Well it appears the election has been decided??? And the coronavirus vaccine is on the way. If asked will you get the vaccine? I’m still debating.

In the meantime, Wall Street continues to come up with new predictions.

The Wall Street bullies are continuously promoting stock picking, market timing and trading. We have all seen the talking heads on the business channels, using the brokers’ tools, picking stocks and making great returns.

People like Jim Cramer want you to believe it is easy.

These commercials/shows make us believe that it is an easy task to predict market movement or pick the next ‘hot’ stock. The latest is options trading made easy.

The bullies know we are looking for a get rich scheme to make our lives easy.

Hit it right, they contend, and you will be on easy street.

When you bet on a long shot in gambling or assume excessive risk by trying to pick the “big winner”, your brain releases Dopamine.

During the current NFL season there has been a record number of comeback wins from 10 or more points. There was plenty of fans releasing Dopamine.

The casinos in our area count on the excitement of winning a large sum of money with little risk. Just a small wager will result in huge returns. They count on the release of Dopamine.

This chemical produces a euphoric feeling and is closely related to the high that cocaine and morphine produce.

For stock pickers, even thinking about placing an order for a stock they hope will bring them huge returns can produce this chemical.

All the while stock pickers ignore the real risks and likely losses in the speculative venture.

Like the comeback wins which are considered unlikely and is not a recommended recipe for success on a consistent basis.

There will always be investors who get lucky and make unbelievable returns. We must realize that this is a matter of ‘luck’ and not ‘skill. These lucky investors will very seldom repeat in the future. Many believe that if you find the right Chartered Financial Analyst CFA you can win.

Do you recall the Bernie Sanders scandal? Many of his clients said if you were not a client of Bernie you were a loser. How did that turnout?

Successful investors have a long-term plan when allocating their assets. They know there is an academic and scientific method available when building a prudent portfolio. Their strategy includes understanding the expected return and expected volatility of their portfolio.

Many investors believe that looking at past performance is a good indicator of future results.

This is exactly what the Wall Street bullies want you to believe.

As investors we must realize that if something happened in the past does not mean it will repeat in the future. Thousands of variables must be exactly the same for these situations to repeat.

During a meeting in Chicago I met with an active trader and his quote has stuck with me.

“Trading strategies work until they don’t.”

The problem for us investors we will never know when these strategies will stop working.

Develop a prudent strategy and remain disciplined. Find an investor coach/fiduciary adviser who shares your beliefs and go confidently into the future.

To succeed in reaching your long term goals you must own equities….globally diversify……rebalance.

Investors are always looking for answers. How do I earn stock market returns with Treasury bill risk?

There is a saying the greater the risk the greater the return. There is of course a point of diminishing returns. In that, at some point adding risk will not increase return. This has been proven by Nobel prize winning research.  

The Wall Street bullies have continually come up with exotic strategies to avoid risk and increase return. NOT!!

In fact, Modern Portfolio Theory tells us at a specific level of risk there is an appropriate mix of assets. That is proper diversification will lead, long-term, to your desired return.

One of today’s leading financial thinkers, Bruce I. Jacobs, examined recent financial crises ….including the 1987 stock market crash, the 1998 collapse of the hedge fund Long-Term Capital Management, the 2007-2008 credit crisis, and the European debt crisis….and reveals the common threads that explain these market disruptions. In each case, investors in search of safety were drawn to novel strategies that were intended to reduce risk but actually magnified it…. And blew it up.  Until we manage risk in responsible ways, major crises will always be just around the bend.

So, believing you can earn a great return with little or no risk will lead to disaster, in the long-term.

There is a way to responsibly manage risk and therefore return.

Modern Portfolio Theory and Efficiency hypothesis have both won the Nobel prize in economics. While the three-factor model was written by a Nobel Prize winner.

When we combine all three, we develop a portfolio that will earn market rates of return, while responsibly managing risk…over the long-term.

The implementation is the easy part. Remaining disciplined during market extremes is the hard part. This will require the guidance of an investor coach/fiduciary advisor.

There continues to be more and more media attention that the ‘buy and hold’ strategy is dead. That Modern Portfolio Theory no longer works. This is another attempt by the Wall Street bullies to keep your money on the move.

There are an increasingly amount of ‘experts’ extolling the underperformance of equities for the near future. These ‘experts’ have an obvious conflict of interest as they recommend their own solution.

I even heard of a late-night show comedian saying that there is a recession coming. Unbelievable, Now, there may be a recession coming but no one can predict when and how long, not even a celebrity.

True investors are much better served using a passive management strategy and utilizing Modern Portfolio Theory and ‘buy and hold’. This strategy, over the long term will lead to success. It should be emphasized that ‘buy and hold’ should really be ‘buy and rebalance’.  ‘Buy and hold’ might signify set and forget and we must rebalance back to our target allocation periodically. This entails buying low and selling high, automatically.

When we rebalance we sell asset classes that have done well and buy asset classes that have done poorly, short term. Buy low, sell high. This is done periodically and eliminates the need to forecast the future.

There is some confusion as to, what is an investor? Many believe that a successful investor makes more than their peers all the time. This they believe is measured on a short-term basis.

A true investor will make comparisons of 10-year performance and perhaps longer. It might be ok to compare 5-year performance. But investing is a long-term disciplined process. When you compare performance on a short-term basis. Like monthly or worse daily, you are really a speculator not an investor.

Now its ok to be a speculator, but if you have a long-term goals like retirement planning. Being a speculator will lead to disappointing long-term results.

To be successful, investors, no matter how large, would be far better off using a passive strategy with Modern Portfolio Theory as part of the process. Modern Portfolio Theory is actually part of a larger strategy called Free Market Portfolio Theory. 

