Want To Know What The Best Future Play Is With Your Investments? So Would I!

Who Really Believes They Can Predict The Future, Reliably

                                                                                        By: Brendan Magee

I was in the car the other day listening to my local talk station and an advertisement came on the air and the announcer asked "Want to know what the future play is for your investments? Then tune into this Saturday's Financial Quarterback Show." As I listened to the announcement I had two thoughts:

1. It would be awfully foolish and arrogant of me to announce to the world that I can reliably, consistently predict the future.

This would be especially true when it comes to stocks and the market because all the knowable and predictable information is already factored into market levels and stock prices. When it comes to prices or markets moving, that comes from unknowable unpredictable events and how people, six billion, around the world react to that new news and information.

I find it hard enough to predict how one person who I have lived with for seven years now is going to react on a day in day out basis. What do you think my odds are of predicting how someone in Hong Kong, Germany, Brazil, or Africa who I have never met is going to react to news and world events that have not even happened yet on a consistent basis?

2. What happens to the people who listen to the show and some how believe that this radio show host has the ability to tell them what to be doing with their money based on a prediction about the future? Somehow they have been led to believe that forecasting and investing are the same thing. They are not. Forecasting and speculation about the future is gambling, not investing. When it comes to gambling, the gambler will eventually lose. Academic paper upon academic paper statistically proves this.

If it weren't gambling, and the show host new exactly what was going to be happening in the market tomorrow and all the days after, he would be so rich he wouldn't have time nor the inclination to share with the the public about his investing insights.   Unfortunately, this is not disclosed to the investor tuning into this radio show.

There are three kinds of people who make predictions about the stock market, those who don't know they don't know, those who know they do not know, and those who know darn well they do not know, but get paid big bucks convincing you they know. In any case, stay away from those making predictions and you and your money will be much better off.

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.

Humilty Needed To Get Through Life And Investing

Investing Requires Humility

   By: Brendan Magee

Whether or not you are a fan of the Howard Stern Show Radio Show would have a lot to do with how familiar you are with comedian Artie Lange. He has been amongst the show's cast of characters for about the last 10 years and having been a listener from years gone by I recently picked up and read his book "Too Fat To Fish."

Now at first glance, knowing that Mr. Lange appears on the Stern Show, you you'd think that his book is nothing, but foul mouthed comedy. I can't say that there isn't a few sections that you wouldn't want to read to your kids or mother, but there were also some very interesting life stories that surprised and drew me deeper into the book.

For example, when Mr. Lange turned 18 his father, working as a roofer and t.v antenna repair man, fell of a roof and was permanently paralyzed. He walked around with a painful self-destructive guilt at not being there to hold the latter his father was standing on and prevent the fall. Even though Mr. Lange was experiencing a successful and lucrative career in show business, Mr. Lange has battled life threatening cocaine, alcohol and heroine addictions. Fortunately, he appears to have lived and gotten past his addictions.

Towards the end of the book though and as he has come to grips with his demons, Mr. Lange talks about the catharsis he had in putting his life and career in proper perspective, and it is this revelation that I think investors could learn from. Mr. Lange was ruminating on how his life was teetering from the pressure of producing and starring in a movie, Beer League, his daily Stern Show appearances, and trying to avoid drugs and alcohol that were abundantly available to him that could have meant the death of not only his career, but also his life.

From this time in his life he stated " I couldn't have done it alone, and what I learned most of all is I'm surrounded by people who care about me. I'm lucky that way, and I know not everyone is. I'm the kind of guy who keeps things in, who likes to go it alone, and who doesn't like to ask anyone for help. I like to take care of everything myself, because I think I know best. But this episode in my life changed that pointy of view, because I couldn't bullshit myself anymore.  My way wasn't working. I needed help from people in my life. I had to ask for it. And they were there for me. Sometimes your guardian angels aren't just in Heaven. They're all around you if you know where to look."

This is no doubt an expression of humility and if you read the book it took many a destructive life experience to come to this catharsis. Many investors would do well also to have a breakthrough in humility. Let me first say that humility is not failure. Accepting where you need help and asking for it takes courage and wisdom.

So here is your humility test as an investor. Answer the following question, When it comes to building your portfolio, do you know exactly what you are doing and why? If you can answer that question 100% yes, no need to go any further. However, if your answer is any thing less than that swallow your pride, admit your limitations, and ask for the help you need. Avoid the pain and suffering that goes along with not swallowing your pride. Like Mr. Lange, you'll be amazed at how much simpler and enjoyable your life gets. (By the way, I would suggest reading the whole book)

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments go to www.cocahgee.com or call 610-446-4322.

