When Investing for Peace of Mind, Always Consider the Sum of All Outcomes.

During conversations with investors and financial professionals I hear of the hot advisor who beat the market. They made money throughout the ‘great recession’. They are a Chartered Financial Analyst CFA or some other designation that ‘proves’ their ability to beat the market. They have the system to make money in futures, options, gold, real estate and/or other alternative investments.

Many have very impressive credentials. Like degrees from Ivy league  schools or a pedigree of a very successful financier. Somehow investors believe that the necessary skills are hereditary. You need to remember that most successful investors have a relatively short time horizon.

Many because the equity markets are random and unpredictable. Past performance does not equate to future success.

During my studies of investing strategies over the last twenty years I have learned trading strategies work until they don’t. When they stop working it gets real ugly real fast.

Just because someone else got lucky doesn’t mean you will.  If we offered you a million dollars to play Russian roulette with a gun containing one bullet and five empty chambers, you would be a fool to ignore the chance of blowing your brains out.

Every day in the world of investing, someone takes a foolish gamble, gets lucky, and wins big.  When investing, you must always consider the sum of all probable outcomes, including the bullet in the chamber.

Keep in mind the promoter of the latest hot “investment” will have very compelling reasons to buy. Many times the phrase ‘new paradigm’ are used. Or this time is different. Most of these schemes involve speculation and gambling and not investing.

IF you are saving for a long term goal, like retirement or college for your kids or anything that is important to you follow a formal strategy.  You should follow a strategy which is backed by academic research. This research should use at least 60 years or more of data to eliminate any chance of bias.

To succeed in reaching your long term financial goals you should, buy equities……globally diversify….rebalance.

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