Should You Get Out of (Or Into) the Equity Markets?

During conversations with investors I continue to hear apprehension when the subject of stocks is discussed. This apprehension or fear is completely understandable. We hear nothing but bad news from the media, the continuing battle in Washington, the liberal tone of the current administration like it or not, our own budget deficit and ballooning debt, the list goes on and on.

Through all this bad news the equity markets posted solid returns in 2012 and 2013. Will there be down markets in the future? Absolutely, there is no doubt. However, no one can tell you when and which countries and/or sectors will be involved.

The equity markets around the world are random and unpredictable.

This is undeniable. However, the equity markets remain the greatest wealth creator in the world, if properly used. This does NOT mean picking the right stocks or market timing, getting in and out of the market at the right time. Neither of these activities promoted by the Wall Street bullies are in your best interest. These activities benefit the Wall Street bullies and will not improve your returns.

The market returns are there for the taking, they are waiting for you to take advantage.

Listening and taking the advice of the Wall Street bullies is not in your best interest.  These bullies include shows like Hannity or Limbaugh or OReilly who tell you how horrible everything is and try to instill fear.

Your time can be much better spent than worrying about the direction of the equity markets. If you have developed a prudent portfolio and remain disciplined you will succeed long term. This will require the help of an investor coach who will keep you from letting your emotions take control.

Remember the Equity Markets are forward looking:

  • Expectations about the future are in today’s price.
  • Market returns are not strongly correlated with macroeconomic variables such as GDP
  • Markets can provide positive returns even during periods of poor economic performance.
  • Timing markets is difficult.

A study was done looking a past recessions and stock returns. The conclusion there is no correlation between recessions and stock returns.

To succeed in reaching your long term financial goals you need to own equities, as scary as this may seem, globally diversify, no one can tell you which countries and/or sectors will outperform and rebalance, buy low sell high.

If you follow these simple rules you will stop gambling and speculating with your investments and improve your results with less anxiety about the future. If you are younger growth must be your goal, a retiree your goal is to keep pace with inflation. Owning equities in your portfolio is a great solution to accomplish both.

The True Enemy of Every Investor .

Successful investing is not, per se, a portfolio problem, but rather a people problem. No matter how well designed and engineered a portfolio is, it can easily be destroyed by imprudent investor behavior.


Unfortunately, the true enemy of every investor lies within.


The instincts, emotions, and even biochemical makeup of human beings drives them to gamble and speculate with their money, even when they don’t mean to. This problem is multiplied exponentially by financial institutions that profit from this self-destructive cycle. You will see that this cycle is hard wired into every human being in the world. No one is exempt.


In recent conversations with investors these tendencies to gamble and speculate are becoming evident. It sounds something like ‘if this asset class is doing well and this one is not why not transfer all of our money into the better performing asset class?’ This is a classic case of market timing. Getting into and out of the market/asset class at the right time.


We are emotional beings and when our friends/relatives tell us how they are making ‘tons’ of money investing a certain way. We become envious and wonder why we can’t get a ‘piece of the action’?


Just because the ‘hot’ asset class is doing well does not mean this trend will continue. It may for a while but eventually the ‘hot’ trend will end. Leaving the investor with a sick feeling and even more skeptical of the markets.


The markets are not the problem you are. This is where an investor coach/fiduciary adviser can help. Your fiduciary adviser will help you build a prudent, globally diversified portfolio with the right amount of equities and fixed income for you. Most importantly your coach will keep you disciplined when your emotions tell you to invest the ‘hot’ way.


To succeed in investing for the long term you must


  • Own equities and high quality short term fixed income.
  • Globally diversify
  • Rebalance.

What Will Happen Next?

When dealing with investors I have heard a number of questions.  The most frequently asked is; what will the market do next?  Every one of them believes someone knows what will happen next. Investors are in constant search of the ‘expert’ that will give them the answers and ‘beat’ the market. Unfortunately, there are no answers to the question; what will happen next? While investors are searching for the right answer they lose money unnecessarily.

This is evidenced by the Dalbar research study which looks at individual investor performance from January 1984 thru December 2013. The study revealed that during this period the S&P500 earned 11.10% while the average individual investor earned 3.69%. Keep in mind that during this period inflation averaged 2.80% so the average investor barely kept up with inflation.

Why the difference? It can be explained by the investors search for the ‘best’ manager. This is called track record investing and it doesn’t work. It also is the result of market timing. That is getting in and out of the equity markets at the right time. This has also proven not to work, long term.

