The Nudge to Invest

by Paul R. Ruedi, CFP®

I often take for granted that I grew up in an “investing” household. I was very comfortable putting the vast majority of my wealth in a diversified stock portfolio at a very young age. But not everyone grew up with that level of comfort with investing or the expectation that any extra savings they have will be invested in the stock market. As a result, people often pile up cash while they put off investing. The most valuable thing a financial advisor can do for these people is simply give them a nudge to invest. I’ve seen this several times in my career.

The first time was when my wife was in her mid-20s. After really attacking her student loans, my wife (a new girlfriend at the time) kept her expenses low and built up her savings entirely in cash. A little bit of cash is okay, to fund your emergency fund for example. But my wife had a material amount of her savings that she didn’t need for emergencies simply sitting in cash, not growing at all. She just needed a nudge to get investing, and has been reaping the benefits of doing so for over a decade as a result.

Another was a close friend who was in his 30s and had a lump sum he always intended to invest, but just never found the perfect rental property or other type of investment. He ended up sitting on cash for years, so I explained how much the stock market had grown over that time and asked if he really wanted to miss out again. This was a financially savvy person who fully intended to invest the cash he had accumulated. He still needed that nudge.

I have also seen people set everything up to contribute money to a 401(k) or IRA, but then simply leave the money in the account in cash instead of investing it. To do this really defeats the purpose of those accounts. If you are a young person who is doing this, please start actually investing your retirement savings as soon as possible.

When people think of the ways financial advisors create value for their clients, their minds likely run to exotic financial strategies and meticulous calculations. But as I look back, the most valuable thing I did throughout my career was convince people who were piling up cash to invest in the stock market. Some people simply require a nudge to get investing. If you are one of those people, you may want to consider working with a financial advisor. 

Paul R. Ruedi is a Certified Financial Planner™ professional with Ruedi Wealth Management in Champaign, Illinois.