Be A Rebel With Your Investments

The media has no shortage of investment tips, tricks, software and gurus to try to “help” us with our investments. From bitcoin to gold, from hedge funds to annuities, from talking heads to late night infomercials, it is easy to find people saying everything and anything to get you to try their product.

According to a well-known study of investors and their behavior, DALBAR’s Quantitative Analysis of Investor Behavior (QAIB), investors completely change their investment portfolio composition roughly 3 times every 10 years.

Think about that for a minute. The average investor completely changes 100% of the holdings in his/her portfolio about every 3 years. Why is that?

Here are a few reasons why I think this is true:

• Investors think they see an opportunity to get more return than what they are getting
• Investors get scared when their portfolio goes down and want to “stop the bleeding”
• Advisers are introduced to a new fund/product through their broker/dealer and try to sell it to their clients for a commission.

If it seems that investors (and perhaps their advisers) aren’t sure how to build portfolios that do not need to be revised every few years, it may be by design.

Wall Street is an industry that needs people to buy and sell regularly to make money. Without trading, there is no way for them to make money. This is due to what is called the bid/ask spread. It’s a gap between what a stock or bond sells for and what it is bought at; the difference is what gets paid to the marketmaker. The marketmakers are the folks who actually make the trades and the spread is their cut.

So, when you completely change your portfolio every few years, that means that there are cuts all across the board. Every buy and every sell generates a spread, and you end up paying those who enact the trades you want them to make.

What if there was a way to minimize the buys and sells?

Well, as it turns out, there is.

And, the concept is not new. It began as early as the 1950’s, and the research continues through to today. Academic research has shown over and over again that you can put together your portfolio one time. You can set it up that is designed for your personal risk tolerance (what percent up and down can emotionally handle), and then rebalance systematically back to these targets.

This is the way of the rebel investor.

The rebel investor doesn’t follow the crowd.

The rebel investor isn’t swayed by gimmicks, fear, or greed.

The rebel investor has a true purpose for his/her money.

The rebel investor remains calm in spikes and crashes.

The rebel investor sets his/her portfolio and can weather the fluctuations.

The rebel investor uses a coach to stay on track.

Are you a rebel investor?

Contact me if you want to figure out how best to build your portfolio. I look forward to meeting you!

It’s About The Long Game in Investing Success

No doubt many of you are familiar with the fable of the tortoise and the hare. The hare takes off in the race and guns it. He is superior in speed to his friend, the tortoise. He is aware of his superiority in speed and decides to take a nap, thinking he has time.

As he sleeps, the tortoise eventually passes him and goes on to win the race. The hare wakes up, but it is too late. Slow and steady wins the race.

Why on earth would I bring up this story? Well, I think it teaches us two things:

1. You cannot win a marathon by sprinting in spurts.

2. You win a marathon by going at a good, steady pace.

I am no expert in running. In fact, if you were to look at me, you would immediately know that I am not a runner. But, I do know the difference between sprints and distance. There is a reason that ultra-marathon runners like Rich Roll do not compete with Usain Bolt. You would not see Michael Phelps go up against Sun Yang.

You do not train the same way for these different events. There is some overlap, but the end game is different and requires a different strategy to be successful.

The reality is that people try to treat their investments like sprints. They chase hot stocks, tips, or sectors of the market. They are hoping to get rich quickly and in the end may not achieve what they are trying to do.

In fact, I just heard a sad story from an estate attorney. Twenty years ago he met with a couple to help them with their estate plan. At the time, their retirement nest egg was $550k. Now, 20 years later, it is worth $500k.

What went wrong? The market has been very generous the last 20 years and surely there should have been some growth, not a loss!

I don’t know all of the specifics, but it was probably a combination of buying and selling many stocks / bonds / mutual funds over the years trying to chase a better return. Poor timing could have also resulted in locking in losses during the last three major financial crashes. There could also have been high fees and/or commission that came out of the account.

When asked why they stuck with their adviser all these years, they said they liked the guy and trusted him.

This is very sad to me: seeing a couple who is ready to retire and essentially did not make any money with their investments for the last 20 years!

So what is the solution?

It’s about the long game.

It’s about discovering your true purpose for money and your personal risk tolerance.

It’s about building your portfolio around your risk tolerance and then staying the course.

It’s about rebalancing your portfolio systematically instead of impulsively.

It’s about the long game.

If you need help with getting your investments on the steady course towards success, please reach out to me and let’s talk.

Develop the Right Mindset About Money

This week, I will be teaching at my workshop the idea of Mind Over Money. The workshop explores how investing experts, culture, and our own minds impact our investments.

The impact is usually negative.

We talk about how Wall Street bullies try to get us to give in to our fear or greed to do imprudent things with our money. We also talk about how the media impacts our decision-making ability.

Lastly, we talk about our own minds and how they can play tricks on us and end up making us do foolish things with our money.

A huge key to having success with your money is to develop the right mindset about it.

There are several things that this mindset includes: a true purpose greater than money itself, a mindset of abundance and not scarcity, and living within your means… just to name a few.

Today, I want to write about living within your means. It has been said that the easiest way to give yourself a raise is to live under your income level.

Most people I meet with have consumer debt. Lots have a mortgage and a car loan. Many have student loan debt. Some would argue that these debts are OK to have. I am of the personal opinion that we should be as debt-free as possible - and I love helping people get to this point.

Most Americans have credit card debt and a mindset that perpetuates the problem of overspending their income. The idea is that I will make more money in the future and therefore I will pay for it then. The mindset is backwards.

Instead, we should strive to live below what we bring in. This way, we have greater freedom to set aside money for an emergency savings account, for car or home repairs, a future vacation, a church or charity we’d like to give more money to. The list could go on, but it starts with making a decision to stay within your means.

The people who develop this mindset are patient and can wait until they are ready before making a big purchase. Then, instead of having debt hang over their heads and making them feel like slaves to their jobs, they are free to enjoy their purchase.

The first step towards having success with your finances is to decide that you will live your life using less money than you make.

This creates the space for freedom from debt and freedom to enjoy life.

Are you ready to make this first step towards having success with your finances? You can contact me through this website or come to an upcoming workshop to learn more.