The invisible hand of the market sets prices more efficiently than any other process known to man.  Is it perfect?  Indeed, No.  There is no perfect price; only what a willing buyer and seller negotiate.  The market instantly incorporates the collective mind of every market participant.  Free markets work.  Unfortunately, most investors never tap their real power.

Stop trying to beat the market and let the market forces work for you. This will be accomplished by owning equities….globally diversify….rebalance.  These 3 simple rules will lead to a successful investing experience.

This along with the guidance of an investor coach/fiduciary adviser will improve your long term results as well as reduce your anxiety. When investors really understand how the markets work they can invest confidently. Because they know that free markets work.

Just The Facts!!

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.

English: The corner of Wall Street and Broadwa...
English: The corner of Wall Street and Broadway, showing the limestone facade of One Wall Street in the background. (Photo credit: Wikipedia)

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.

To truly succeed in investing for the long term, you must own

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

Your emotions will continue to guide many of your investment decisions. The media along with the Wall Street bullies will continue to use fear and hype to keep your money moving. They will continue to put a spin on any event that will strike fear and incite greed.

How many times have you heard ‘if this happens then this will happen’? Well just because it happens once has nothing to do with future results. As I mentioned earlier there are hundreds if not thousands of variables that must perfectly align for events to perfectly repeat. This very seldom is the case.

Don’t forget the media and the Wall Street bullies have access to you 24 hours per day seven days per week through the expansive media networks.

If you want to invest with less anxiety and do not enjoy watching all the daily newsfeeds. You need to find and follow the guidance of an investor coach/fiduciary adviser. Also keep in mind that hiding your money in your mattress is not a very good solution.

Are You Seeking Advice or Validation??

In my previous message I discussed process and superstitions. Now I would like to expound on that discussion. Many of us continue to believe that the investment manager makes the difference between a good return and poor returns. These investors believe that they can find the manager that will help them ‘beat’ the market. Or more importantly ‘beat’ their neighbor, friend, relative……….

Barclays Global Investors headquarters on Howa...
Barclays Global Investors headquarters on Howard Street in San Francisco, California. (Photo credit: Wikipedia)

As I mentioned previously people that go to a casino believe they have a system but it ends up they have thinly veiled superstitions. Many investors are lured by ‘experts’ with a system. These typically include a ‘system’ to predict when to get into and out of the market or a particular asset class or a particular hot stock. Somehow these ‘experts’ have determined a particular indicator or indicator(s) that can predict what the markets will do next.

What these ‘experts’ forgot or more likely don’t know to tell investors is that there is NO correlation between past events and future results. The markets are random and unpredictable. These ‘experts’ actually believe they have found the ‘holy’ grail or at least they want to convince investors that they have found the grail. These ‘experts’ fall into one of two groups, group one does not know what will happen next and group two does not know that they do not know what will happen next.

Some ‘experts’ will lead you to believe that they have watched and studied the markets for so long that they can ‘feel’ the pulse of the market. These ‘feelings’ are nothing more than thinly veiled superstitions.

Any adviser that cannot tell you the expected return and expected volatility (risk) of the recommended portfolio is speculating and gambling with your money and not investing.

Many of these ‘experts’ made a correct prediction once or twice and have convinced themselves and potential investors that they can do it again and again. Well these predictions were a matter of luck and not skill. The academics have proven time and again that the markets are random and unpredictable.

Sure some of these ‘experts’ get lucky but do you want to invest your money based on someone’s luck or based on academic research? Investing is a long term process ideally a lifelong process that has its ups and downs.

To reach your long term financial goals you need the assistance of an investor coach/fiduciary adviser. Your coach will help you build the right portfolio for you and your family. Most importantly your coach will keep you disciplined during market extremes, both up and down.

Keep in mind your coach will, at times, ask you to do something you do not want to do. Your coach may ask you to sell a good performing asset class and buy a poor performing asset class. This is called rebalancing and at times this requires discipline to go against the financial media.

If your adviser does whatever you tell them to do, what good are they? What are you really paying them for? You need to ask yourself if you are seeking advice or validation. An investor coach/fiduciary adviser is just that your coach not your facilitator.

Which Do You Rely On?….Process or Superstition?

This past week I attended an investment symposium in Cincinnati. Ironically, the symposium was in a large downtown casino. Every week I contrast true investing from gambling and speculating. And here I was walking through a large casino that seemed to be busy at all times of the day. As I walked through I noticed the faces of some of the gamblers and in all cases it had the look of desperation and false hope.

