Super Bowls and Investing Are Counter-Intuitive

Super Bowls and Investing Are 

Counter-Intuitive

                                             by: Brendan Magee

This past Sunday's Super Bowl will go down as one of the greatest Super Bowls of all time. The New England Patriots came back after being down in the second half of the game by a score of 28 to 5, and the truth be told I missed the entire comeback.

I watched the first half and saw how Patriot's Quarterback, Tom Brady get pounded, I saw the Falcons score in every way possible. I watched the first series of plays in third quarter and came to the conclusion that the Falcons were not going to lose that game and went to bed. I found out just how misguided my perspective was on Monday morning. I just couldn't imagine how the Falcons could have lost that game. The outcome was completely counter-intuitive.

One of  the reasons people have such a difficult time with investing is it works in a counter-intuitive manner. Invariably, the world of investing works completely the opposite of how all the evidence suggests.The one thing we seem to forget be it investing or Super Bowls is that what has already occurred has absolutely nothing to do with what will happen in the future and the future is completely random and unpredictable. It's a lesson that is often very difficult to remember, especially in the heat of the moment, but we will save ourselves a lot of pain and regret if we can hang on to it.

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

Investors Have Two Choices: Keep Changing Investments or Transform As Investors

Keep Changing Investments or 

Transform As Investors

                 by: Brendan Magee

The Dalbar Corporation's Quantitative Analysis of Investor Behavior Report for 2015 reveals that investor's retention rate for their investments is roughly three and a half to four years. What that means is that investors, on average, are making changes to their portfolios every three and a half to four years. Some may make changes more frequently and others a little less frequently, but investors are making changes to their investments as a means to addressing their investing problems.

The Q.A.I.B. Report also shows that investor's returns are lagging way below the benchmarks. It's as if the going hourly rate was $15 per hour and the average investor was actually earning $8 per hour. To make it even more absurd imagine that the bosses (the stock market) are more than willing to pay the $15, but the employee is sabotaging their own take home pay. In the real world you couldn't imagine someone forfeiting what they are legally entitled to, but that is exactly what is happening to investors.

So let's look at the options available on how to fix this problem in a real world situation. A middle aged couple meets with me to find out why their investments over the past seven years has earned nothing. The choices being made available to them were Roth IRA's by adviser Y and the opportunity to step back and take a look at how it was they came to say yes to their current adviser and make nothing in returns over the past seven years so they wouldn't make that same mistake (or a worse mistake in the future) again.

Their choice was to make a change to their investments and go with a Roth IRA, not step back and take a look at themselves and their decision making process. It's kind of like a golfer who isn't playing as well as they think they should. You can by a new driver, putter, or even a new set of golf clubs or you can try and figure out if its your swing (you the golfer that is out of sorts).

There are two sayings that my friends at Landmark Education introduced me to and I think they are  appropriate to the couple I was talking to and the overwhelming majority of investors, "The more things change, the more they stay the same."

The Dalbar Study dates back to 1985 and has been repeated every year since. The conclusions have always been the same. "Investors are drastically under performing the stock market's rate of return and their results are more a byproduct of their behavior. They are constantly doing the wrong thing at the wrong time. They are making changes to their portfolios (moving their money from one investment to the other). We are seeing that same scenario play out with the couple I had met with. So in reality with all the changes being made to peoples portfolios, it is more of the same and nothing is changing, especially investor returns. (By the way, it is possible that changes are being made to your portfolio without you even being made aware of it)

The second saying that I got from Landmark Education is, "The more your resist, the more the problem persists." I am not sure if it is resisting or not, but the problems of investors continues to persist. The reason is the problems that are haunting investors cannot be solved by a product of any kind. They can only be fixed by the investors themselves, and before they can be fixed they need to be acknowledged.

Take the couple I was speaking with. I was offering them the opportunity to help them see, not so much, what their current brokerage firm was doing to them. Rather, I was trying to give them an opportunity to see how it was they came to say yes to allowing someone to manage their money in a way that was a total waste of their time and money. This would not be an opportunity to make a change to their investments so much as it was an opportunity to transform as investors.

By transform, I meant that who they are as investors and how the process of investing occurs to them changes in a powerful way forever. This doesn't take place until they see/acknowledge something about themselves as investors that they had previously been unable (maybe unwilling) to see/acknowledge. This is what a breakthrough is all about and it doesn't come from a product of any kind. It occurs at the mind, body, and soul level. It comes when you are asked the right questions and take the time to answer them properly.

