Financial lessons and passive investing in the markets will rob millions of Americans of the opportunity to retire and live comfortably through their golden years.
The stats are mind-blowing…
“Thirty-six percent of American workers age 55 to 64 say they have less than $25,000 in retirement savings.” — Employee Benefit Research Institute
“Fifty-one percent of households are at risk of not having enough savings to maintain their standard of living after retirement.” — The Center for Retirement Research at Boston College
“Sixty-six percent of Americans said their top financial concern was not having enough money for retirement.” — Gallup Poll
But beyond the research and statistics, I’ve seen this retirement dilemma first hand. And it’s that experience that shaped the way I approach investing in the markets…
The year was 2008.
I was working as an adviser for a Fortune 500 financial planning firm. Each week, I met with dozens of families. Their stories were all different, yet all the same.
Simply put: The goal, for each, was to get to 65 with a nut big enough to last. Although no one seemed to know what that meant — how big? How long? And HOW?
My analysis usually showed a shortfall in savings. Roughly 80% of our clients were behind the curve.
The obstacles to saving enough were similar… the kids’ college took priority (purchasing power sitting idle in the basement) or an aging parent needed more help than anticipated. Basically, “life” got in the way.
Worse still, I learned that most well-intentioned Americans have no clue how to manage long-term investments. And that’s why they hire professionals. But that’s a problem, too.
You see, even though I was a professional (a licensed financial adviser), I was expected to toe the company line and only recommend strategies and investments that were “pre-approved,” more or less.
Most of the time, that advice centered on “traditional” investment tenets: dollar-cost averaging (read: buying a little more each month), buy-and-hold (err, more like “buy-and-hope!”), asset allocation (but just long stocks and bonds).
I found it odd that our recommendations in 2008 weren’t all that different from all the years prior. The state of the market seemed to make no difference. Basically, the buy-and-hold mantra was dutifully repeated as the S&P 500 lost, from its October 2007 peak, 15% by March 2008… 20% by July 2008… 42% by October 2008… and a full 50% by November 2008.
And the entire time, I had a sense that there must be a better way.
So every lunch hour, instead of taking large groups of potential clients out for free meals as was expected of me, I sat in my car, ate a sandwich, and read everything I could find about non-traditional investment strategies.
Thousands of pages later, I came away with two realizations.
The first is that “passive” investing is risky. It requires the investor to give away too much control to the whims of the market.
The second is that you have to play both sides of the market. The best way to limit your profits and increase your risk is to look only to the long side (i.e. buying)… that is a double-whammy that you have to avoid.
Since my firm pitched long-only, passive investing, I saw that we were at odds. I packed my boxes and my bobble-head in early 2009 to join a proprietary trading firm run by two accomplished hedge fund managers.
During my interview for that job, I naively asked: “Did you guys lose less than the market last year?”
I got a hard stare in return.
“We made money last year.”
Somehow, even after insulting my interviewer, I got the job.
Of course, the thought of making money in 2008 only solidified my suspicions about passive, long-only investing. And over the next year, I learned the “better way” that I knew was hiding beneath the pile of traditional investment advice.
I won’t bore you today with all the gory details about non-traditional investment strategies. I know, as my wife kindly reminds me, that “they’re pretty esoteric and not all that interesting to everyone.”
My only goal today is this: To spur you to make a proactive decision about your financial future. Make it today, not tomorrow or someday. Make it right this minute.
Whether you hire a “professional,” go it alone, join Boom & Bust or Cycle 9 Alert… only YOU can decide what you’re willing to do to reach your financial goals.
I personally think you’d be better off taking the bull by the horns. Switch gears and leave passive, long-only investing behind and learn more about my approach to data-driven active investing.
It’s an approach that works to limit risk, protect capital, and grow investment portfolios. And, in my opinion, it’s the only way to avoid wealth demolishing years, like 2008.
Six years ago, I vowed to do better for my clients the next time another 2008 rolled around and I continue to hold to that commitment today. While I don’t try to predict exactly when the next market crash will unfold, I’ve spent the past six years preparing a strategy that is fit to not only weather the storm, but also provide great opportunities to grow your wealth while everyone else is floundering.
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If “buy-and-hold” and the notion that you can’t beat the market have left you short of your personal and retirement goals, then you’re going to want to hear the truth about passive and active investing.
Chances are, if you’re more than 25 years old, you think it’s impossible to “beat the market!”
But today, there is MORE than ample evidence that proves:
- The stock market is NOT perfectly efficient
- Passive investing can be MORE risky than active investing
You CAN beat the market… you just need to use the right strategy!