There has been increased attention paid to the financial brokerage industry with regard to a non-fiduciary mindset on Wall Street. Investors are continually looking for the answer to one question. “How can I beat the market?” Not only is it a matter of increased return, but bragging right to their friends on how much money their broker makes them. These same braggers neglect to tell when their broker loses their money. Wall Street is more than happy to accommodate this greed.

It is much like gamblers at a casino, you never hear about the losses only the wins. Investors are continually moving to the hot broker. As I call it musical brokers. An article in the New York Times in 2012 brings this out in the open. This is what most of us suspected.

A Goldman Sachs executive Greg Smith resigned his job by writing a scathing op-ed in the New York Times. In that column, written as an exit letter, he accuses top management of encouraging predatory sales practices that actively hurt customers:

“I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.”

While he insists that he’s seen no behavior that’s actually illegal, he explains that:

“People push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.”

Recently I learned that 1 out of 25 people or 4% in the U’S. is a sociopath. The definition if a sociopath is a person with a personality disorder manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience.

In contrast the ratio of sociopaths on Wall Street increases to 1 out of 10 or 10%.

This is alarming news for investors relying on Wall Street representatives for investment advice. Is their advice in your best interest or theirs?

To be a successful investor find a academically proven scientific strategy to investing and remain disciplined to it. Three simple rules will help you succeed. Own equities……globally diversify………rebalance.

I just read an article that many Americans are afraid of stocks. They are afraid they will lose all their money. Many expect to earn stock market returns with treasury bill risk.

Many investors I talk with each day have different reasons for not investing in the equity markets. Including ‘the market is at an all-time high of 21,000 that is too high’.  Or ‘I am about to retire and I cannot afford to take a loss in the equity markets’.

These investors believe equity risk is their greatest risk. In fact, it is inflation risk that is their relentless enemy. They need to at least maintain the purchasing power of their money. This is best accomplished with equities.

Then there are those that believe there is someone out there who can and does know when to get in and out of the market to maximize return and avoid all losses.

After two decades of research I can tell you this person does not exist.  You will find someone who makes a correct prediction. The problem is there is no evidence that their predictions will be correct going forward.

For example, the market crashed when there was a terrorist attack just three years ago. Over the last two months there has been terrorist attacks in the United Kingdom and the markets barely moved.

Like I said random and unpredictable.

You cannot consistently predict market movements based on past events. There rarely is any cause and effect that repeats.

If you invest in stock markets no one can predict “save” you from the down periods—NO ONE.  If markets were not random and unpredictable, they wouldn’t offer higher expected returns.

Markets randomly and unpredictably go up and down.

Perhaps we should have faith in the free markets and allow them to work. And worry about something fun like ‘will it rain this weekend?’ Or ‘Will my boat start?’ Or ‘ how will I clean up the huge tree that this weekend storm took down? Or ‘Why can’t the Brewers win a close game?’

As we age our situation gradually changes from growing our money to taking an income stream that keeps up with inflation. To succeed in this, we must reduce the level of risk in our portfolio as we grow older.

We will succeed in our investing when we own equities, globally diversify and rebalance.

That if we fire our broker/agent and hire an investor coach/fiduciary adviser.

We all believe that we make important decisions based on fact. Our research, typically, is quite limited. We ask our friends, neighbors, co-workers, family or a trusted adviser their opinion. If it aligns with what we believe our decision is made.

Many times, we make decisions based on current events. These short-term based decisions are very emotional and are not evidence based.

You can never overcome your own humanity. As much as we would prefer to think that we make investment decisions based purely on logic, advertiser and journalists are well aware that emotion ultimately drives most investment decisions.

As a quick demonstration, consider the statements below. See if you can match each statement with the emotion being expressed. (Answers listed in the key below.)

greed regret trust loyalty envy

1. “It doesn’t matter how sophisticated his charts are or how much sense he makes, I just don’t feel comfortable letting him handle my money.”
2. “I’m not sure I should have put my money in that fund. It lost 15% already. Maybe I’ll sell some of it tomorrow.”
3. “My boss got 25% on his money. I only made 8%! I wish I got 25%.”
4. “I’d wish I’d known that stock was going up, I would have bought more shares.”
5. “My dad worked in that company all of his life and he left his shares to me in his will. It would be wrong to sell it just to diversify my portfolio.”

Answer key: 1. Trust 2. Regret 3. Envy 4. greed 5. Loyalty

We as people are naturally predisposed toward or against specific investing tactics. What is interesting is that no matter what our emotional tendency maybe, we can almost always find what looks like purely factual data to support our view.

It is easy to overweight information that validates our perspective while minimizing any information that goes against what we inherently believe.

The Good News: Simple awareness of your emotions when it comes to financial and investing matters can make the difference between good and bad investment decisions.

The recent up and now down markets have many investors on edge, asking….should I get out of the market for good? This is really, what the financial institutions want…they make money when money moves.

Because we make emotional decisions with our investments. We need the help and guidance of an investor coach/fiduciary adviser.

Together you and your coach will develop a customized plan for YOU. Then going forward your coach will keep you disciplined to your plan.

This is where a true adviser really, earns their fees.

As an investor you must remain disciplined to your strategy…you must own equities…globally diversify…..rebalance.