By Dr. James M. Dahle, WCI Founder
It's a funny quirk of human nature that we learn more from bad experiences and examples than we do from good ones. Today, let's talk about 35 signs that you are not a very good investor.
How to Know You Are Terrible at Investing
If you recognize yourself in any of these examples, see what you can do to correct the problem.
#1 You Think You Can Beat the Market
If you could truly pick stocks well enough to trounce an index fund, you should be a billionaire and you should be managing billions of other people's money—not your own little six- or seven-figure portfolio. If you own individual stocks but don't realize you are almost surely hurting your return by doing so, you're fooling yourself.
#2 You Think You Can Pick Someone Else That Can Beat the Market
The fact that there is still money in actively managed mutual funds is one of the greatest examples of the triumph of hope over experience. Over the last 20 years, nine out of 10 mutual funds have underperformed the market. Before tax. And no, they're not the same funds that did it the prior 10 or 20 years. There is no persistence. Of the funds that beat the market in 2019, only 77% beat the market in 2020 and only 7% beat the market in 2021.
#3 You Chase Performance
You own a portfolio composed of the assets that did the best last year, a recipe for chronic underperformance due to the lack of persistence among asset classes and investment managers.
#4 You Buy Investments Designed to Be Sold
Loaded mutual funds and commissioned insurance products, such as variable annuities and whole life insurance, are designed to be sold, not bought. They don't have a place in a real portfolio. They just show up in the portfolios of investors who have mistaken a financial salesperson for an advisor.
#5 You Buy Long-Term Investments with Short-Term Money
Putting your emergency fund or that down payment money into stocks, real estate, or other investments designed for the long term is a rookie error. If the volatility doesn't eventually get you, the illiquidity will. Sometimes, the return of your principal matters more than the return on your principal.
#6 You Don't Use Retirement Accounts
There are precious few free lunches in investing. One of the biggest ones is the use of retirement accounts to reduce taxes, protect assets, and facilitate estate planning.
#7 You Pay Too Much for Advice and Assistance
One percent per year of a $300,000 portfolio ($3,000) is a very reasonable price for financial planning and investment management. One percent per year of a $5 million portfolio ($50,000) is not.
#8 You Think Your Investments Care About Your Politics
The futility of ESG investing on changing the world is well-known, yet the trend toward it continues. You (and your favorite causes) are generally better off investing primarily to make money and then using the money to do good in the world instead of trying to do good through your investments. Plus, the market doesn't care that your Facebook group thinks the world will go to hell in a handbasket if your least favorite politician wins the election. As Mark Twain said, “It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”
#9 You Only Focus on Nominal Returns
The only return that matters in the long run is your after-tax, after-fee, after-inflation return. Learn to think about money in inflation-adjusted terms.
#10 Lack of a Written Investing Plan
Your brain space is limited, like all of ours. Write down your investing plan and the reasons for it. This will help you see the gaps in your knowledge, and it will help you avoid changing it at the worst possible moment.
#11 You Cannot Explain Your Portfolio in 30 Seconds or Less
My portfolio is composed of 60% stocks, 20% bonds, and 20% real estate. Do you even know what your asset allocation is?
#12 You Don't Realize That the Investor Matters More Than the Investment
Your behavior as an investor will have a much larger impact on your investment returns than the particular investment that you select.
#13 You Think Investing Is Exciting
Successful investing is boring investing. If you talk about it like it's something exciting, using fancy financial terms you may not even understand, successful investors may smile and nod their heads. But inside they're mocking you.
#14 You Never Rebalance
Buy, hold, and rebalance. Don't forget that third step. It's an important piece of risk control, and controlling risk matters a lot more in investing than chasing returns.
#15 You Know Your Rate of Return, but Not Your Savings Rate
Great investors are first great savers. It doesn't matter what the return on a tiny little portfolio is. Especially in the early years, focus more on making more money and saving a bigger chunk of it and less on maximizing that investment return.
#16 You Don't Even Know Your Rate of Return
I find it amazing how few investors know how to actually calculate their investing return.
#17 You Look at Your Portfolio More Than You Mow Your Lawn
Investments make most of their money when you're not looking. So, look less. It doesn't help to look more, and it could hurt you.
#18 You Are Attracted to Investments That Promise Returns That Are Too Good to Be True
Yes, we'd all like to earn 40% a year. But do you realize that if you have a million dollars and earn 40% a year, you will own the entire world in just 59 years? You'll be a billionaire in just 20 years. There are only 2,700 billionaires in the world. That tells you that you shouldn't expect any sort of long-term 40% return. That's too good to be true. People telling you to expect that are lying and are probably trying to steal from you.
