Investment Myths and Where To Focus
Someone Can Predict the Market
No they can’t. Anyone can get lucky in the short term, but how many are over the long term consistently? The reality is that NO ONE knows where the market is going to close at the end of the week, this month or this year. All you can do is manage risk.
Timing the Market Works
You can definitely get lucky from time to time. However, we have spoken to numerous people that got out of the market before the 2008 meltdown. What did all of them attribute it to? Dumb luck.
The “Silver Bullet” Theory
Some people think there is a ‘silver bullet’ or ‘magic investment’ option or approach that will always make their account grow, regardless of market cycles. Unfortunately, investing is for the most part fairly boring, it’s not supposed to be amusing. Thus, many people allow greed or fear to drive them into the myths listed above.
Getting Aggressive to Recover Losses
You would be right…but only if the market goes up…and if you are invested in the exact right investment at the right time, and that includes buying and selling…good luck. If it goes down again? Ouch.
3 Things Investors Can Control
There are very few things people can control when investing. The “talking heads” on the TV and radio can be confusing. Understanding what happens in the world and how that affects you personally is the single most difficult position investors face. The confusion created by all of the noise can be frustrating. That being said, her are the three things you can control as an investor:
- Risk
- Behavior (investment decisions based on emotion)
- Contributions
You can’t get away from risk. If your portfolio has a lot of risk and the areas in which it is invested does well, you do well. However, if that pendulum swings to the other side, so does your portfolio, for better or worse.
Behavior, or the emotions that lead us to make investment decisions, can be far more important than what we are investing in. Today, a click of the mouse can be very damaging to your portfolio if it is not a prudent investment decision.
Contributions are the #1 reason for how large your portfolio grows. This can be a little boring, as it simply means the more you save, the more you will have. It’s boring, but true.
Focus on these three points, consider the rest of the noise…as noise, and you will be much better off in the long term.
How We Help
Our dedicated research department (none of which are financial advisors, only investment managers…that is all they do), monitors the risks in the market, has no emotional tie to your account, and thus our only goal is to protect and enhance your portfolio by managing the risk inherent to the markets on a proactive basis. How do we benefit you pertaining to the three things you can control?
- Risk – We are experts in managing and monitoring risk. You decide how much risk you want, and we manage that risk specific to the approach outlined in your Investment Policy Statement. Therefore, our research department is not able to be gamblers with your money.
- Behavior – We manage risk specific to a defined, fiduciary process. The investment managers in our research department do not have an emotional attachment to your money, and instead focus on risk.
- Contributions – We provide you strategies on how to maximize the benefits of pre-tax savings, but you always control how much you are saving in your 401(k).