Capitalism 101: If you put skilled labor, natural resources, intellectual capital and financial capital into a free market economy, wealth will be created in that market.
Investing is when you provide a portion of the financial capital to the market and get your fair share of wealth creation. The return is called the capital market rate of return.
You deserve it and a good advisor, or your own self-discipline, should be able to provide it by coaching you to avoid making two mistakes, lack of discipline and lack of diversification.
Lack of discipline typically includes market-timers and performance-chasers. Timing the market or individual stocks is extremely difficult to do.
Each time it involves two correct decisions, when to exit and when to re-enter, with a lot of sleepless nights in between. Only in hindsight, weeks and months later, can we confirm a market peak or valley.
As this was being written in early February, many people were not in the market. Usually, 30 to 40 percent of the next bull market has already passed when they re-enter.
Often in a down economy, the market recovers when the economy is still very gloomy, so people don't believe it really is the start of the next bear market. Stay disciplined and stay invested.
Another typical discipline problem involves chasing performance. When Peter Lynch's Magellan Fund was averaging a 15 percent return per year, the average owner of the fund during that time was only getting 5 percent. How could that be?
Because people would jump in after reading about the fund after a year with a 30 percent return. The fund would go down, and after a certain amount of time as the pain increased, they would bale out.
The same thing happens with advisors. People try one advisor after another, seeking someone that will satisfy their expected returns. People chase performance by moving from one individual stock to another.
A wise economics professor once said, “Your only free lunch in investing is diversification, eat as much free lunch as you can!” Diversification reduces risk while not sacrificing long-term return.
For the average person, owning individual stocks is speculation, not investing.
“An average investor with $1 million should put it in a low expense ratio index fund,” said Warren Buffett. He is one of the most prolific investors in the world, including placing bets on individual companies, and he says to be diversified.
A wise old advisor once told me, “I can teach you or the market can teach you with very large tuition bills.” Many people treat their own money with disrespect.
Consider that you are your own fiduciary, make your money management decisions wisely and avoid these typical mistakes.
For more information, call (760) 804-0910 or visit www.oreillywa.com.
Investing is when you provide a portion of the financial capital to the market and get your fair share of wealth creation. The return is called the capital market rate of return.
You deserve it and a good advisor, or your own self-discipline, should be able to provide it by coaching you to avoid making two mistakes, lack of discipline and lack of diversification.
Lack of discipline typically includes market-timers and performance-chasers. Timing the market or individual stocks is extremely difficult to do.
Each time it involves two correct decisions, when to exit and when to re-enter, with a lot of sleepless nights in between. Only in hindsight, weeks and months later, can we confirm a market peak or valley.
As this was being written in early February, many people were not in the market. Usually, 30 to 40 percent of the next bull market has already passed when they re-enter.
Often in a down economy, the market recovers when the economy is still very gloomy, so people don't believe it really is the start of the next bear market. Stay disciplined and stay invested.
Another typical discipline problem involves chasing performance. When Peter Lynch's Magellan Fund was averaging a 15 percent return per year, the average owner of the fund during that time was only getting 5 percent. How could that be?
Because people would jump in after reading about the fund after a year with a 30 percent return. The fund would go down, and after a certain amount of time as the pain increased, they would bale out.
The same thing happens with advisors. People try one advisor after another, seeking someone that will satisfy their expected returns. People chase performance by moving from one individual stock to another.
A wise economics professor once said, “Your only free lunch in investing is diversification, eat as much free lunch as you can!” Diversification reduces risk while not sacrificing long-term return.
For the average person, owning individual stocks is speculation, not investing.
“An average investor with $1 million should put it in a low expense ratio index fund,” said Warren Buffett. He is one of the most prolific investors in the world, including placing bets on individual companies, and he says to be diversified.
A wise old advisor once told me, “I can teach you or the market can teach you with very large tuition bills.” Many people treat their own money with disrespect.
Consider that you are your own fiduciary, make your money management decisions wisely and avoid these typical mistakes.
For more information, call (760) 804-0910 or visit www.oreillywa.com.