What If You Could Play Par Golf EveryTime!

Why Par Should Be Good Enough

For Golfers And Investors

                                                                                                                                                             by: Brendan Magee

Like a lot of people. I tuned into last week's Ryder Cup Golf matches between the United States Golfers and the European Golfers. I love the pride the golfers take in representing their countries and the enthusiasm displayed by the galleries. I am also blown away at how great the golfers are. They hit shots under pressure that I could only dream of pulling off maybe once out of 200 attempts. These players truly are the best in the world.

Now professional golfers keep score and it is always best to be under par. By that I mean,  if the hole they were playing was a par 4 they would want to get the ball in the hole in three shots or less. It is amazing though that often times a match was lost by a player who played a hole over par. Par would have won or produced a tie, and thus in a lot of cases would have been good enough. Par, as it turns out, had a lot more value than the golfer may have realized before they even started their match.

The equivalent of par when it comes to investing is market rates of return. Market rates of return would be what a particular kind of investment has produced over a long period of time. It is the cost entrepreneurs and business owners typically pay to use other peoples money to build and make their businesses more profitable. For example, from 1927 through 2012 the long-term rate of return of U.S. Large Company Stocks was 9.82%. The long-term rate of return of International Small Company Stocks was 14.40%, and for U.S. Micro Cap Stocks was 12.26%.

If you were an investor investing in these kind of stocks and had a rate of return above these asset classes it would be the equivalent of shooting below par and outperforming the course. If you invested in these asset classes and got less than what the asset class produced it would be the equivalent of under performing the course and shooting above par.

Now the overwhelming majority of golfers do not play par golf. U.S.G.A. statistics bear that out. Par on most golf courses means you would be shooting every time you played golf between 70 and 72.  There is a very good reason for that. Golf is a hard game to master. Go to any club and look at the scores of that club's best players and you will not see time in and time out that those players consistently shoot 70 to 72.

Fortunately for investors achieving the equivalent of par golf when it comes to investing is not that difficult at all. In fact it is much simpler than most investors realize. To achieve the rates of return mentioned above only required the investor to own those asset classes in their entirety and hold on to them. Sounds easy, but in the midst of a market meltdown holding and not selling seems like the last thing you would want to do.

However simply enough, those asset classes could be owned in their entirety simply by owning an index representing each category of investment. Those markets of investments would have produced the rates of return without the investor having to do a thing to achieve them. To put that in perspective, over a ten year period of time with a seven percent rate of return your principle doubles itself. The rates of return mentioned above outperform that pace. The overwhelming majority of investors do not come close to market rates of return. Statistics bear that out.

So what does the investor have to do to achieve market rates of return (again, the equivalent of playing par golf every time)? First, recognize how great it would be to achieve market rates of return. They need to recognize that that would put them in the upper echelon of  all investors. They need to recognize that like golfers any strategy designed to outperform the course (shoot below par) will lead to under performance (like it does for most golfers playing bogey golf, it causes investors returns to fall well below what they need to achieve independence and dignity).

A golfer who tries to thread their ball through a thicket of trees in the hopes of getting through that small opening in the forest believing they can save a few strokes if they can just pull this shot off,  usually turns a five into an eight, and an investor who loads up on a stock they believe will achieve instant riches usually endures a loss of capital they never planned for nor can afford.

Secondly, investors need to realize they can be assured of market rates of return simply by owning a particular asset classes index. This means the fund manager will not do anything to try and exceed the market rate of return. Their goal is to match it.

Third, investors need to recognize the signs that they are engaging in activities, or they are allowing their money manger to engage in activities, that are designed to outperform market rates of return and put an immediate stop to it. Stock picking, market timing, and track record investing are the activities that are presented to the investor as the strategies to use to produce stellar/above market rates of return. Their success depends on the money manager's ability to consistently predict the future. Just like the average golfer cannot consistently hook a shot around a tree and get over a pond that is 240 yards away, no one can consistently predict the future.

Make no mistake about it, it's not just being right once that would be good enough to outperform the market, those predictions would have to be right time and time again. No one on this planet has that ability. So make sure you have eliminated any and all gambling and speculation from taking place in your portfolio, and own the index that represents the investments you want to be in and you will be assured  of playing the equivalent of par golf every time out.

As needs to be said, rates of return are not guaranteed and you need to consider all risks before investing.

Brendan Magee is the founder of Inevitable Wealth Coaching. With questions or comments go to www.coachgee.com or call 610-446-4322