Losing money in bubbles is not just something that happens to “dumb” people or “other people.” It can happen to the most brilliant of people, it can happen to you, and maybe it has in the past, and it can literally destroy your life savings. No one knows where the next bubble is going to be in advance, but you can protect yourself from them by following the three simple rules of investing. If it is highly popular and on the cover of every magazine, chances are it is not a prudent investment, but rather a bubble waiting to happen.
Matson On Wall Street Bullies
You should know that most larger financial organizations don’t want you to solve these problems (with investor behavior). It is simply not in their best interest. Your problems are their profits.
Excerpts from Main Street Money by Mark Matson
Now that the election is over, investors are wondering what the future has in store for their portfolios. The reality is that while elections may have short term impacts on the markets, over the long run, the impact is minimal. A Free Market System is based on capitalism, which always finds a way to thrive. Our structured portfolios are based on a long-term investment philosophy and will be more efficient than active management if and when taxes increase. Our portfolio managers at Matson Money are prepared to rebalance if necessary to ensure you maintain your expected risk tolerance level.
So what should you, as an investor do now?
1. Stay positive. Nothing beneficial has ever come out of being negative.
2. Get educated to break the investor’s dilemma.
a. Fear of the future leads to trying to find someone who can predict the future.
b. Since nobody can predict the future accurately, investors look to track record investing, which academically has proven to be disastrous.
c. Trying to find the right answers leads to information overload, which leads to frustration and emotion-based decisions.
d. Since we as humans gravitate toward pleasure and retreat from pain, we break the rules of prudent investing and sell investments that are doing poorly and buy what’s increased in value.
e. This, in turn, leads to performance losses, which leads to more fear of the future. The investor’s dilemma starts all over again in a never-ending cycle.
We, as investor coaches, are here to help you break the investor’s dilemma and tune out all the media hype of doom and gloom. Every month we offer educational classes to help you understand what’s really important in investing. Our ultimate goal is to guide you along the road to true investing peace of mind.
Call us to find out when the next investor coaching session is and reserve your seat.
Becoming a Seasoned Investor
Seasoned in my mind, means several things, such as:
- Being able to withstand physical hardship, strain, or exposure.
- Being able to bear up under hard times.
- to be competent with a skill or ability.
- When you are seasoned, you can see the truth about a situation. You are not naive. Naive means deficient in worldly wisdom or infomed judgment, lacking in experience, or to learn from experience.
When you are seasoned, you become prudent. But here’s the catch: Most investors are not mature or seasoned, nor are most advisors. They repeat the same mistakes over and over again ad infinitum, without really learning. Unseasoned investors chase markets. Unseasoned investors also panic in down markets. They stock-pick, they invest in track records, and they market-time like crazy. That last type of investment behavior really ticks me off, and I see it all the time.
Excerpts from Main Street Money by Mark Matson
Unless you’ve been living under a rock since New Year’s Day, you should be well aware of the
tumultuous events that have been taking place around the world – the disaster in Japan and the
uproar in the Middle East and North Africa are just a few global measures that are causing
economic changes around the globe. We’ve seen gas prices soar and a rise in food and beverage
commodities, but the place in which these changes are especially apparent is the stock market.
Inflation has caused investors to shift their assets and determine which of the world’s financial
markets are being hit the hardest with higher interest rates and a rise in inflation. If you have any
game pieces playing in the stock market you’ll surely want to know which markets are being
affected by the ever-changing economic fundamentals. Let’s discuss the possible risks that your
portfolio faces, and aim to strengthen any weak spots.First off, let’s discuss the risks you must
consider – inflation and interest rates. These are two of the biggest factors to put into perspective
when considering stock market choices. Currently, higher energy and commodity costs are
sticking it to both consumers and producers. However, the big question that investors need to
mull over is how much of these high prices are due to speculation. Instead of looking at
speculations in the stock market, it’s crucial to consider supply and demand realties, and how
they will subsequently affect inflation, and in turn interest rates. Possible solutions to market
volatility and the risk of rising inflation and interest rates starts with broadly and efficiently
diversifying your portfolio. Here are some suggestions of market choices to invest in during this
time: U.S. and international stocks, commodities, inflation-protected bonds, real-estate
investment trusts and cash, all of which have the ability to withstand inflationary bouts.
Next, let’s discuss the risks you must anticipate – war, disasters, political and economical
upheaval and social unrest. While the stock market is extraordinarily resilient, and has been
fighting against all the shocks in 2011 so far with great momentum, it’s hard to say whether it
will continue to stand firm against the current troubles in the Middle East and Japan that are
disrupting the technology, automobile, and oil industry. Possible suggestions for anticipating
these risks include adding gold and other precious metals to your portfolio, as well as
implementing hedge-fund-like long-short strategies, which attempt to generate stock-market
returns, but with lower risk. Essentially, you bet that some investments will rise while others
Of course, we must discuss the risks that never go away – markets and companies. Yes, market
risk is inescapable, but don’t view your portfolio like betting at a horse race – because the
favored winner may inevitably lose horribly. The key to market strategy is diversification and
implementing a safety margin. Keep these three risks that all investors should understand in
mind: valuation risk – overpaying for an asset, fundamental risk – buying something that turns out
to be flawed, and financing risk – using leverage. Other suggestions include avoiding
concentration in similar stocks and mutual funds, as well as never overlapping markets or
Finally, a risk you must fear is that of playing it too safe. It’s a difficult balance to find – risk it
all and you could end up with too many losses, risk too little and you could be in danger of not
having enough money in later years, and of missing major market advances. Any suggestions
for not playing it safe simply revolve around going around your judgments and taking small risks
that yield small returns. Hopefully then you’ll start to feel more confident in your investing
strategy. Unless you can predict the future, it’s crucial to embark on a strategy that will preserve
capital in a period of heightened volatility. Simple steps like assessing risk, identifying
opportunities and looking past the present and into the future can shed light on how to handle the
markets twists and turns. And even though the future of the stock market can never be certain, at
least you can equip your portfolio with a nice safety net.
We have all been conditioned by the financial services industry to ask the question, “What will the markets do in the new year?” There is always someone in the financial services industry who will attempt to answer that question with some prediction. Sometimes they guess right, but more often than not they guess wrong. Our answer to that question remains the same: WE DON’T KNOW WHAT THE MARKETS WILL DO THIS YEAR!
We are not fortunetellers. We do not own and do not want to own a crystal ball. The financial markets are controlled by over six billion people making daily buying and selling decisions. One of our basic views is that no one knows whether the markets will go up, down, or remain unchanged over the short or long-term. What we do is properly position our clients with well-diversified, efficient portfolios to take advantage of market conditions. Our goal is to obtain market returns.
One of our most important responsibilities to our clients is to provide the coaching to keep you disciplined. We can help you to stay focused on your long-term goals and not panic when markets go lower and not to become greedy when the markets rise. Investing this way is not necessarily glamorous or sexy, but very prudent. Fear and greed are the two most powerful emotions that destroy investors’ peace of mind and their investment returns.
As we enter 2012, we hope you have peace of mind on your investments and retirement goals. This is accomplished by attending our Coaching classes where we teach you more about our Free Market Investment Philosophy, our Free Market Efficient Portfolios, and our Free Market Strategy for capturing Market Returns with lower volatility.
Our advice remains the same: turn off the hype on TV, don’t listen to the talking heads and recognize that they have no idea what is going on in the future with the markets. Finally, as a believer in our investment philosophy, invite a friend or relative who is not taking advantage our coaching to come to one of our seminars. We truly want to “save the world one investor at a time!”