Lazy Investing Can Be Good Investing

April 18, 2007

Tax Refund Challenge:

Now that you have filed your taxes it is time to evaluate where you are financially. Say what you will about filing tax returns they at least allow you to take inventory on how much you earned in 2006. I am always talking about saving for the future and making sure that you are locking away 15%-20% of your gross wages for the future. That is easy to say when you earn a good living, but I know from emails that I receive that many out there are struggling financially. The average refund was estimated to total $2,480 for 2006 up from $2,371 for 2005. I would challenge you to look at your return and if you are not happy with your income level do something about it. Success is easier than you think… You just have to believe and figure out where your passion is. Use the refund money as your initial savings for starting a business, or for going back to school. It is very fulfilling and can be financially rewarding to make a big change and have success that leads you to a better life.

Understanding the Limitations of Human Behavior:

In the last show I opened up and shared free websites to go and get information about the financial markets. The reason I did this is because the stock markets have been choppy recently, and volatility causes many of you to become fearful that you will lose your money and make bad decisions. I thought if I shared with you where to get good information it might help a number of you to make better decisions.

Just providing resources is not enough. I also need to let you know the facts behind human behavior and your investment returns. There is a great resource that provides an analytical way to review the way many of us act in good and bad times. That resource is DALBAR and their “Quantitative Analysis of Investor Behavior” (click to check out the site yourself)

Scary Stats and Figures:

Annual Return From 1986-2005 (20 Years):
Inflation = 3.0%
Bond Investor Return = 1.8%
Equity Investor Return = 3.9%

Long-Term Gov’t Bd Index = 9.7%
S&P 500 Return = 11.9%

Average Retention Over 20 Years:
Equity 2.9 Years
Fixed Income 3.2 Years
Asset Allocation Funds 4.1%

Up vs Down Markets:
Reviewing each month for the last 20 years the market moves up 60% of the time and down 40%. If you do not know what to do, then consider doing nothing.

One of the first things that I let people know about investing is that anyone can make money when the market is up. There have been enough studies that support this by using Darts and Monkeys, but your real test as an investor comes when the market is down. I know that most of my listeners are overachievers that own or run successful companies, but even smart individuals can make bad decisions when fear overcomes them. Use this data to keep your thoughts rational if the market continues to be choppy or goes through a correction. If you buy and hold you are much more likely to be successful then trying to time the best time to come in and out of your financial investments.

Now that you have an understanding of the numbers and the value to be a consistent and patient investor consider checking out the example that is provided on the site titled, “The Story of Quincy & Caroline” (click here).

Good Luck!


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