Now there is the problem for most people. Changes to your investments can be made in a nanosecond. With E Trade and on-line trading you can scratch your "I've got to make a change itch" over lunch, and you do not have to ever acknowledge how responsible you are for the investment problems you are experiencing.

Transformation takes some time and cannot be rushed if you are going to do it right. As opposed to a trade in two seconds, you are actually going to have to talk to someone and you might have to acknowledge that your decisions were based on myths and misinformation that you couldn't see were misleading. You might feel a little blow to your ego. You might have to acknowledge that you are at risk in making those same kind of bad decisions in the future and need help. You might have to acknowledge that the biggest threat to your financial security is your own behavior and you need help managing you. You might have to acknowledge somethings about yourself that are not too pleasant. The result, you with more peace of mind about your investments and financial security than you ever thought possible.

Acknowledgement has done wonders for those seeking sobriety. Having witnessed many A.A. meeting, I can tell you that every meeting is started with each member acknowledging they are an alcoholic. Key to the success that A.A. has helped people achieve is the opportunity for people to stop living in denial about their drinking problem. It's not a change that is at the root of their sobriety. It is acknowledgement and rather than make changes, I think investors would do a lot better and transform their lives through acknowledgement.

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

Investment Industry Product Driven, Unfortunately Your Returns Are Behavior Driven

Investment Industry Product Driven, Unfortunately Returns Are Behavior Driven

by: Brendan Magee

I had two encounters this past week that demonstrated to me just how at odds with one another the investment industry and investors are with one another.

The first was at a Christmas party I attended with a networking group I belong to,and the second was with a gentleman and his wife who are trying to figure out the best way to invest their money. At the Christmas party a nice woman asks me what I do for a living. As I am experiencing the conversation, we are just making pleasant conversation, and I am giving her my best explanation as to what an investor coach does. I am telling her that as a coach I help investors focus on the questions they need to be asking. I tell her that coaching helps a person understand that an investor's results are mainly derived from what they do or don't do with their investments/ what they allow or don't allow to be done with their money. I am telling her that as a coach we are trying to help investors stay focused on their behavior.

After listening with some patience she says with some annoyance,  "This isn't a sales call. Just give me the bottom line. What do you put your clients in." Then she tells me that before a career change she had spent a lot of time in the investment industry.

The second instance was the second phone call with a gentleman and his wife who are trying to figure out how they should be investing their money. They met with two very well known companies for consultations. The first suggested an annuity. The second recommended a diversified portfolio of stocks, bonds, and cash. At no point did the representatives of the companies, nor the woman I met at the Christmas party show any interest or seem to put any value on finding out whether or not investors understand the rules for successful long-term investing and could apply them with discipline.

For the couple they are trying to come to long-term conclusions about their investments using quarterly returns data. They have no idea as to whether or not the 100 to 50 stocks that are in the recommendations of one of the firms they have met with are diversified or not. They don't even know to ask the questions to make that determination. Their life savings and the futures they want to pass along to their children and grand children are at risk as they are playing a game of blind archery with their portfolio.  They have no real idea about what they may be allowing to be done with their life savings.

This where the investor's financial future and the investment industry's agenda are at odds with one another. The investment industry's bottom line profits depend on the investor continuing to buy and put money into an endless parade of investment products, products that not event their representatives fully understand. The investor's financial security depends upon following and applying three rules: Own stocks, diversify, buy low/sell high.

The questions are, does an investor understand how to properly apply these rules? Over the past 20 years, as noted by the Dalbar Corporation's Quantitative Analysis Report for 2015, and investors under performing the market by $286 billion, you would have to conclude that investors do not know how to follow these rules, nor does the investment industry show any interest in making sure they do.

When is the last time you saw an investment advertisement or a cable to television show talking about an investors behavior? Without any attention given to it, what do you think the odds are that an investor would be able to recognize and eliminate bad behavior? Finally, if the investment industry isn't promoting good or prudent behavior, what kind of behavior do you think is being promoted? Is it behavior that's more beneficial to your bottom line or theirs?

Now it might not be the easiest thing to do, but unless you stop and take an honest look at whether or not your behavior is leading you in the right direction or causing you to shoot yourself in the foot, how can you ever overcome it? ( By the way, if you want to get a completely unvarnished perspective, do not do this exercise on your own. It's too easy to not be as thorough as you need to be) Going through an exercise like this can be painful. Your pride and your ego most likely will get bruised a bit, but if the exercise doesn't kill you, the result will be an investor who has taken complete ownership of their financial future.

