Chris Collins CLU RFC CFP®

 

…and all the children are above average?

 

L

ake Wobegon—where "all the women are strong, all the men are good looking, and all the children are above average."

Are you kidding?

Well, yes.  It’s just entertainment—a light-hearted fabrication to make us laugh.  Nobody would really believe such things.  Would they?

Your Moneywhere "everyone’s stocks beat the market and everyone’s bonds do, too, and all portfolios are above average.”

Are you kidding?

Well, yes...but… 

Year after year, the official published results of investment companies and the securities markets themselves exceed the actual 20-year averages realized by individual investors.   The gap is huge.  This under-performance problem happens to investors whether they own stocks or bonds.  The annual Dalbar QAIB study confirms that this underperformance problem is the typical investor experience.

A make-believe world seems to have mesmerized the average investor.

The trouble with trying to help the hoodwinked is that they do not realize they are trapped.  They want to, and if fact do believe something to be true which is not.  That is the key.

Everything changes after deception is discovered.

What’s the big lie?

Carefully consider your personal beliefs—what you think is true—about investing.  The problem is with the man in the mirror, not the money in the market.

To escape the trap, stop believing you can continually beat the market.  You cannot.

Most investors do not see the trap.   Some simply refuse to see it.  They seem to prefer the lie.  After all, it is a very alluring lie.  Their meager results continue …and all their children are above average.

Compounding the underperformance gap over a lifetime of investing leads to frustration and disappointment.  It means that after years of trying, the average investor can look back and clearly see where he should have been.  By then, of course, it is too late.

80% of what's invested in the securities markets is in actively managed accounts.  This means 80% of investors and their advisors must believe they can consistently beat the market.

Eighty percent cannot be above average.  20% cannot be below average.  Invest accordingly.

The passive approach captures market returns by design not by chance.  What’s more, it costs less.

While no one ever knows what the markets may deliver in the future, accepting far less than that does not make sense.

To learn more about how to improve your chances of reaching your investment goals, give us a call.

 

 

Chris Collins