"Should I buy ‘XYZ’ investment?" Or "I heard ABC idea, do you think this is a good idea?"
Sometimes, the answer is an obvious no—it’s a terrible idea, and you should run. Other times, it’s a clear yes—it’s a great opportunity that aligns with your goals. But often, the answer is unclear and falls somewhere in between.
The Three Categories of Financial Decisions
When I help clients evaluate an investment or a financial idea—whether it’s Roth conversions, asset location, or account type—my recommendations typically fall into three categories:
1. Driving your car off a cliff
These are decisions that are objectively a bad ideas.
I love using the concept of "multiply by zero" to assess whether something falls into this bucket. If this investment went to zero, would it be a small setback or a financial catastrophe? If the math, U.S. law, or basic common sense make it clear you should not do it, then don’t. It’s like driving your car off a cliff.
Some examples include:
Investments that put your retirement at risk
Anything that involves tax fraud
Get-rich-quick schemes promising guaranteed high returns
If an investment has a significant risk of total loss, it doesn’t matter how great the upside looks. Risking everything is not smart. Don’t drive off a cliff.
2. Picking up the winning lottery ticket
If you find the winning lottery ticket as you walk by on the sidewalk, you should pick it up. This is objectively a good idea.
These are investments or financial strategies that, based on your financial situation, have little to no downside risk. Examples include:
Roth conversions when you’re in a 0% effective tax rate
Maxing out tax-advantaged accounts when it won’t strain your cash flow
If an investment or idea falls into this category, the decision is straightforward: You should do it.
Disclaimer: Please work with a qualified professional to determine if these or any strategies are right for you.
This is where much of the advice I hear dispensed (either from professionals or from internet amateurs) stops.
And that’s too bad—because more often than not, the real answer isn’t a clear "yes" or "no".
3. It depends…
The third bucket my recommendations typically fall into are financial decisions that aren’t obviously good or bad—they depend on your goals, risk tolerance, and personal values.
There isn't a rubric or set of filters to easily determine
Aligning Investments with Your Values
A great investment on paper might be terrible for you if it doesn’t align with what actually matters to you.
Let’s say you’re considering investing in individual stocks, a private business, or a high-risk startup. Should you do it?
This how working with a real financial planner can help. They can walk you through a guided discovery to help you connect the decision you are making to what you value most.
Example: Stability vs. Adventure
If you value stability, adding complexity or high-risk assets might feel stressful. The potential upside may not be worth the emotional cost of market swings and uncertainty.
If you value adventure, taking the occasional big swing might actually help you sleep at night! Some people thrive on calculated risks and the thrill of the unknown.
Neither approach is wrong—it just depends on what matters most to you.
Other Key Questions to Ask Before Investing
Beyond the “multiply by zero” test, here are some other filters to consider before implementing a strategy:
How complicated is this going to be? Do you have the patience (or a great advisor) to handle complex paperwork, regulations, or liquidity issues?
How is it taxed? Don’t let tax implications drive your decision, but make sure you understand them. A great investment can quickly become “okay” at best if taxes eat up your returns.
Final Thoughts: The Right Investment for You
Investment decisions should never be based solely on hype, fear of missing out (FOMO), or the latest hot trend. They should be based on…
· Whether you can afford to lose the money
· Whether it aligns with your values
· Whether it makes sense for your overall financial plan
A real financial advisor won’t just give you a yes/no answer. They’ll help you explore the trade-offs, uncover what really matters to you, and make a decision that fits your life—not someone else’s.
So, should you invest in “X”? Let’s have the real conversation.