Are Your Investment Decisions Prudent?

Every day we hear on the radio or see on the television or print media reasons to make emotional decisions with our money. Every day there are reasons for any asset class to go up OR down. Every day there is new information that will affect us in a positive or negative way. The variables that can affect investments are never the same as there are hundreds if not thousands of such variables.

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You can justify almost any imprudent investment decision with “facts.”  Information is filtered by our emotions to create “facts” that support our decisions or beliefs.  Without outside guidance, it is impossible to tell when and how this happens.  Truth in the field of investing is elusive. It may not be lies but rather that no one knows what will happen next. You may find someone who makes a correct “prediction” however there is no evidence that this same person or institution will be right going forward.

Remember investing with hindsight is very dangerous. Back in my stock picking days I picked a semiconductor company. It went from $2.50 per share to $110.00 per share in only four years. That’s a 4400.00% return. Wow, if only I had invested all money then…..  Just because I picked this stock does not mean I would do it again. It was a matter of luck and NOT skill.

I think a great analogy is if you know someone who won a lot of money in the lottery. Would you go to this person to ‘pick’ your winning numbers? Of course not. You know it was a matter of pure luck. The same goes for money managers. There is no correlation between past performance and future results.

To truly succeed in investing (not speculating and gambling) for the long term, you must own equities…..globally diversify…..rebalance.

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