What Are You Doing?

Each week I discuss the dangers of speculating and gambling with your investment dollars. Many people I talk with believe that there is someone out there who can beat the market and earn superior even gaudy returns.

At the same time, these investors believe someone can tell them when to get into and out of the equity markets.

I personally was following an analyst who had a great track record. At least that’s what his literature said. He gave examples of all his great trades. He bought the right stocks and timed the market perfectly.

Given this data I believed I found the right analyst who had the magic touch. Well, apparently, this success was short lived because the trades were a disaster.

After some painful experiences, I began to realize that no one could consistently beat the market.

What I learned in college and graduate school finance classes proved that stock picking and market timing DO NOT work consistently.

The Wall Street bullies taught me that the academic research did not apply in the real world. This was huge mistake for me to believe.

Why not take advantage of over fifty years of academic research and earn great returns without the need to correctly predict the future. No matter what the past success of any analyst, it is a matter of luck and not skill.

There is no repeatable method to beat the market.

All investors should treat their investment money with the care of a fiduciary. Some examples of fiduciaries are trustees…managers of pension funds and others responsible for managing other people’s money.

Keep in mind there will be times when your globally diversified portfolio will lag behind the U.S. equity market. However, over the long term your portfolio will earn you the great market returns. Remember controlling risk is one of our goals.

Of course, there are examples of fiduciaries that violated their duties and invested the money imprudently.  There has been fraud committed, Bernie Madoff comes to mind.

Here is a guy with all the inside connections and theoretically inside information. With this help, even Bernie could not consistently beat the market.

What makes you think you can? Or that there is some guru who can?

Find an investor coach/fiduciary adviser who will help you develop a prudent portfolio and keep you disciplined.

Your coach will help you with three simple rules of investing:

  • Own equities and fixed income
  • Globally diversify
  • Rebalance

With the help of your coach you can reach your long-term goals with less anxiety and with the knowledge that you are invested correctly for your situation.

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