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

The Day After The Day That Lives In Infamy And Investing

The Day After The Day That Lives In Infamy And Investing

         by: Brendan Magee

Yesterday marked the 75th anniversary of the the attack on the United States Naval Base at Pearl Harbor. I was wondering what the day after the attack was like in the neighborhoods of America. That was the day the country was beginning to come to grips with what had just happened.  I remember how utterly stunned I was on September 12th, 2001.

For sure there was grieving for all the sailors and service men who lost their lives, anger at the Japanese for their surprise attack, fear because now the country was thrust into World War II and all that that would bring. At that point the country had to start picking up the pieces for not being able to see what was going to happen on December 7th.

This is one commonality between investing and our military, the biggest most dangerous problems each faces are the problems they cannot see. Imagine how life/history would have changed had the Navy been alerted to the pending attack of the Japanese? Imagine if the people who lost $65 billion to Bernie Madoff knew in advance that the man was a thief? Imagine how different the investing landscape would look today? I think this is one of the reasons terrorism and investing occupy so much of our attention. With each, there is always an element of the unknown and it can be terrifying to think what could happen

So given that there is always an element of the unknown with investing, how do we protect ourselves? We have to realize that like America's freedom, there are those who would like to take your money from you. They are good. They are smart, and they will never give up.

We have to accept that we cannot see everything. We need to have a second set of eyes to help us see our blind spots. That would be a coach. We need to engage in a conversation that enables us to stay vigilant. As a coach,  I hold monthly coaching sessions for my clients. This is so they can maintain an understanding of what it is they are doing with their money, but also fully understand why they are doing what they are doing. Hopefully, this does two things. One give them added peace of mind that they are doing the right things with their money. Two, as they are approached by people who mean to do them and their financial security harm, they can in some way recognize the danger and keep the wolves away.

We need to remember that unless we are held up at gun point nothing bad can happen to our money until we have said yes to something we shouldn't have said yes to, and unless we are asking the right questions, the wrong answer can be almost impossible to see. This is when the life altering events occur. History shows this clearly whether it's investing or wars.

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.

 

Del Frisco's Steak House, Ocean Prime & Mutual Fund Managers

What Del Frisco's, Ocean Prime And Mutual Fund Managers Won't Let Each Other Do

by: Brendan Magee

Two years ago, my wife helped me cross off my bucket list eating at Del Frisco's Steak House. I had read all the reviews and knew that it was a great place to eat and it didn't disappoint one bit. Walking out I told Jennifer,if I were a convicted man with only one meal coming to me before I was executed, please get it from Del Frisco's.

Driving away from the restaurant, another restaurant's sign caught my attention, Oceans Prime. Given it was located right around the corner from Del Frisco's, I figured it was Del Frisco's prime competition and anything that could stand up to Del Frisco's had to be experienced at least once. This past Saturday for my birthday,  I got to see for myself if Ocean Prime was as good as Del Frisco's.I can honestly tell you both are phenomenal dining experiences. Both serve outstanding food and deliver an awesome experience that some how has you forgetting that you are forking over a mortgage payment to cover the tab.

Leaving the restaurant this time I had a couple different thoughts. One was, there are a lot of people willing to pay top dollar for a great meal. Both restaurants, when we were there, were packed with customers. The second was, neither restaurant is going to let the other restaurant win the competition. They are both going to push each other to be better and more profitable. If Del Frisco's sat back and said, "O.k. Ocean Prime, we are going to step back and let you be number one." That would mean Ocean Prime would get all the perks that go with being number one. Those looking for a great steak and willing to pay $50 for a steak are all going to go to Ocean Prime. Ocean Prime would become more profitable and open additional locations. They might be able to lower their prices a little bit and lure more of Del Frisco's customers away. Del Frisco's could lose their business if they failed to keep pace.

So Del Frisco's can't let Ocean Prime have a permanent competitive edge. They will create new dishes, higher better chefs, redecorate their dining room, etc. They can't afford to be number two for very long.

The same competition takes place among mutual fund managers. There is a race for being number one every year, and if say Fidelity sits back and says to Vanguard, American, T. Rowe Price, etc. we are going to be content to eternally stay in second or fourth place all the money is going to flow away from Fidelity to who ever is the perennial winning mutual fund company. When that happens, the fund managers at Fidelity will have their incomes cut or jobs eliminated. They won't get the bonuses they were counting on or the book deals the other top performing fund mangers are going to get.

