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.

Gold Doesn't Fuel Your American Dream

Gold Doesn't Fuel Your American Dream, Cash Does!!

                 by: Brendan Magee


I got a couple of calls the other day. One client is getting ready to take a trip over seas. One client needs a couple of dollars to pay the taxes on her beach house. The trip and the beach house are significant parts of both these ladies' dreams. One is a devout woman of faith and she is taking a trip to the Holy Land. The other lady has had the beach house in her family for more then 50 years. Her children, her children's children, and her great grandchildren have spent a significant part of their lives at that house. The taxes and the air fare both need to be paid in cash, nothing else will be taken for payment.

This may seem like a bit of an oversimplification, but I recently received an e mail asking me if I would like to attend a seminar where I would learn about the benefits of investing gold. I would learn about how gold will perform when inflation, interest rates, and debt levels go up. Plus, I would learn how a trade war will affect the stock market. First and foremost, how do they stand their with a straight face and tell anyone they know how an investment will perform in the future? 



I ask myself, "Even if I know how gold will perform in the future and how a trade war is going to affect the stock market, "So what!" Like my two clients, I have dreams and things I want to do in life, but they can only be paid for in dollars. I cannot take a gold bar to the college my boys choose to attend and pay the tuition with a gold bar or certificate. They will want cash. The trip my wife and I want to take to Hawaii will require cash as well, not gold.

As an exercise, for a few minutes, write down all the things in life that you want to do, see, experience, or have. How many of them do not require cash to pay for? So one problem is I need  cash to fulfill on my dreams. The other problem is that gold has been a terrible long-term investment.

Historically, the long-term rate of return of gold is about even with T-bills. The amount of volatility is about equal with stocks. In fact, according to Longtermtrends over the past 100 years the S&;P 500 is up over 36,000 %, the Dow Jones is up over 31,000 % while gold is up only 6,568%. So as an investment, gold has me taking stock market risk but only getting T-bill returns. Not a recipe for investment success.

So yes, buy your wife that gold necklace or watch. She deserves it and will look great in it, but as far as investing and coming up with enough cash to fuel your American Dream you would be wise to stay away from gold.

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

One More Reason Why The American Is Dying

One More Reason The American Dream Is Dying

         by: Brendan Magee


As evidenced by a recent Fox News Poll, 88% of U.S. citizens believe that a secure retirement is a major part of the the American Dream. I think we would all like to believe that after a lifetime of hard work that we have the right to sit back and enjoy our golden years in relative comfort and security. 

The problem is that, routinely, investors are being talked into decisions and behaviors that are in complete conflict with financial security. I saw an article in Yahoo finance that does just that and thought I would point out the flaws, but at the same time show you how investors can easily get seduced into following this misguided advice. 

The article entitled "My 7 Must-Own Stocks to Build Up Your Retirement," does what a lot of investment articles and broadcasts do in that they give the illusion that the advice is prudent when in fact it turns an investor into an unsuspecting gambler and speculator. 

So let's start off with the "7 Must-Own Stocks." They are as follows U.P.S., Boeing,Visa, AbbVie, Jason Hall, Colgate Palmolive, and Westlake Chemicals. First and foremost, the article is posted on Yahoo Finance which tends to give the article a boost in credibility. Secondly, the article lists a few companies we are all familiar with. We see the U.P.S. trucks all the time as well as their commercials. We probably all brush our teeth with Colgate or use their mouth wash. With our level of trust going up, we tend to lower our guards and give the article more credit than it deserves. 

  The first question to be asked is, "How does the author, Lawrence Meyers, of Investor Place know what is going to happen in the future with any of these companies?" He goes into detail about why believes their stocks are good investments based on  information he has in hand, but what does any of that information have to do with what will happen in the future? The truth is  only unknowable and unpredictable information and how people around the world react to it is going to move the market. What do you think your odds are there?

What ever information he has will have nothing to do with what happens to these companies in the future, good or bad. So the investor who takes him up on his advice believes they are engaged in investing when in fact they are speculating and gambling with money intended for retirement, not the blackjack table. 

Secondly, one of the most critical components of successful long-term investing is diversification. It protects you from unforeseen future developments like 9/11, or a 2008 stock market crash. Ideally, by having your money spread out among multiple asset classes you are protected against the possibility of one asset class tanking. You also don't miss out on an asset class taking off and you missing the boom.

With this article's advice all the money invested in these companies is all in U.S. Stocks. Remember the 38 percent drop in U.S. Large Company Stocks in 2008? So not only would your money be invested in one country, it would be even less diversified by owning individual stocks. Unknowingly, the investor following this articles advice is taking way more risk than they are aware of without an increased expectation in returns. 

So the article seduces the investor into becoming a speculator and a gambler, and we all know the long-term expected profit of gambling and speculation. Then gets the investor to take on massive amounts of risk without any increase in the long-term expected rate of return. That is not a recipe for a secure retirement. It's recipe for working longer, retiring with far few resources to afford the kind of retirement you were hoping to live,  or not being able to retire at all. In either case, that is not what most people are looking forward to in retirement.

