they often think of funding their employer-matching 401(k) for retirement by dumping money into some mutual funds.

While a 401(k) or IRA program can be a good way to help build up some retirement savings, they are sophisticated animals that require a certain amount of specialized knowledge to participate in successfully. Yet most people are not aware of this, or if they are aware, are too busy to be concerned about that fact and rely on their employer and fund managers to play the game for them. This reliance on others keeps them from building a cash surplus that can help maximize wealth.

I teach my Money Mastery clients a very different way of dealing with the subject of investing by encouraging them to take a principled-approach to finances. As they use sound financial principles to create a Master Plan for their financial life, they begin to connect very personally and intimately to the details that make following this Master Plan possible.

Most importantly, a principled-approach gives them vital knowledge that allows them to avoid costly financial mistakes and begin to see highly lucrative opportunities for wealth creation in the future. With time, they move from being simply a “saver” — someone who gives his money over to others to handle in hopes of making more — and begins to manipulate and handle that money themselves as a dynamic investor.

Saver vs. Investor: What’s the Difference?

The difference between a “saver” and an “investor” is that a saver is someone who gives their money to someone else to control, eliminating opportunities to learn for themselves what will and will not make them more money. Examples of these types of savers are 401(k) participants, individuals who use financial advisors to play the market for them, etc. Often these types of people are referred to as “investors” because they are turning a portion of their money over to be “invested” in mutual funds and stock equities in hopes of gaining a nice return. But even though they may be referred to as “investors” that doesn’t make them such.

Unfortunately, this group of people cannot be considered true investors because they are not personally controlling what happens to their money, nor learning from experience in working various financial strategies with that money. And they are not personally learning how to prioritize the use of their money to assure the best financial outcome.

Many people today are trying to build their retirement by turning their money over to someone else to manage for them, These simple savers do not control whether they make a profit or take a loss. This lack of control leads to a “herd mentality.”

Savers have their heads down, following the person in front of them, hoping for the best. If the rest of the herd is on a good path, then all is well.  But unfortunately, as we have seen time and again with the stock market, what comes up must also come down. If the herd is following someone who is headed over the cliff, everyone else is going over with them.

Let’s take a look at the number of steps away from your money that you are when you “invest” in programs such as 401(k)s and how you do not thus control whether you will make any money or lose it:

1. First, you put money into a 401(k) or IRA and it has now left your hands to be handled by a trustee.
2. The money is then invested in mutual funds and/or equities for you.  These funds are managed by a fund manager.
3. The funds are then invested in various stocks, which are managed by a director.
4. Your initial investment either makes money or loses it, but YOU are not in control of that process.  In addition, because you are not handling it, you are not learning from your mistakes or how to make different decisions going forward.
5. In addition, fees are assessed all along the way to pay for the services of the trustee, fund manager, and directors.

Do you know how much in fees you are losing in such programs?

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