Steve Van Remortel president of SM Advisors a Green Bay based expert strategist has a tagline for his firm of “Those Who Plan – Profit”. It means exactly what it says you will earn a better profit if you develop and follow a plan. Steve has used this process to help a large number of businesses become successful and earn a profit.
This process works very well with investing as well. When you develop a plan and remain disciplined to your plan you will profit over the long term. In most cases like SM Advisors it requires a coach to keep you disciplined. In this case it requires an investor coach.
Since becoming involved in the financial services business in 1992 I have learned that the Wall Street bullies would prefer that you do not have a plan. These bullies would prefer that you invest based on your emotions. They would have you listen to the financial media and trade…trade…trade..
These bullies want nothing more than to have you gamble and speculate with your investment money. A sure sign that you are gambling and speculating would include:
- Stock picking.
- Market timing (getting into and out of the market at the right time based on some murky predictions).
- Track record investing (investing with the ‘hot’ manager or the latest ‘hot’ trend).
In 2013 Dr. Eugene Fama won the Nobel Prize in Economics based on his Efficient Market Hypothesis. In his award winning hypothesis Dr. Fama states
“In [a free] market at any point in time the actual price of a security will be a good estimate of its intrinsic value”.
Another way of saying this is that free markets work and if you believe that
- Based on supply and demand the free market is the best determinant of market prices.
- All available information is factored into the current price.
- Only new and unknowable information and events change pricing.
- The randomness of the market makes it impossible for any individual or entity to consistently predict market movements and capture additional returns unrelated to risk.
You will invest using free market investment strategies. Dr. Fama’s Efficient Market Hypothesis needs to be included as one component of that strategy or PLAN.
You can continue to plod along hoping you can increase your return by trading in and out or you can develop a solid plan.
Remember any trade(s) that require an accurate prediction of the future will eventually fail.
A great first step is to determine your current expected return and expected volatility(risk).
With this vital information you can begin to plan for a successful long term financial goal, such as retirement.
Because as Steve Van Remortel states “Those Who Plan – Profit’.
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