Investors Being Dealt A Losing Hand, Everyday

By: Brendan Magee

Everybody knows the odds are in the casino’s favor not the gamblers. The gaming industry, though, goes to extraordinary lengths to create the illusion that the gambler has more than a reasonable chance of winning and winning big. Huge billboard ads display winners holding up huge checks. Television commercials show winners telling you how good it felt to win big. However, we know those casinos aren’t losing money, the gamblers are.

Just like the casino, the investment industry goes to great lengths and expense to create the illusion that investors aren’t playing a loser’s game. Every mutual fund company and every brokerage firm proudly promotes the huge rates of returns that their investment products generate. All you have to do to get your share is invest in their services and products.

So, what are the services these brokerage houses make available to you? One, they identify good stocks to invest in, they can tell you when’s the right time to be in or out of the stock market. They can even help you to identify who the most brilliant fund managers are. Sounds like a great deal, but in actuality it’s a losing hand and the investment industry already knows it. They just hope you never find out.

In order for someone to be successful with stock picking, market timing, and track record investing, they have to have the ability to consistently, reliably predict the future. Everything that is knowable and predictable about the market has already been factored into the market and market prices. Markets change on new and unknowable information which only takes place in the future. This is the illusion the investment industry goes to great lengths to hide. That somehow, some way they have the ability to see into the future and know how things will go.  You and I both know that no one can reliably and predictably predict the future. If they can, they aren’t going to do it for.

This is no secret. It's actually knowledge that has been around for a while. The 1990 Prudent Investor Law states, "Forecasting and analysis in an attempt to separate the winners from the losers is deemed wasteful."

So, when investors make investment decisions based on an analysis, a track record, or any type of recommendation they are not investing, rather they are gambling and speculating with their money. This blind spot is one of the reasons investors have historically underperformed. *Since 1991, the average stock mutual fund investor's annualized return has been 6.24% as compared to the S&P 500 which did an annualized 10.70%. In other words, investors have needlessly forfeited forty percent of the returns that have been available to them. Every day, investors and their families live with the consequences of playing a losing hand. The investment industry hopes you never find out the game they have you playing. 

Now the only way to start playing a better hand is to start asking a completely different set of questions, the two most important being:

1.What is your true purpose for money?

2. How do markets actually work?

Answer those two questions and you will be playing a completely different hand!

*2021 Quantitative Analysis of Investor Behavior

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments, email brendan@coachgee.com

 

 

What I Hated About Investing...

 What I Hated The Most About Investing

by: Brendan Magee, Investor Coach

During my time as a financial planner, there was a lot I grew to dislike about investing. There was so much information to digest which I could never make sense of. There were new investment products coming out every week, and it made me fearful that last week's investment products were now inferior. There were track record that far too often didn't continue after I invested in them. There were questions that I had about investing that always got a very professional sounding answer back from people who seemed to know what they were talking about, but didn't answer my questions which only added to my frustrations. Given all that, I could never feel confident in the investment decisions I was making for myself or my clients. The unanswerable question was, "What do I have to do to be confident about investing?"

On top of that, what I realized was, that without any understanding of how the world of investing worked, I was blindly handing over my money and that of my clients to people I had never met (fund managers, I most likely never would either), to a process I had no understanding as to whether or not it actually worked, nor would I know what to do if I found out wasn't working.

That wasn't the worst of it. What I hated the most about investing was my future, and that of my clients was in the hands of something I had no understanding of, not did I have any control over. My fate, and that of my family's, was based on blind random luck. Having gone to school to get an education and worked hard to build up my financial planning practice, not having a say over how my future was going to go didn't appeal to me one bit. Matter of fact, I hated it and the truth of the matter was, I was ready to throw the towel in and give up.

The breakthrough didn't come from another product. It came from a coach helping me to discover how markets actually worked. How markets set prices and how markets generated returns. With that, every question I ever would have thought to ask about investing, and more importantly every question I never would have thought to ask about investing got answered. This was a ten thousand pound monkey that I couldn't possibly describe how good it felt to get off my back.  I now had the freedom and power to clearly choose how my money would and wouldn't be managed. I knew where to put my money and understood exactly why it should there.  My destiny was now back in my hands because I knew that my future depended solely on my behavior, not anyone else's. I knew exactly what I had to do to not only fulfill on my American Dream but start experiencing it today.