So if one fund manager has a competitive edge in one year, the other fund managers are not going to let that edge stand unchallenged for very long. If Vanguard struck it rich with tech stocks, the other fund managers are soon to be loading up on tech stocks and there goes Vanguard's competitive edge. The fund managers have effectively cancelled out the others' competitive edge.

This is one of the main reasons why the top performing fund managers do not repeat the following year as the top performing fund manager. If the other guy is winning all the time, that means I am losing all the time, and who wants that?

This is true with restaurants as well as mutual fund managers.

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

Investing: What It Takes To Win!!

Investing, Defeating Jihad

What It Takes To Win!!

By: Brendan Magee




In his book, "Defeating Jihad", Dr. Sebastiona Gorka makes no bones about it. We are at war with Radical Islamic Terrorism. In America we value freedom, and Dr. Gorka states that freedom is not the natural state of affairs. "There will always be those who believe they have the right to take your freedom to serve their greater ideological cause." History, he says, backs this up with the rise of Nazi Germany as well as communist Soviet Union which he and his family had to endure in Post World War II Hungary.

Gorka states that our new enemy, Radical Islam, is using Islam and Allah as the justification for mass murder. No peaceful coexistence is possible in their view. The infidel must be killed or submit. The Nazis invoked the Fuhrer. The jihadists invoke the name of Allah to enslave/destroy the nonbeliever.

9/11 occurred more than 15 years ago and we are still at war with Radical Islam. Dr. Gorka points out that the United States defeated Nazi Germany and the Empire of Japan in five years, but today we face an enemy we have been fighting for over a decade with no end in sight.

Gorka quotes the book The Art of War, which states "know your enemy if you wish to win." Unfortunately there is another quote from the book that isn't as well read. Sun Tsu's recipe for ultimate victory is to first know yourself. What do I represent? What am I prepared to risk blood and treasure for? If you have not answered these questions, you should not be going to war at all, Gorka states. As Americans living in a post-9/11 world, we have yet to adequately answer these questions and as a result the war on terror seems to drag on without any end in sight.


So what does this have to do with investing? For God's sake all you might want to do is save enough to live your golden years in comfort right? You're not going to be spilling any blood or treasure. You're just planning on working as hard as you can to provide for your family and your financial security. No one is going to be firing an AK-47 at you and you certainly aren't going to be fighting ISIS any time soon, right?

Consider for a moment that like the war on terror, unless you know yourself and answer certain questions sooner than later, investing is going to drag on with no end in sight. You won't truly know if you are winning or losing. You won't know anything other than you have to keep on keeping on because, "For sure this isn't what victory looks or feels like."

You might not be spending blood and treasure, but you will certainly be spending time, effort, money, and passion in an attempt to build financial security for yourself and your family. None of those things comes in unlimited supply. You will also have enemies to deal with. Like Americans with freedom, you have something people would like to take from you, your money. Some you won't even be able to recognize as your enemy because they are so good at deception.

Unless you know yourself, you won't be able to protect yourself from your weaknesses. You won't know the weaknesses you can handle vs the ones you can't handle. You won't know where you need help and where you don't.

So what is the question you need to ask and answer? The question is, "What is your true purpose for money, that which is more important than money itself? I do not recommend that you answer this question on your own, but if you are going to go down that path, if the answer you come up with is anything that can be accomplished with money, you haven't answered the question properly.

In 1950 as America began to face the growing threat of communism and the Soviet Union, Paul Nitze of the State Department laid out for President Truman a reexamination of the country's strategic plans to win the Cold War. First and foremost, Nitze concisely laid out the true purpose of The United States of America, "To assure the integrity and vitality of our free society, which is founded on the dignity and worth of the individual." Money alone could never buy that and if that weren't important enough the United States would not have truly understood why the country was going to the lengths it was going in order to defeat the Soviet Union.

So your task is to answer the question, "What is your true purpose for money, that which is more important than money itself?' In answering that question you will answer, "What is it that you represent?" What are the values you cherish the most? What are the ones that you would never give up on? What are your weaknesses and how are you going to manage them?  Why are you spending so much time, energy, and money? Are you willing to pay the price? If you have not answered these questions, do not invest one more penny until you have.

Speaking from experience, once you do, you will never be the same again!

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