This bears repeating: 93% of the so called experts have zero clue as to where the markets are going. That goes for individual stocks as well.
Stock pickers for years have lagged even the most modest of indexes over time and believe me, it hurts to say it, but a composite index seems to be the place to put your money. Then forget about it.
You don’t need some guy who runs a 25 billion dollar hedge fund telling you that they are going all in on Acme Widgets because truth be told, The Hedge fund guy is telling you after he made his move not before. He has already positioned himself well enough in advance so he can take advantage of that media spike.
Carl Icahn made billions doing just that. Nothing wrong with it and if you are dumb enough to get on a train that is at the end of the line, you really can’t complain while it refuels and goes the other way.
I am not against people showing their hand after all the chips are in but don’t blame anyone other than yourself for missing a 40% gain while you take your 3% gain and scratch your head.
I know I am being tough here but I sometimes need to shake people up a bit and get them to come up with there own ideas. Their own research and their own thought process.
Using a financial advisor can help but that advisor has to have creativity and knowledge to guide you through tough times and the good times as well. I have known a couple of bad wealth managers but I have known and still know dozens of great ones. Even though there is a cost, that cost is more than made up for in the decisions that are made to protect and grow your wealth.
Taking charge of your own financial destiny can have a much bigger cost and that cost could be unrecoverable if you create a financial plan that is impossible to achieve. A lot, and I mean a lot of people in this day and age think they have the tools to make better investment decisions.
“ I watch all the business shows, read research reports on the internet, have a zero commission trading account and I have time”
Ugh, famous last words. That person has a shot at being successful but he also over estimates his investment or investor IQ. Like Fredo said to Michael in the GodfatherII. “ I am smart Michael,I am”. Just because you believe it, doesn’t make it so.
The age old refrain of these amateur investor types when they lose 1/3 of their money trading on some app is that the markets are rigged. Rigged for only the big boys.
I can see why they have that frustration but the “ rigging” of the market is one part pass the blame, two parts over confidence. Blame yourself, learn from whatever mistake you made and move on.
I hear time and time again about guys who think they know market dynamics and how the pricing of equities works and yet still lose money. The day traders have methods and sometimes they work and sometimes they don’t.
The trick with all of this is to convert yourself from a trader to an investor. Timing market moves is a suckers game and for every three time you time it correctly you mistime it seven and yes, hitting 300 in baseball will get you to the All Star game and maybe the Hall of Fame but in investing all it will do is get you broke.
Listening to talking heads is comparable to listening to the News at 11. It already happened.
Equity markets are complex organisms that no matter what, no one can or will ever accurately predict moves consistently. That is why index funds do so well. You buy them and ride the ups and downs. At the end of the day the US economy and most equity markets will do ok.
Here is the other side of all this; I don’t like ok. Average to me is fine if you accept mediocrity. That’s not how I look at investing. I know the limitations of day trading. I know the limitations of information gathered from the internet. I know the limitations of looking at technicals, and I know the limitations of the human mind. Mine especially.
What all this means is, understanding what they can’t do will help you take advantage of what they can do. That might be the most important thing you will ever read on this Substack ( Except of course that Sympathy For The Devil is the perfect Rock and Roll song).
Getting back to the wealth advisor role. He/she is your point person to all of this. Use them to walk you off the edge, guide you back to sound financial planning, and give them your password to your TD Ameritrade account so they can shut it down.
I write this column on Mondays to talk about the Market and the Economy but I felt it might be time to go over the most important component of the market, you, the investor. Slap down your ego a bit and put you back on track to a more prosperous future.
You have ideas but are they grounded in real terms or they hyped by forces that may not have your best interests in mind? That is why, most people need to have professionals involved and stop thinking they “have it figured out” You don’t.
Excellent article! I had to send it to my nephews who have limited experience and knowledge but plenty of media input. Thanks for writing this, You practice what you preach.