To protect themselves from this kind of advice, investors need to start asking themselves better questions. Questions like: How does the market really work? How does the market produce the returns it is generating? How do you spot the warning signs that someone is trying to talk you into gambling and speculating with your money rather than prudently investing it? Answering those two questions would put the investor in a far better position as far as knowing what should be done and not be done with their money? 

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

One Reason Why The American Dreeam Is Diing

One Reason The American Dream Is Diing

A Conversation For Change or A Conversation For Healing, Which Would You Prefer?

A Conversation For Change vs. A Conversation For Healing,

Which Would You Prefer?

          by: Brendan Magee

I am in the doctors office with my dad. He has numerous medical conditions that require doctors to be on top of his situation. They need to see him weekly, check his weight, chemical balances, blood pressure, and to see if the medications he is taking are having the proper effect on his body. To make sure nothing gets lost in all the translations I attend all the appointments with my dad.

During the last discussion it dawns on me that we are not engaged in a process or conversation with the doctor for healing my dad's medical problems. We are in a process for maintaining his health at its present condition. His ailments are not going away and for my dad that is the most frustrating part of all the medications and doctor's appointments. Healing isn't taking place.

What we experience is a never ending process of changes. Weight, blood pressure, or fluid levels are up, the doctor makes a change to his medications. We are in a weekly process of tweaks to his medications. It's one of those things where the more things change the more they stay the same. 

I likened it to the process that a lot of investors go through. Not happy with your investment returns, suffered a big loss, losing out to the hot performing investment? The solution is to make a change. Change to a fund with a higher track record for the last five to ten years. If that doesn't do it load up on the commodities that are getting all the media's attention. If that doesn't do it, turn on the computer and open up an account with E*Trade or Fidelity and start buying companies that the analysts say can't miss.

The constant in the lives of investors as it is with my dad and his doctors is change. If not to their own funds, then the fund mangers in the investors portfolio are engaged in trading of the stocks in its portfolio. The other constant is that the relief from disappointing returns or confusing messages that are floating around out there is that eventually the investor starts to experience the same frustration, confusion, upset, and fear they were hoping to get rid of when they made the last set of changes to their portfolio.

Again, the more things change the more they stay the same.

I do not believe investors are so much looking for changes, rather I believe they would prefer healing. Rather than make the pain of arthritis manageable, wouldn't you prefer to get rid of it once and for all? Rather than soothe your anxieties, fears, and worries about investing, wouldn't you rather find a way to eliminate them?

When it comes to investing, that requires a different conversation. A conversation that is focused on you the investor rather than your portfolio. It requires a conversation that exposes breakdowns and blind spots. It requires an investor to look and see what are the impacts of those breakdowns and blind spots. In other words it takes getting up close and personal with your humanity and how vulnerable it makes us when it comes to investing. An investor needs to see, and take ownership of where their behavior has them taking actions and making decisions that are in conflict with themselves. Most of all, it is going to take acknowledging that when it comes to putting a stop to dysfunctional investor behavior, you alone cannot stop it.

The minute that happens, that's when the healing will begin.


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.

Are You A Predictably Irrational Investor?

Are You A Predictably Irrational Investor?

            by: Brendan Magee

I don't know too many people who would not object or defend themselves if when it came to handling their money, savings, and investments were defined as being "predictably irrational," but Richard H. Thaler, Professor of Economics from the University of Chicago was just awarded the Nobel Prize in Economics for his research in determining how peoples' behavior affects how successful or unsuccessful they are in saving money.

The Nobel Prize committe's position in awarding Thaler the Nobel Prize is detailed below:

The Nobel committee, announcing the award in Stockholm, said that it was honoring Professor Thaler for his pioneering work in establishing that people are predictably irrational — that they consistently behave in ways that defy economic theory. People will refuse to pay more for an umbrella during a rainstorm; they will use the savings from lower gas prices to buy premium gasoline; they will offer to buy a coffee mug for $3 and refuse to sell it for $6.

I think a good way to determine if you fall under Thaler's theory is to ask yourself two questions:

1. When it comes to saving and investing, have you ever done something you said you weren't going to do?

2. When it comes to saving and investing, have you not done something you said that you were going to do?

Take an honest look at your decisions. During the crash of 2008, did you take money out of the stock market? In the early 2000's did you pull the trigger on a tech stock after seeing how well that sector of the market was performing? Now most of us know and agree that you don't sell low nor buy high, but if you answered yes to any of these questions you were behaving in a destructive manner. It may bruise the ego a little in owning up to mistakes that you have made in the past, but the only way to take ownership of your American Dream is to take ownership of bad behavior that you are responsible for.

So if the answer is yes that your behavior has been in conflict with what you are ultimately trying to accomplish, why is that? You are a smart individual. You have achieved a high school diploma, a college degree, a masters, etc. You are raising children, own a home, and have been successful enough to start saving and investing money. You are intelligent.

