How would you feel if you retired and then learned that you had been deceived all of your investing life? Are you ready to take control and learn more about investing?
First, answer these four investment questions:
- Do you know your “real investment costs”?
- Are you measuring your portfolio’s risk?
- Are you receiving market returns with lower fees and risk?
- Do you avoid buying the same stock in different mutual funds?
Investors who cannot answer “yes” to all four questions are caught in the Investors’ Trap and may be living a life of frustration, not peace. Investors need the simple truth of how the market works, and how to protect their wealth.
The Investors’ Trap keeps investors on information overload, worried about investment scandals, and concerned about their future. Investors want and need security, but are speculating and gambling by allowing their brokers to market time and pick mutual funds, based on past historical returns.
Here are seven key investment truths to becoming a smart investor and a good steward of your investments:
- Wall Street and the media are NOT your friends. The financial media and big broker dealers have been known to prey on and benefit from investors’ vulnerability, confusion, lack of investment knowledge, and lifetime game plan.
- Stock picking is gambling and speculating. No one, including your broker, knows the future.
- Market timing does not work. Getting out of the market is easy, but knowing when to get back in is the hard part. The market does much better without your interference. Once your portfolio is truly diversified, stay put—for your lifetime!
- Track record investing does not work. Counting on historical returns is like driving forward while looking in your rearview mirror. No mutual fund or asset class consistently repeats its returns, year after year.
- True diversification comes when your portfolio is invested in at least sixteen to twenty institutional asset class mutual funds, holding stocks and bonds of small and large companies in forty-plus countries, which lowers your portfolio’s risk.
- Know the turnover rate of your mutual funds. Turnover rates greater than twenty percent are considered to be excessive, and increase the mutual funds’ hidden fees, due to the money manager’s frequent buying and selling.
- To eliminate duplicity of investments, it is important that each of your sixteen-plus mutual funds holds only one level of risk.
Now that you know the investment truths, the choice is yours. Please protect yourself from being led to participate in an activity that has been proven not to work or be in your best interest. Informed investors learn from their past, but cannot allow it to remain their focus.
You have a choice! Invest the same way you always have and get the same results, or turn over a new leaf and go with a strategy that in 1990 won the Nobel Prize in Economics. You choose!
Written by: Maria J. Wordhouse Kuitula and Phyllis J. Veltman Wordhouse, free market wealth and stewardship coaches, co-authored the book Stress-Free Investing, available at Amazon.com. Maria is the president of Wordhouse Wealth Coaching and may be reached at 616-460-6518 or [email protected]. For QUESTION LISTS and INVESTOR EDUCATION VIDEOS, go to www.WordhouseWealthCoaching.com. © Wordhouse Kuitula 2013.