This Is Why You’re Missing The Best Returns

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Your money needs to be working hard for you. That means getting you great returns on investment so that you can relax knowing you will be able to stop working and live well off your returns.

 

The sad truth is that this is a reality for a very few people.

 

But why is that?

 

Markets are booming…

The best 12-month performance for the S&P 500 in the last 30 years happened over the one-year period that ended March 31. 

Over that stretch, the S&P 500 gained 56.4%. 

56.4% ! 

That is not a typo!

Over the past 18 months since the covid pandemic outbreak the S&P 500 has gained as much as 98%… 

…and as I write this the S&P500 is sitting at 4,429.10 which is just off the 42nd record high of the year putting us on pace for the most record market highs since 1995.

Unfortunately, the average investor, and those that have handed their financial well being over to a financial advisor, most probably are NOT getting returns anywhere near these spectacular returns. 

Look at the graph below. 

You’ll see that over the past two decades the average retail investor has done dismally. They’ve done worse than just about everything else…

WTF!!!!

Why is the average investor not even managing to get the average

when markets are repeatedly hitting new all-time highs?

ONE WORD…

😀😂😋😜😥😤😪😩😡😍😳😴😭😱😰😐😇😎😖

Emotions.

The emotional roller coaster ride shakes many investors out of the market and destroys their chance at freedom.

On the emotional roller coaster the average investor destroys wealth by… 

  • buying when the market is high
  • selling when the market is low
  • staying out of the market during bull runs
  • staying in the market during bear runs

 

But why would anyone do those things, you may ask?

Why would anyone be so STOOOOOOOPID.

It’s actually easier than you may think to be STOOOOOOOPID.

Because we are emotional creatures!

This is what happens when investors let their emotions drive their wealth bus.

Fear and greed become the prevailing forces.

Fear and greed are terrible drivers and will either drive you over a cliff or just freeze and prevent you from getting anywhere. 

Not a great way to get to freedom

In Part 1 Masterclass Series on How to Pick Great Stocks and Increase Your Portfolio Returns, Nic Oldert and I show how to conquer the market fear curve by protecting yourself from fear and greed by having a clear strategy to achieve above average returns and get to your financial freedom faster. 

We share how to use technical and fundamental analysis to help you pick those stocks that are likely to outperform the market and how to invest in these stocks cost effectively.

You add these ‘conviction” stocks on top of a base of solid index trackers which will already ensure you get the market return, which as you can see above beats all the average investors who have no strategy and who effectively erode their wealth. 

You add these conviction stocks on top of your index tracker base to move the needle and get a few more percent of return.

A small increase in rate of return, is the difference that makes the difference.

Compounded annually a 2% increase in your average portfolio return had an exponential difference on the amount of money you end up with. Over 20 years that difference will be close to 70% more!

If you start your investment journey with $10,000 and you know one path will grow that amount to $48,000 and another will grow the same amount to $172,000 – with no additional money put in by you and no additional risk or complexity… 

Which path will you take?

That seems like a silly question – obviously the path to the $172,000!

But to be on that path you cannot do what the average investor does.

You must tame your fear and greed monsters, have a robust and proven investing strategy and then you must stick to your strategy.

 

It’s not complicated, but if you don’t know what it is, it’s highly likely you’ll let fear and greed drive you around and get nowhere. 

If you don’t have your strategy firmly anchored in your life, and you aren’t confident that you are getting your money working as hard as it should be, you can still join the Stock Investing Masterclass Series. 

You can get the recording of Part 1 and attend Parts 2 and 3 happening on August 10th and August 12th. 

If you can’t make those training sessions live, no worries because they will be recorded too. Go here to get the details.

So how do you tame the fear and greed monsters that drive the emotional side of investing? 

The best way to do this is to avoid the emotional roller coaster completely by applying these four principles in your investing life.

They will help you protect your money from you, improve your returns and get you to your freedom. 

 

  • Diversify your assets.

 

The secret to building wealth, and keeping it, is diversification. This is why I go on and on about building a solid base of broad market index trackers which give you fabulous diversification across markets and geographic regions.

Not only does diversification lead to better returns, but it also lowers risk. Numerous studies show that asset allocation accounts for 90%-plus of your investment returns.

 

  • Stop listening to the news and short term noise

 

The market’s short-term direction is unknowable. The daily and weekly ups and downs are just reactionary and tell us nothing about the fundamentals of the markets and the companies that make up the market.

In addition, no one has a crystal ball. 

Anyone who pretends to know where the market is going short term is a very big liar! 

The so-called experts that do this full time and get paid an eye watering amount to do so, get it wrong more often than they get it right. That’s why we don’t bother with actively managed fund (another tips to getting your money working for you and not for the financial industry)

Tune out the noise, don’t get sidetracked by the drama loving news. Stay focused on the big picture and stick to your strategy.

 

  • Set Up An Automated Investing Plan.

 

Automatic investing simply means investing money regularly.

Recently I shared with you a video on Boring is Beautiful all about your base investment strategy. The simple investment strategy of investing in a handful of broad market index trackers which you invest in consistently. If you haven’t yet set this up, get a copy of The Wealth Chef book and put this in place in your life before you consider doing anything else.

 

  • Be consistent – have a strategy, make a plan and stick to it.

 

Other than annual adjustments and periodic rebalancing during your BIG MONEY DATE, you shouldn’t deviate much from your investing strategy and implementation plan. 

If you have a life-changing event, reevaluate your plan at that time. 

But following your strategy and sticking to your implementation plan will keep you from making emotional investment decisions.

Challenge Yourself Today

I know these four principles may seem daunting and you may be thinking, “easier said than done Ann.”

So that’s why I challenge you to put these steps into action. 

It’s not that hard to train yourself to become a great Wealth Chef and get your money working for you. But you do need to know the recipes and then you need to implement them.

Start by diversifying your assets at the base of your investment pyramid with a simple portfolio of broad base index trackers.

Set up a regular investment plan where you commit to investing in these monthly through a direct debit / standing order into your online broker account. 

The more you can automate your wealth creation, the more successful it will be.

Once you’re invested, ignore the day-to-day noise in the media.
Once this is in place, add a set of conviction stocks on top of your index tracker base. The purpose of these stocks is to increase your overall rate of return on your investments which will accelerate your financial freedom.

If you follow this simple game plan, you won’t let fear shake you out of the market at the wrong time. And you can ride your investments to the top.

Before you know it, not only will you outperform the average investor… you’ll also significantly move the needle on your net worth.

Get yourself a copy of The Wealth Chef book to learn how to get your base investments in place and sign up for the Stock Picking Masterclass Series to learn how to select your high performing stocks to add on top of your base to increase your returns. 

How much is the $172,000 path worth to you?

Are you prepared to take some time to learn so you can live free?

If you’re not prepared to put a little in to get a lot out, that’s totally your choice. Please just make that choice consciously and understand the consequence of never learning how to get your money working for you.

I hope you choose freedom.

Big love

Ann

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