Casino Royale en Las Vegas
Casino Royale en Las Vegas (Photo credit: Wikipedia)

I’m sure many of these gamblers felt they had an edge because they were sophisticated and had a ‘system’. But if you looked closer it was not a ‘system’ but rather thinly veiled superstitions. They relied on luck and when the luck ran out the sophisticated gambler moved on to the next ‘system’.

A prudent investor will not switch from one hot ‘system’ to the next. With the help of an investor coach they will develop a prudent portfolio designed for them and then remain disciplined to that process. That process includes among other things the following three rules:

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

The Wall Street bullies have extensive marketing campaigns, which begin as early as grade school, to keep the public gambling and speculating. You can tell you are gambling and speculating if you are doing any or all of the following:

  • Stock picking.
  • Market timing (Getting into and out of the markets at the ‘right’ times)
  • Track record investing (Investing in the hot managers or hot asset class)

These bullies forget to tell the public that these activities are in the best interest of the bullies and NOT you. These bullies use your emotions to keep your money on the move. Because their fees depend on you keeping your money moving from one strategy to the next.

Have you ever meet someone who won big at a casino? Did you find it curious why the casino would then give these ‘winners’ ‘free’ rooms and food. Perhaps even ‘free’ transportation back to the casino? Well these casinos do this because they know that if you continue gambling you will give all your winnings back.

Don’t get me wrong, gambling and speculating are not all bad. It’s ok as long as you gamble and speculate for entertainment purposes only. However it is not ok when this is your retirement plan strategy.

The Wall Street bullies believe the same thing if you continue trading their fees will continue and you will lose. These bullies will continue to use your emotions to entice you to gamble and speculate with your savings.

These gamblers and speculators will have continuous anxiety because they do not know what to do next. Their faces have the look of desperation and false hope.

Stop empowering the Wall Street bullies and take control of your own financial future. Fire your broker/agent and hire an investor coach/fiduciary adviser.

There Will Always Be Uncertainty In The Equity Markets!!

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.

Federal Reserve Bank of NY, 33 Liberty Street
Federal Reserve Bank of NY, 33 Liberty Street (Photo credit: Wikipedia)

But OMG what should I do with my investments? Or is this a good time to invest? These are the 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.

For Investors The Enemy Is Within…

During discussions with people at networking events or social events or just hanging out one question remains constant. What do you do? When I respond, investor coach or investment adviser or fiduciary adviser the reaction is predictable. You can see it in their faces, OMG stocks. Fear, is etched on their faces. This of course is not always the case but it happens often enough to address here.

English: Albert Einstein Français : Portrait d...
English: Albert Einstein Français : Portrait d’Albert Einstein (Photo credit: Wikipedia)

Many of these investors have been through the tech crash of 2000-3 as well as the housing crisis of 2008. These investors during a time of crisis, when acting on their own or even when they have a financial adviser will panic and sell at the bottom. Thereby locking in their losses. This happens at nearly every ‘crisis’. They continue the trend by re-entering the market AFTER the run up. This is just the opposite of what they should do.

If you have a financial adviser who allows you to perform the destructive behavior of selling low and buying high, fire them. If your current adviser allows you to panic during down turns and buy the hot asset class or stock during times of hype, fire them. If you do not follow your adviser’s advice during times of crisis as well as times of hype, fire them.

A true fiduciary adviser provides you with the prudent portfolio at YOUR level of risk and keeps you disciplined during market extremes.

If you haven’t guessed the problem with most investors is not the stock market volatility but rather the problem is the enemy is within YOU. Most of us without the proper guidance or leadership will allow our emotions to guide our decisions. This is true not only of investment decisions but any important decision we need to make in life.

I could discuss all the evidence on why investing in the equity markets is one of the greatest wealth creation tools on the planet. And when I am done you will follow your emotions and listen the Wall Street bullies and your friends and family. Each will give you a number of reasons to panic or buy the hype.

The question becomes WHY? Why do we continue to repeat this destructive behavior? Einstein has a quote that might be relevant here. The definition of insanity is doing the same thing over and over again expecting different results.

A great solution to this problem is to hire an investor coach/fiduciary adviser to help you develop a plan and remain disciplined. This is the true value of any competent adviser. You can take advantage of the great wealth creating opportunity of the equity markets. However, doing it alone will typically lead to poor results and a lot of anxiety.

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

Discipline or Trading…Which Wins?