The problem is and this is what Thaler bases his research on is that you are human, and there is no escaping that fact. As human beings we do not have one bit of control over the thoughts and impulses that come into our heads and that we act upon. Sure there are areas where we do a good job of self control. We usually don't say every little thought we have about our boss to his or her face, but what about the times when there is no one else involved but ourselves? The popcorn at the movie theater, the pepperoni pizza, the gym, etc. How successful are you in controlling what goes into your mouth and what your body is engaging in?

Perhaps the thing that we need to come grips with is that there are certain areas of life where we are way better off engaging in or avoiding, but  living up to those agreements we are incapable of doing them  to the level or as consistently as we need to in order to be successful. How many of us would be 25 pounds lighter if we joined Weight Watchers? How much more money would you have if in 2008 your coach talked you out of getting out of the market or stopped you from loading up on tech stocks? 

So you turn to a coach whose job isn't to sell you products, but rather make sure that you do not "ever" engage in behavior that sets you up for failure.

Eating less and moving more are easy concepts to understand in losing weight. Own equities/stocks, diversify, buy low/sell high are easy concepts to understand when it comes to building wealth. Both concepts are easy to understand but awfully difficult to stick to over long periods of time. If they were everyone you meet, including yourself, would have a size 32 waist with a million dollars in their retirement accounts. Unfortunately, those people are the exception. Why? It's because we are human.

Sorry to run but my fitness instructor is waiting on me.

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

Pete Rose & Investors: More Often Then Not Are Their Own Worst Enemies

Pete Rose & Investors: 

 Their Own Worst Enemies

At this point in his life, Pete Rose should have his bust in Major League Baseball's Hall of Fame. He should be employed by the Cincinnati Reds or The Philadelphia Phillies serving in a front office position passing along to the next generation of players what it takes to become a successful player. He should be serving as a global ambassador for America's pastime.

I base this opinion based solely what he did on the field as a player. No one was more dedicated to his profession or team then Pete Rose. Through hard work and dedication he put himself at the top of the sporting world, and all that that brings with it was within his grasp.

Off the field has not been where he has shined. He gambled on, denied he gambled on, and then admitted that yes he did bet on Major League Baseball games. Now it is coming to light that he was having relations with 16 and 17 year old girls during his playing days. Not only has he hurt his chances of one day being voted into the Hall of Fame, he has putting himself in the position of being a social outcast.

Worst of all these are things that Pete Rose has done to himself. No one forced him to bet on baseball. No one forced him to have sex with teenage girls. Those decisions and behaviors were made by one man, Pete Rose, and Pete Rose will be the one to suffer the consequences.

Unfortunately, the overwhelming majority of investors find themselves in a similar situation. They are in position to enjoy all that free market capitalism has to offer, a comfortable retirement, security, the ability to help their children, give to good charities, etc, but through flawed behavior and thinking they find themselves disappointed by what could have been.

Look at the annualized long-term rates of return of just a few investments below from 

1927 through 2016:

U.S. Large Company Stocks    10.02% 

U.S. Micro Cap Stocks             12.38%

U.S. Small Cap Value               14.91%

(Past performance is no guarantee of future performance)

According to the Dalbar Corparation's "Quantitative Analysis of Investor Behavior Report," from 1987 through 2016 the average stock mutual fund investor's annualized return was just 3.98%. The average investor is getting a fraction of what the market is producing. Just like Pete Rose, the investor's returns are behavior driven, not market driven.

Just like Pete Rose seems to have been hooked on the need for action and living on the edge, investors are driven to try and pick the winning stocks, time the market and find the top performing investment managers. Their American Dreams aren't taken from them, rather they are surrendered as the result of years and years of behaviors that set them up for ultimate failure. 

Unfortunately, not until Pete Rose or investors start looking at their own behavior will lasting changes begin to occur. 

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.     

Teach Me To Trade Like The Wall Street Pros? 

No Thanks

         by: Brendan Magee

The commercial I am listening to on the radio asks me how I would like to earn an extra $500, $1,000, to $1,5000 per month. I am asked to think about the difference that would make in my life. Having young kids and bills to pay, I could use it.

To earn the money though, I need to enroll in this company's on-line trading educational program, and this is where they lost me.

There are countless examples of brokerage houses and the media leading investors down the wrong path. Here is one from Fortune Magazine. 

By all accounts this is a reputable and trusted resource for investors to use in making their investment choices. Their year 2000 guide is going to help me "Retire Rich." They are kindly giving me the "Ten Stocks To Last The Decade." How nice would it be in year 2000 to know that at least for the decade my investments are in the right stocks?

So let's see how our portfolio would fare had we invested in Fortune's stocks. Over the first 27 months, our portfolio is down 62%, but let's not panic. We still have almost eight years to go in the decade and we are not short-term investors. So if we had held on for the remainder of the decade how did our portfolio do? We are down 47%!

The reality is that teaching me to trade like the pros is teaching me to gamble and speculate and the long-term expected rate of return of gambling is zero.  Rather than teach people how to gamble and speculate, investors would find it invaluable to learn how to avoid gambling and speculation.

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