Nothing about the world I was living in had changed. I was still an individual living in a world of some 20,000 mutual funds with a media spinning a 24 hour a day message of doom and gloom. Who I was, living inside that world had been completely transformed. My relationship with investing had been transformed in an instant from confusion, stress, and anxiety to one of freedom, clarity, confidence, peace, and empowerment. I knew how to tap into the most powerful wealth creation system ever created, and how to use it to fulfill on my true purpose for money. 

Helping people to transform their relationship with money and investing is what I have been put on this earth to do. It starts with understanding how markets actually work. Couple that discovery with creating your true purpose for money and you will be living an unrecognizable future. Let me know if I can help you. 

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With any questions or comments email brendan@coachgee.com or call 610-299-3969

     

Robinhood's Big Lie!

 

Robinhood's Big Lie!

by: Brendan Magee

 Robinhood is getting a lot of publicity these days. Their trading application has gone viral. From January through April they added three million funded accounts, and their company has an estimated value of $11.2 billion. 

The company has also gained some negative attention. Robinhood has settled with the Securities and Exchange Commission for $65 million as a result of charges that it mislead investors about the costs of trading while using their application. 

That aside, the biggest danger posed by Robinhood comes from a claim they make in one of the advertisements. In the ad they claim to the public, "You were born an investor." Nothing could be further from the truth, but unfortunately many an unsuspecting investor will see the validity in that statement thinking,  "What could go wrong?" 

Massachusetts Securities regulators have found somethings wrong with how Robinhood is aggressively and misleadingly marketing themselves to inexperienced younger investors. Their charges contend that Robinhood is luring young investors into making risky and costly trades by making it seem more like a video game rather than alerting investors to the dangers, costs and risks of excessive trading. Unfortunately, one 20 year old never heeded any warnings and after believing he ran up debts of over $730,000 committed suicide. 

The plain truth is, people are not born investors any more than they are born surgeons or professional athletes. However, they are born human which makes them vulnerable. They are vulnerable to a good story. They are vulnerable to believing something about themselves that just isn't true.  They are vulnerable to wanting to belong to a crowd and will do anything to fit in. This is what Robinhood is cashing in on. They are turning the next generation of investors into gamblers without them ever suspecting it. All the while, Robinhood is cashing on on the destruction of their American Dreams.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With comment or question send an e mail to brendan@coachgee.com. 

Phil Town Rule #1 Investing Destroying American Dreams

 

Phil Town & Rule#1 Investing:

Talking Investors Into Destroying Their 

Own American Dreams

by: Brendan Magee

 There is no shortage of con men, gurus, and prognosticators lining up to profit off the demise of hard working people's American Dreams and Phil Town, founder of Rule#1 Investing falls right into that group. 

Some how some way I have found myself on the receiving end of his Facebook posts and when I looked into what he was offering,  I couldn't believe it. I mean you really have to have a lot of nerve to legitimately offer to people such complete nonsense knowing full well there is no way in hell you can deliver on your claims.

His first claim is that investors "Can achieve average annual returns upwards of 15% buying wonderful companies on sale." Now when you go to his virtual seminar you will learn a system and a strategy for finding great companies which will only cost you $297. 

According to Town, a wonderful company is. "One that will continue to grow as the years go by, surviving whatever challenges the market may throw at them along the way." 

So right there is a bait and switch. People who follow his method of investing won't be investing, they'll actually be engaged in predicting the  future. No matter what the market throws at these "wonderful companies," they are going to grow, and if the past two years has taught us anything the future is relatively easy to know in advance. Really, at the end of 2019 who didn't know a global pandemic was coming and that the world's economy was going on lockdown?

Even more evidence that you won't need to protect yourself from the future is Rule#1 Investing's claim that, "You don't need to diversify, if you know how to invest."   The reality is you don't need to diversify if you can predict the future. If you know every year what the top performing companies are going to be, there is absolutely no need to diversify. Here again, Rule#1 Investing shows its flaws. If you can identify the top performing company, why would you need to buy more than one? Why wouldn't you simply buy the company that was going to perform the best? Why waste any money on the second best company?

