In sports, one team wins when they beat the other team. But “winning” is not always synonymous with “beating” when it comes to investing.
Investors are not sports teams, and they’re generally not aware that they’re continually playing against themselves. Money coaches need to let their clients know that “the market is you and me.” All of us. We are the market. The sure way to losing on Wall Street is playing to “beat,” when you should be playing to “win.” Consider this important question: In a year when some sectors were up 15%, but you “only” made 12% in the broad market, did you lose?
Wait! What? How can that be?
Greedily lusting after market out-performance–beating the market–is a fallacy, a recipe for unrealistic expectations, anger, fear and loss. Winning investing means efficient investing. Winning investing means winning with long-term, market-based returns in low-cost, passive, index-based investments. Having the goal of beating some randomly selected index, like the S&P 500 or the Dow Jones, is not realistic, not efficient and not a winning philosophy.
…some sectors were up 15%…you “only” made 12% in the broad market, did you lose?
As investors, we have myriad opportunities to invest our time in building wealth that have nothing to do with the markets, so rather than chasing “winners,” isn’t it time to employ an efficient goals-based investing paradigm that puts risk and return expectations in their proper balance so you can actually win? But before you can win, you have to understand what drives you as an investor. With some time and effort, investments are not that hard to understand, but investor behavior, your behavior, is eminently more complex.
In other words, you need to know what pushes your buttons! The dynamic field of Behavioral Finance has made point this very clear: Markets are efficient, people are not.
EMH theory (Efficient Market Hypothesis*) states it is impossible to “beat the market” because existing securities prices reflect all available relevant information at any given moment. This is stock market efficiency, EMH theory predates the internet by many decades! The proponents of passive portfolio management, consider this to be doctrine, and buy index-based exchange traded funds that track market performance. **
Trading is not the answer.
Behavior modification and passive investing are.
You can take control by building the skills and confidence you need to prevail on your own terms. It’s about self-improvement. Its about self-sufficiency.
Wall Street knows investors cannot beat the market.
Wall Street has long known that “beat the market” is a myth, that “markets are efficient,” and that investors are anything but efficient, so Fix The Investor is a welcome and revolutionary response to investors’ dissatisfaction with the misleading and destructive idea that investors can beat the market.
Financial pornography has a way of raising investors’ hopes and expectations far beyond where they should ever go, and the only antidote is for you to modify the destructive human emotional responses that Wall Street profitably plays into. According to the “stopped clock theory,” even a stopped clock can be right twice a day. And just like that broken clock, investors can “beat the market” here and there, but it’s just not a realistic or achievable long term goal.
Passive investing with low cost Exchange Traded Funds can deliver on two guarantees:
1-You will make money when the market makes money, and
2-You will never earn less than the market.
That second of the two guarantees, “never earn less than the market,” is very comforting to a long term investor who understand that in the long run they will do well just to stay invested. An abundance of historical positive indices performance provides comfort and guidance to lower risk investors. “Never less than the market” also implies when the market goes down, so does your portfolio.
The overconfidence that develops from those sporadic wins only sets you up for future losses. We are all subject to the failings of human nature, so our fears, our greed and our instinct to cut and run in turbulent times (what did you do in 2009?) are irresistible forces to overcome when hard decisions about money must be made.
But Wall Street isn’t solely to blame. Your money has other enemies, and you may be its worst!
So we help you identify and repair those destructive investing behaviors. We provide individual attention, helping you pinpoint the reasons you’ve had trouble making and keeping money. We can identify and help you fix the problems by offering you the benefit of decades of hands-on private client advisory experience to deliver personalized, goals-based coaching.
Are you ready to fix your financial biases, bad behaviors and random market decisions that have prevented you from building lasting wealth?
*Eugene Francis Fama, American economist, is credited for the so-called Efficient Market Hypothesis (EMH). His most famous article was published in May 1970 entitled “Efficient Capital Markets: A Review of Theory and Empirical Work” (Journal of Finance 25 (2): 383–417.). One of the articles first sentences is well known and quoted: “A market in which prices always ‘fully reflect’ available information is called ‘efficient’.”
**Relevant Morningstar Inc. data supports the conclusion. From its June 2015 Active/Passive Barometer study they compared active managers’ returns in all categories against a composite made of related index funds and exchange-traded funds (ETFs). Year-over-year, only two groups of active managers successfully outperformed passive funds more than half of the time: U.S. small growth funds and diversified emerging markets funds. (Source Morningstar and Investopedia)