Remember no strategy always looks like the right thing to do. We must continue to believe the free markets do work.  Most importantly we must believe in our strategy and remain disciplined.

We must own equities….. globally diversify ……. rebalance.

There is never a shortage of predictions on where the markets will go next. These predictions are typically based on current events.

Who will win in Washington DC?

What will happen tomorrow….next week….next month…..next year……?

Will the stock market crash? When should I get out to avoid losses?

Should I buy gold and when?

Will inflation take hold? Or is deflation around the corner?

And the list goes on and on…

The talking heads on television need these predictions to keep viewers watching, which in turn increases advertising revenues.

Everyone wants to know what will happen next. In many cases, we make emotional decisions based on the latest short term predictions.  These decisions will in most cases result in very disappointing performance.

If you wish to succeed long term in reaching your financial goals, you need to develop a prudent strategy and remain disciplined to that strategy. Most important you must have realistic expectations.

Proper expectations are the key to investing with Peace of Mind.

Do not expect to predict or forecast stock prices and movements.

Do not expect to pick winning stocks and beat the market. In the long-term stock picking will lose.

Do expect to achieve close-to-market returns over time and to see daily, weekly and yearly volatility. Reduce your costs, use diversification, and sit tight. If you expect the impossible you will be frustrated, unhappy and fearful.

All of us would like to get rich quick. However, if this is your strategy, odds are you will be very disappointed. As I mentioned earlier, develop a lifelong game plan and stick to it. The only adjustment you should make is to gradually become more conservative as you get older.

To succeed in reaching your long term financial goals you should:

Own equities….globally diversify….rebalance.

Leave the predicting to the talking heads and if you do watch see it as entertainment, not strategy.

Investors are continually asking what is the main determinant of investment success? 

Wall Street and the financial media would like you to believe that.

• Timing when to get in and out of the market
• Picking the right stocks and bonds to own.
• Using track record investing to find the next hot manager, will help you succeed in investing.

This is wrong! All the above factors actually negatively impact your portfolio in the long run. Any time you spend on the above activities is time wasted. 

Allocating your assets based on your acceptable level of risk is the main determinant of investing success.

More importantly time spend with your family and friends is much more valuable than time spent trying to beat the market.

It seems odd that crashes of the past are seen as buying opportunities. While current and future crashes are seen as risk.

In most cases the reason we look to beat the market is our emotions. When the market has down turns, we become nervous and scared. When there are markets upturns we become greedy and jealous.

During prolonged up markets Warren Buffet said it best FOMO. Fear of missing out.

We believe that when the market is going down it will always go down. Conversely, when the market is going up, we believe it will always go up.

The real problem is most investors are looking for stock market returns and Treasury bill risk. What they end up with is Treasury bill returns, (if they are lucky) and stock market risk.

Most investors miss out on market returns because they lack discipline. This is the main determinant of long-term investment success.

This recently became evident when a large number of investors got out of the market around Christmas time. And subsequently missed the January and first half of February rally.

This is where a true adviser can help. If your adviser allows you to panic during downturns or concentrate in the latest hot market. Any price you pay them is too much.

Fire your broker/agent and hire an investor coach/fiduciary adviser.

To be successful in reaching your long term goals you must own equities…globally diversify…..rebalance.

We are experiencing, among other things, some very tense and violent situations around the world right now. The situation in Ukraine, including the downed airliner, the Israel and Gaza battle. As well as our own battles within our country. There is uncertainty all around us. But OMG what should I do with my investments? Or is this a good time to invest? This are typical reactions to a short term down swing in the markets. Many of us forget to keep ourselves focused on the long term. We forget that the stock market does go down. It is the price we must pay for the great returns we realize, long term. Please remember a fact from Frederick C Taylor.  From 1926 thru 2012 the Standard & Poors 500 has earned a 9.75% average annual return. There have been 22,040 trading days during this time. Only 52% of those days were up days or 11,461 days. That means there were 10,579 down days. The down days are admittedly more painful, but necessary to earn the great market return. It is also important to remember that

“There ain’t no such thing as a free lunch“

(alternatively, “There’s no such thing as a free lunch” or other variants) is a popular adage communicating the idea that it is impossible to get something for nothing. We read or listen to the financial media telling us why a downturn is occurring. I’m not sure what the answer really is. Perhaps, it’s just the market looking for a reason to correct.  Again I do not know the answer. I do know that downturns are inevitable. They happen.

Dealing with these downturns is part of the reason the long term returns are so attractive.

For long term investors these downturns mean nothing. Anyone who tells you they can predict the market turns are gambling and speculating with your money not investing. In fact you are gambling and speculating with your money if you:

• Pick stocks
• Market time
• Track record invest.

During a downturn in the markets if you become overwhelming uncomfortable. You should talk with your investor coach about reducing the level of risk in your portfolio. If the both of you decide a reduction in risk would be right for you then do it. However, do not expect to increase the risk level when market conditions improve. This would be market timing and therefore imprudent. Those of you that are already clients know that you are globally diversified with the right amount of risk for YOU. Each of you know the three simple rules of investing:

• Own equities and fixed income.
• Globally diversify
• Rebalance

Keep in mind no one can predict the future with any degree of consistency. My suggestion to all of you is to relax and enjoy the summer weather. Stop watching all the ‘bad’ news. Do not allow the Wall Street bullies to make you do something you will regret long term. Selling or panicking during a downturn will result in  “Short term gain ….Long term pain’. Stay focused on the long term and with the help of an investor coach/fiduciary adviser your financial goals are attainable.