10 quick tips for the time poor

The conventional wisdom is usually wrong in the investing world, as some of the academic data I have shared on previous blog posts illustrate.

For the time poor, here are 10 misconceptions that could cost you a fortunate:

1).  Property and gold outperforms equity markets.  They don’t, it is as simple as that.  They regularly do over short periods of time (days, weeks and months) and occasionally they do over long periods of time such as gold in 2000-2011, and property from 2000 until 2007.  Longer term they simply don’t .

2).  The small things don’t matter.  In fact, a $5,000 after tax pay rise could indirectly net you $1M-$5M+ –

3).  You get what you pay for.  Not always, in fact an advisor who can lower your fees is likely to bring you value added.

4).  It is better to only deal with an advisor you have known for years.  Emotionally this feels good, but if a new advisor can lower your fees or the fees of the funds within your portfolio, motivate you to spend less and be in contact more regularly with you, switching could save you a fortunate as the benefits will gradually compound.

5). Markets may outperform other assets long-term but they are more risky.  Don’t confuse volatility and stability.  A more volatile asset isn’t more stable long-term.  The only time you need to dramatically reduce your exposure to equities is when you are close to retirement, especially 5 years away.  It makes sense to have more government bonds in your portfolio.

6).  With interest rates of close to 0%, it doesn’t make sense to have government bonds in your portfolio.  If you are young or relatively young, it is indeed not a bad idea to have 90%-100% in government bonds, provided you have at least 25% of your portfolio in bonds once you age.  Even with bonds at these levels, the academic evidence suggests the portfolio is more likely to last.

7).  Markets are too high at these levels.  You have got to love human nature and its irrationality!  Markets were at 30-70 more than 115 years ago.  They hit 26,600 this year, which is a growth rate of 10.5% compounded. As Warren Buffett has said, the Dow will one day hit 1M. Don’t bet against American or indeed global enterprise.  

8).  OK so markets will go up high long-term, but in the next few years they will decrease or even crash!  I remember in 2014, many people were afraid when the Dow Jones was at 17,000-18,000, and now they have hit 26,500 this year!  There is a chance the Dow will never seen 18,000 again.  But maybe there will be a crash or a fall to 22,000.  The point is nobody knows when a market crash will come.  It is better to not try to time markets, but spend time in the market. 

9).  We can pick winners like an individual stock or bitcoin, as we are smart or have done `research`.  Sorry, the research actually shows that human nature is egotistical and this egotism breeds lower returns.  You can make loads of money some days, months and even years trying to market time and stock pick.  You can’t over a 50 year investment career.  

As Buffett once said, `In 1900 the Dow was at 66.  In 2000 it was at 11,000+, and now they are at 26,000.  How did people lose money in such a period?  They tried to dance in and out of markets`.

10).  Emerging markets are the place to be.  Emerging markets can be a part of your portfolio, but they are riskier than US markets.  Best to keep them 10% of your portfolio maximum.  A global/world fund will  usually automatically have 2%-3% exposure.  

Blog Comments

Very interesting post. But I consider that Real Estate could give you a really good performance if you treat it as a business. I actually have a RE flipping company in Spain and we do quite well. I like stocks and gold to diversify.

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