The simple truth is no one can predict the future, no matter how much they would like to believe it. Rule #1 investing is putting people in the same position as people walking into a casino. They are gambling, only they may be doing it with money they will need to retire or put their kids through college. Gambling a few bucks on a football game or on a weekend in Vegas may be enjoyable and harmless, but talking people into doing that with the money they will need to fulfill on their American Dream is disgusting. Unfortunately, the only protection people have from these kinds of scams is to be aware of them and avoid them before they fall victim to their seductive pitches. 

If you have any comments or suggestions, call 610-299-3969 or send an email to brendan@coachgee.com.  

Investors Out 53% In Returns!!

Investors Receiving 53% Less In Available Returns!!

                                                                                           by: Brendan Magee


This week there was a lot for investors to worry about. The Dow dropped 800 points. There are indicators that a recession has started. There is always news of a trade war between the U.S. and China and the impact that is having on our economy.  However, all this pales in comparison to a problem that is causing more damage to investors and their families than anyone is taking the time to realize.




For the 30 year time period 1988 through 2018 investors received 53% less of the returns that were readily available to them. From 1988 through 2018, U.S. Large Company Stocks had an annualized rate of return of 9.97% while the average stock mutual fund investor did an annualized 4.09%. So investors on average only received 47% of the returns that were readily available to them. Bond investors did even worse. Their annualized return or this period of time was a measly 0.26%.


To put this in perspective, at 9.97% annualized return $100,000 invested in 1988 through 2018, an investor who invested in U.S. Large Company Stocks  would have seen their portfolio grow to $1,730,719. The average stock mutual investor in that same year would have seen their $100,000 doing an annualized 4.09%, would have seen their portfolio grow to $780,670. In other words, the average investor received $950,049 less in returns that were readily available to them.


Yes, there are investors who did better than the average, but even if they did twice the average they are still underperforming the benchmark. Now even more heartbreaking is the fact that there are also investors who did worse than the average. We have to consider there are investors who did twice below the benchmark which means they saw close to a zero percent annualized return over the past 30 years.


Now take a moment to think about the impact this disparity in returns is having on the lives of everyday people. Money, or lack of success with money, causes stress on people's lives. Stress leads to health problems. Money creates tension in the home. Relationships get strained, and we all know that frustration with money can lead to divorce. Vacations that were planned have to be put off or cancelled all together. Colleges that you planned on sending your kid to have to be taken off the list. Retirements have to be put off or never happen at all. Second jobs have to be taken up. Less time is spent with the family. Explanations that can't be given as to why the plans families made and aren't happening only add to the frustration husbands and wives start to experience with one another. Lives are being impacted by this epidemic.


So what's at the root of this problem? How do we start to right the ship? First and foremost, we have to start working on the right end of the problem. The same study that showed the disparity in investor returns point to another problem. Investors are making changes to their portfolios within a 3 to 4 year period of time. Now most people will readily agree that when they are opening up an I.R.A. or participating in a 401k plan that they are in engaged in a long-term process and that the money needs to be left alone to grow. Unfortunately, making changes to a portfolio every three to four years is not behavior that's consistent  with producing good long-term results, matter of fact it's in complete conflict with it.


So in other words, investors are not dealing with an investing problem, they are dealing with a behavior problem. Much like an obese person can't stay away from junk food or an alcoholic can't stay away from the booze, investors are engaged in behavior that is every bit as destructive to themselves and their families. Unfortunately, until we acknowledge the problem for what it is, a human problem, we are not going to change the results investors are achieving.


So ask yourself one simple question, Are you capable of managing your behavior over a 25 to 30 year period 100% in lock step with producing the results you want for yourself and your family? If the answer is no, like a lot of people have done with Weight Watchers or Alcoholics Anonymous get structures in your life that will help you stay on the right path. If the answer is yes you believe over 30 years you can be consistent with your behavior, get a second opinion from your spouse?


Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments send an e mail to Brendan@coachgee.com or call 610-446-4322

Investors-The Reality Of Coached vs Not Coached

How Investing Occurs For Coached vs A Not Coached Investors

                             by: Brendan Magee

How does the world of investing occur to you? When you think about investing what are the words you would use to describe how you feel or relate to investing? This was a question I posted on Facebook and got back a few responses that show there is a clear difference between how investing occurs for a coached vs  a not coached investor. 

