Investors; It's Not The Goal, It's The Behavior

 It's Not The Goal, It's The Behavior

by: Brendan Magee

The other day I was listening to an investing commercial on the radio and the man spoke about what they would do for investors. They said if you came into their office you would have a conversation about your goals and then they would help you create a plan to help you reach your financial goals. They stressed the importance of an investor focusing on their goals. 

Goals, no doubt, have their place, but if all you do is focus on your goals, you aren't going to accomplish a thing. The focus needs to be on the behavior. Whether it's dieting and becoming physically fit or investing, the behavior is going to determine what you achieve. Simply getting on a scale for the next 30 days with a goal of losing five pounds isn't going to magically make it so. You better start eating some vegetables and stay away from the ice cream and cookies.

Investing is the same way. Simply looking at your account balance isn't going to make me a millionaire. I better start saving. I better cut down on eating out and running up the credit cards. I better take the time to understand what are the rules for successful investing and start applying them. 

I should probably determine if I am capable or incapable of following those rules on my own. If not, I should employ a coach who will make sure my behavior is consistent with reaching my goals, even when I don't want to. 

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.

March Madness Blown Calls & Investing, Some Times Once Is All It Takes

Reffing And Investing, 

Some Times Once Is All It Takes

        by: Brendan Magee

With the NCAA Basketball Tournament and the fact that with one loss you go home, everything is at a fever pitch. As it was during the Northwestern/Gonzaga game one blown call changes everything, for the players as well as the referees.

As a ref of 15 years, I can tell you that you can be reffing and everything can be going along just fine and in the blink of an eye you can blow a call. Yes, it happens and I am not saying anything you don't already know. 

However, what you don't know is what happens to the ref who blew the call. He or she has supervisors they have to answer to. They will be asked why they made the call they did, or why they didn't make the call that should have been made. Their reputations and the games they will get in the future will depend on the answers they give.Future games and the thousands of dollars in paychecks can be taken away from them. It takes a long time to get to the level of a college official and in a second all that you have worked for can be lost and never be gotten back.

It can be that way with investing. How many people do you know lost a ton of money in the tech stock crash in the early 2000's or the housing bubble of 2008? It's sad and seems quite unfair, that like the hard working ref, that all that you have been working for your whole life can be lost in a flash and never gotten back. 

As it is with reffing (even with three refs), investors have blind spots, and the biggest most devastating problems will come from what you cannot see or account for. Now, the truly scary part here is that we always have blind spots. At no point in your driving life are you driving where you can see everything. It is the same thing with investing. How come you have blind spots? The answer is because you are human. The Creator only gave us eyes in the front of our heads, not the backs. 

So as investors how is it that we have blind spots? We have eyes, ears, brains. What's the problem? We are not infallible as to how we take in information. How many times has your wife or kids told you, you don't listen? Lets give ourselves some credit and say we listen at least 50% of the time. That leaves a good percentage of the time that we are not tuned in to what people are saying to us. Sound like a recipe for an argument? This is just one example of when we aren't totally tuned in to what is happening around us.

 This is why you have a coach and what you pay them to prevent. Because, unfortunately there are somethings in life where it only takes one time to make a permanent change to your life. 

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

Funds, That Are Driven By Research, So What?

NCAA Pools & Mutual Funds Driven By Research, So What?

                   by: Brendan Magee

With March Madness upon us once again, I find myself parked in front of the television a lot more which means I am seeing a lot more investment commercials too.

One in particular caught my eye. There was a former college basketball player serving as this mutual fund company's spokesman and he was saying that this company's big selling point was that the company's funds were,  "Driven by research!"

On the surface that sounds pretty good. Who wants to put money into a fund driven by blind pure random luck? Where's the wisdom in that? Unfortunately, that is actually what the investors in this fund are actually doing. 

See what the fund company fails to convey in this commercial is that all the research in the world will not have anything to do with how that fund performs in the future. In Free Market investing, all the knowable and predictable information that exists about the market or individual stocks has already been factored into the market and the prices of the stocks. As information changes and becomes available that new information gets absorbed into the price almost instantaneously. Think about how quickly we get news about events happening around the world these days. It is only unknowable and unpredictable information and events that will move the market or stock prices.

Another way of saying that is that it is what happens tomorrow, next week, next year, the next ten, 20,30 years that is going to determine how a mutual fund is going to perform. Do all the research you want. That information is already factored into the market. Trying to use that information to figure our how the fund will perform in the future is pure speculation and gambling. It's like using the season that just finished up and all the information that goes with it to predict who will win the NCAA Basketball Championship. Think about it, how many of those office pools have you actually won?

Gambling with a few bucks on an office pool might be fun with a few entertainment dollars, but not with the money you are going to need in retirement.

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

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.