Now is the time of year when pundits put forth their market prognostications for the coming year, ballyhoo their favorite stocks and dazzle readers with can’t-miss strategies and trends.
So here are a few words to the wise, some random thoughts to keep in the back of your head as you ring in the New Year with the cornucopia of 2015 investment “know-how” flooding the media:
- Markets can stay irrational longer than most people can maintain their composure, so divide your assets among many baskets. You might get rich quick owning a concentrated, under-diversified portfolio — but it’s almost impossible to stay rich by doing so.
- There are smart sounding foolish ideas, just like there are smart sounding fools. It is easier to come up with a new idea than it is to evaluate its prudence. Your latest “can’t–miss” investment idea has likely been considered and rejected by someone far smarter than you.
- The future will be full of surprises — count on it. No one can see through the curtain that separates today from tomorrow so avoid those who predict the future without divine inspiration.
- Hard times lie ahead, so do good times. This should not frighten you but it’s why your financial planning and investment strategy must be flexible enough to accommodate both outcomes.
- Speculation is the sport of fools. The success of a fool doesn’t prove that his course was wise or guarantee that his success will continue. Luck can bring temporary success but time is the ultimate judge of all speculations.
- Doomsayers thrive because most Americans are historically challenged. Many prophecies of economic doom are often just clever sales pitches.
- Suckers aren’t born, they are enticed. Never forget that a large commission, a bad investment and a small conscience are often found in close proximity to one another.
- Past performance is a perishable product with an expiration date of ... today.
- Many investors are confused about what their financial adviser is doing with their portfolio. This isn’t surprising because adviser tinkering is often just motion masquerading as action.
- Don’t invest your retirement assets based on your worst fears — it’s a sure recipe for failure. Rather, focus on what is probable and move forward. Distinguishing between what is possible and what is probable will eliminate many investment mistakes.
- More money has been lost chasing yield than at the point of a gun. I’m changing my mind. More money has been lost trying to beat the market than at the point of a gun. I’m changing my mind again. More money has been lost when greed and wishful thinking overrode clear judgment than at the point of a gun.
- There is no bigger financial trap than the lure of easy money. All financial bubbles have these things in common — unrealistic optimism, rapidly rising prices, people shouting “This time it’s different!” and the lure of easy money.
- Anything that happens today on Wall Street that doesn’t make it into tomorrow’s history books isn’t worth your time or attention.
- The wealth of a nation lies in the minds of the citizens, not in its natural resources or the gold in its vaults.
- You can make lots of money and pay lots of taxes. You can make no money and pay no taxes. Be wary of any scheme promising lots of tax-free money.
- Beware of shortsighted acts of investing folly that can ruin the fruits of many years of labor. This way, you will keep your financial life from acting as a warning to others.
- The dominant emotion in investing is fear. It can overcome the weight of the historical evidence and all intelligent analysis.
- Your investment life should be boring — make the rest of your life exciting.
- Patience is the most important ingredient in wealth accumulation. This, sadly to say, is one reason why so few people are wealthy.
- We live in an age of information overload. None of the cacophony emitted by the financial media will give you an edge in the market because all the information is already factored into asset prices.
- After subtracting the costs of management fees, trading expenses and taxes; most mutual fund managers don’t add value — which explains why their average tenure is about five years. They’ll never admit that most of what they do is just speculating with shareholders’ money.
- Wall Street’s big names will continue with business as usual in 2015, efficiently transferring client wealth to their own accounts.
- Don’t be fooled by Wall Street’s new products that promise greater return than a traditional stock/bond mix. It’s never mentioned that the track record of these offerings is often theoretical and their risks unknown.
- The beneficiaries of all those “What to buy in 2015” articles in financial publications are more likely to be advertisers, not readers. If you come across an article entitled “2015– Another Good Year to Buy Index Funds,” you’ll know things have changed.
- In 2015, investors will once again have the opportunity to receive the market's return with little effort and almost no cost. Don't pass up this golden opportunity.
The ending value of a continuously funded, globally diversified, annually rebalanced indexed portfolio over an investing lifetime will be greater than most investors can imagine and which few stock pickers or market timers will ever achieve
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