One gentleman responded by saying investing occurs as  disciplined and a well defined philosophy. I think that this gentleman feels pretty confident and focused in regards to what is happening with his money. I would imagine he feels pretty secure about his and his family's financial future. 

Now the truth be told, I know this gentleman. I have been coaching him for the better part of seven years. He has put in the time and energy it takes to understand what prudent investing looks like. He has taken the time to understand what imprudent investing looks like and what it takes to avoid it.

Now another lady responded to the Facebook posting and honestly responded that investing occurs to her as risky. That it is for people who can risk to lose money and that it is scary. 

I have known this woman longer than I have known the previously mentioned gentleman.  She has not taken advantage of the coaching that has been offered to her and as a result the impression she has about investing hasn't transformed too much over the years. 

Now the importance of the contrast in how investing occurs between these two individuals is huge. Their perspectives will be the driving force behind the actions they take or don't take over their lives which will have a huge impact on how their lives turn out. 

Think about the American Dream as most people see it. It is embodied in family, and what we want to provide our families with, opportunity to attend good schools, live in a decent neighborhood, take nice vacations, build up financial security, have a say in the causes we value the most, and have a pleasant retirement. What fuels all that? Money, and unless you can play basketball, football, or can sing like Michael Jackson your paycheck won't cover all that. You will need to invest. 

Imagine how successful you would be as an investor if you saw investing as something painful and to be avoided? The most prudently engineered portfolio won't do you any good if you avoid it like the plague. You simply can't achieve your dreams on savings account interest rates. 

Now the coached investor's actions are consistent with achieving their American Dream. The "not coached" investor's actions are not consistent, in fact they are in direct conflict, with achieving their American Dream. They are at the mercy of a story about investing they believed to be true, but really isn't. 

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions and comments e mail brendan@coachgee.com or call 610-446-4322.

Listen To Ray Didinger When It Comes To Football, Not Investing

Listen To Ray Didinger When It Comes To Football, Not Investing

                                by: Brendan Magee

There isn't a more respected journalist in Philadelphia then Ray Didininger. Eagles fan want to listen him after every game. They don't just put anyone in The Pro Football Hall of Fame and he is in there because of the tremendous work he has done over the last 40 to 50 years. 

That is why I was so disappointed to hear him endorsing an investment program that has been academically proven to be wasteful. I am listening, as usual, to the local sports station and that's when I hear Ray sell out investors. He is endorsing a program that is going to teach people how to trade stocks like a Wall Street Pro. This program will teach you when to buy stocks, when to sell them, how to spot trends and know how to take advantage of them, basically no matter what is happening in the stock market you will learn how to profit from it. 

Now let's step back for a minute and imagine that Ray was endorsing a program that would "safely" teach aspiring athletes  how to use performance enhancing drugs/steroids. Not only that, let's say he was endorsing a program that would also teach aspiring athletes how to get past any drug tests they may be required to take in order to be eligible to participate in the upcoming season? Given all we know about the dangers of taking these kinds of drugs, how many of us would turn a blind eye to a man trying to get people or our children to engage in behavior that we know is destructive? 

That is exactly what he is doing by endorsing this on-line training academy's program. In 1990 The American Law Institute's Prudent Investor Law stated, "Forecasting in an attempt to separate the winners from the losers is deemed wasteful." Forecasting, speculation, and gambling are exactly the behaviors people are engaged in when they are stock picking. Not only do they take on the risk of gambling, they also engage in the added risk of owning individual stocks. Ever heard of Enron, Bear Stearns?

Now Ray is a very trusted individual. He has earned that trust over many years of integrity filled journalism. It would be very easy for any of the millions of people living in Philadelphia, based on his endorsement, enrolling in this trading program and start gambling and speculating with money they are going to need in retirement. 

The irony here is that more often than not if someone asks Ray on the radio who he likes in the upcoming Eagle's game or has a question about their fantasy league team, he immediately discourages the fan from using the information he is giving to go out and gamble on the Eagles or their fantasy team. He doesn't want to be responsible for them losing any money. I have no reason to doubt the man's sincerity over wagering on football games. It's just that when it comes to investing their life savings, he is encouraging investors to engage in the same kind of behavior. Why Ray?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments e-mail brendan@coachgee.com or call 610-446-4322.