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.

The Wall Street Journal at 1701 Page Mill Road...
The Wall Street Journal at 1701 Page Mill Road in Palo Alto, California. (Photo credit: Wikipedia)


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.


After studying the collective behavior of thousands of real world investors over the past decade, several truths have made themselves clear. It is my belief that many, if not most financial product sponsors are aware of this dilemma,


but either don’t care that the investor is harmed by it,


or are ignorant of the damage that they unknowingly perpetrate on the American investor.


These Wall Street bullies sell fear during downturns. They will make bold predictions about the impending doom. They will attempt to sell you their solution: buy gold, annuities, life insurance, CDs, commodities, real estate or whatever. Anything that has safety or guaranteed mentioned.


I just read one such prediction ‘now is the time to become defensive’. Unfortunately for most investors they do not look at this predictor’s track record. In most cases it is not very good.


The reason they were quoted was because at some point they were right. But as we know this was a matter of luck and not skill. Investors on the other hand appear to be unaware that the equity markets are random and unpredictable.


Each day I can find in the Wall Street Journal 5 reasons the market should go down AND 5 reasons the market should go up.


As I write this today, September 9, 2016, the U.S. markets are down over 2%. Of course the predictor(s) will say ‘I told you so’. Again this was luck and not skill.


Is this just a one day occurrence or the beginning of a long down trend? No one can tell you with any degree of certainty. As I have said before no one can tell you whether the next 20% move will be up or down. What they can tell you is that the next 100% move will be up.


Investors need to ignore short term volatility and focus on the long term. Especially when investing for retirement. You will, hopefully be retired for a LONG time.


To succeed in investing you must own equities and high quality short duration fixed income.…globally diversify….rebalance.


Work with a fiduciary advisor/investor coach to determine the risk level that will help you reach your goals. With the amount of volatility you are comfortable with.


Your coach will help keep you disciplined during market extremes and conquer your true enemy.