You Don’t Know What You Don’t Know

There is one common thread within Wall Street, no matter what happens there is always opportunity for Wall Street to make money.  They will feed the fear by offering products which provide safety and guarantees.  This safety and the guarantees come at a very high price to the investor.  In the long run the costs to the investor are high as well as the revenues to Wall Street. Higher costs to the investor directly affect performance in a negative way.

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)

All that you know is what the brokerage community or financial press wants you to know.  They have trained you to accept their version of reality – over the span of your entire life.  There is a complete body of investing knowledge developed in the halls of academia.  Most people do not even know that it exists.  This is the real wisdom you need to create wealth and abundance.

Remember market risk is not your greatest risk it is inflation risk. As an example if inflation averages just 5% your cost of living doubles every 14 years.  If you are 65 today with a $2000 per month income, with no inflation increases, your spendable income in 14 years will be $1000. In other words your $2000 monthly income will buy one half of the goods/services it buys today.

Volatility is uncomfortable, at least the negative volatility but it is something you will have to live with to keep up with inflation and grow your wealth.

There are always new ‘experts’ with the new market timing quantitative methods. They offer proof, that for instance if you had looked at a particular indicator(s) you would have avoided the 2008 2009 crash. As I mentioned these indicators although accurate in the past. Are essentially worthless going into the future.

Remember the markets are efficient, as Eugene Fama explained in his Efficient Market Hypothesis written in 1965. This hypothesis has been proven correct over a long period of time. As evident by Dr. Fama’s Efficient market Hypothesis winning the Nobel Prize in economics for 2013.

Although the markets are not perfectly efficient. In that the prices of some securities at some points do not reflect the value. However these inefficiencies are far too infrequent to take advantage of by any ‘expert’.

This is why the indicators I mentioned earlier are worthless going forward. They may have worked in the past but relying on them to predict the future will result in very disappointing results.

The equity markets are random and unpredictable.

Therefore to succeed with investing for the long term you must own equities…..globally diversify……rebalance.

Remaining disciplined to this approach will allow you to maintain the purchasing power of your money. In addition your investment dollars will grow beyond inflation over the long term.

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