Many potential clients ask me about the past performance of ‘funds’. This is not unusual, because most of us have been taught by the Wall Street bullies that the investment choices makes all the difference. We have been taught to believe that there is someone out there who will lead us to investment success through savvy trading. We believe there is someone out there who can tell us

English: The corner of Wall Street and Broadwa...
English: The corner of Wall Street and Broadway, showing the limestone facade of One Wall Street in the background. (Photo credit: Wikipedia)
  • What stocks to buy and or sell?
  • When to get into and out of the equity markets?
  • Who is the best money manager right now?

What the Wall Street bullies won’t tell you and don’t want you to know is that there is no such person or entity. No one can consistently predict any of the above. There are two groups when it comes to predicting the direction of the equity markets.

Those who don’t know where the market is going and those who don’t know they don’t know where the market is going.

The way these bullies make money is when money moves. Trading generates fees regardless of whether you make money or not. The bullies make money on every trade.

DALBAR is an independent analysis company that specializes in studying investor behavior. Each year DALBAR publishes the rolling performance. The recent analysis is for the period 1984 thru 2013.


  • S&P 500                                                             11.10%
  • DALBAR Average Investor – Equity Fund      3.69%
  • CPI (representing inflation)                               2.80%

As you can see a simple buy and hold of the S&P 500 beats the recommendations of the Wall Street bullies. There is a better way to invest. It does not involve:

  • Stock picking
  • Market timing
  • Track record investing.

If you are working with an adviser who does whatever you tell them fire them now and hire an investor coach/fiduciary adviser. Your adviser should help you build a prudent portfolio and keep you disciplined during market ups and downs. Your coach will help you follow three simple rules

  • Own equities and high quality short term fixed income.
  • Globally diversify.
  • Rebalance.

Most importantly your adviser should keep you disciplined. I believe the following quote from the Father of our country will make the importance clear.

“DISCIPLINE is the soul of an army. It makes small numbers formidable; procures SUCCESS to the weak, and esteem to all.” -George Washington

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

Beat The Market…..Really????

Over the weekend I was talking with a friend and an investor, not my client. He was telling me that he is invested in gold and silver. His reasoning is that the Fed is pumping too much money into the financial system and eventually the financial system will collapse. I believe he has been listening to the financial media, ie, financial pornography. These ‘news’ portals continue to use fear to sell their hot commodity/product. They will explain why the collapse is imminent and what to do about it. Which entails buying their ‘stuff’’.

Wise Investments Holiday Card
Wise Investments Holiday Card (Photo credit: pjchmiel)

It seems as though every week I discuss the Wall Street bullies. We have been trained from our youth to believe that someone knows what will happen and when. If the bully talking has impressive credentials, like an Ivy League degree, or Stanford or any prestigious university we give them additional attention and credibility. What these bullies don’t tell you is how they know what to do. How do they determine what will happen next? Many of the scenarios are developed using a method called ‘data mining’.  This entails determining what they want to happen or appear to happen and then finding a period of time in history that proves their ‘prediction’.

What these bullies don’t tell or perhaps they don’t know is that in order for an event to repeat. All the thousands of variables/unknowns have to perfectly align. This is virtually impossible but it is possible. These bullies know that investors make their decisions based on emotions and not logic or cognitive reasoning. The bullies continue to sell fear, right now, and hype when a hot asset class is making a huge move.

The proper method to do research is to look at all the data available and base your portfolio based on this research. In our case this involves data going back to 1926 for the U.S. equity markets. This data reveals market premiums in the equity markets that will reward investors over the long term.

Remember you need to avoid the three signs of gambling and speculating with your investment money. Avoid these signs and you will improve your results with less anxiety. They are

  • Stock Picking.
  • Market Timing (getting into and out of the market and then back in at the right time)
  • Track Record Investing (basing investment choices on a recent track record)


Unless, of course, you enjoy watching the financial news and reading all the financial articles/predictions. Looking at GNP, money supply, unemployment, trade deficit and list goes on and on. This can prove difficult because there are endless supplies of different predictions. The information you will receive will have countless contradictions.

In my opinion there is a much better approach. One that involves basing your prudent portfolio on academic, Nobel Prize winning research. With the guidance of an investor coach/fiduciary you can develop your portfolio/plan and learn to develop the discipline to maintain your strategy. This is equally important for both strong up markets and the inevitable down markets.

Einstein’s definition of insanity is ‘doing the same thing over and over again and expecting a different result’.  Stop following the lead of the Wall Street bullies and learn how to empower your own financial future.

The equity markets remain one of the greatest wealth creation tools on the planet, if properly used.

The free markets work use that information daily.