#19 You Buy Primarily Speculative Investments
If the investment you buy has no earnings, pays no rents, and pays no interest, limit it to a single-digit percentage of your portfolio—if you invest in it at all. This includes precious metals, commodities, empty land, and crypto.
#20 You Buy Investments You Don't Understand
If you ever say, “I didn't know it could do that,” you had no business purchasing that investment.
#21 You Misunderstand Why Real Estate Is a Good Investment
If you think real estate is a good investment for one of the following reasons:
- Real estate isn't a “paper asset;” I can put my hands on it
- Somebody else is paying for my investment
- Real estate always goes up
- I'm investing using other people's money
- 90% of the world's billionaires own real estate
you need more education. Real estate is a good investment because it has high returns and low correlation with other asset classes. Full stop. Need more info? We just put together a course on that.
#22 You Think the Financial Media Provides Actionable Information
In reality, most of the financial information you see on TV, hear on the radio, read about in the newspapers, or see in magazines is useless entertainment. That goes for most blogs, websites, and internet forums, too. The percentage is much better with books, but it's still probably lower than the batting average that would get you on to the high school baseball team.
#23 You Fail to Account for Risk When Comparing Returns
Why would you put money in a savings account paying 1% when “the stock market pays 10%?” Just one word. Risk. Why would you pay off your 5% student loans when you could make 10% in real estate? Just one word. Risk.
#24 You Are a Reactive Investor
Even though the financial media insinuates that you should, you're not actually supposed to change your portfolio in response to ongoing political and economic events.
#25 You Focus on What You Can't Control
You can control your savings rate. You can control your asset allocation. You can control your investing behavior. But you can't control what the market or interest rates do. Quit focusing on those things.
#26 You Don't Understand the Difference Between Deep Risk and Shallow Risk
Deep risks—such as inflation, deflation, confiscation, and devastation—represent permanent losses of capital. Shallow risk, i.e. volatility, is a temporary loss of capital. It is critical to understand the difference. The patient, long-term investor with a solid plan can ignore the latter but ignores the former at grave peril.
#27 You Are Attracted to Complexity
Complex portfolios waste your time, effort, and money. In the words of Thoreau, “Simplify, simplify, simplify.” You need to have a very good reason to add an additional asset class to your portfolio, and the same goes for new investments within a given asset class.
#28 You Are More Interested in Investment Management Than Financial Planning
The real bang for the buck with a financial advisor is the almost free financial planning rather than the expensive asset management. Yet, people are all too often willing to pay for “tactics” rather than “long-term planning.” Or if they're DIYers, they focus on the tactics and strategies rather than their goals and the least risky way to achieve them.
#29 You Think You Need to Hit Home Runs
Investing is more about avoiding errors and hitting singles and doubles than hitting home runs. You are far more likely to lose the game if you're swinging for the fences every time.
#30 You Are Focused on the Short Term
Successful investing can only be measured in the long run, and yet investors seem to care what is going across the ticker (updated every few seconds) at the bottom of the TV screen.
#31 You Look for Shortcuts
If you think there is an investment out there that offers stock-like returns without stock-like volatility, you can be sure that there will be someone along shortly to sell you a product that promises to do that but can never deliver it.
#32 You Buy More When the Price Goes Up
Everybody likes a good sale, except novice investors. If you don't get excited to buy more steak when the price goes up, why would you get excited to buy more stocks, bonds, real estate, or any other investment? The faster it rises, the lower your future expected returns.
#33 You Struggle to Do Nothing
Most of successful investing is doing nothing. Sure, there are investing chores to do—like rollovers when you change jobs, rebalancing, tax-loss harvesting, and directing new money each month into the appropriate investments in your portfolio. But if you feel like you're not investing unless you're doing something, especially in times of market volatility, you're going to hurt your long-term returns. There is almost nothing in investing that must be done “right now.”
#34 You Are Overconfident
Don't confuse your opinions for real insight. What are the odds that you know more about something than the collective millions of other investors in the world? Not very high.
#35 You Are Underconfident
Too many investors have paralysis by analysis and end up leaving their money in cash for years out of fear that they'll do the wrong thing. Get started. Save. Invest. Any reasonable investment held for the long term is going to be better than doing nothing.
If you want to be successful at investing and reach your financial goals, become a good investor. Step #1 is to stop being a bad investor.
What do you think? Which of these errors have you made and why? What else can you add to this list? Comment below!
#1 = you can’t beat the market. Sounds catchy and often repeated. In some sense that is what factor investors try to do, they think a tilt to, say, small cap value will improve returns so it depends on how you define the term beating the market. In the strict sense most of us are trying to beat the market (if you define the market by all possible investable equities) by having a tilt to US equities. Even Jack Bogle did the same, saying avoid international.
Point #1 was about stock-picking and definitely holds true. Your comment is focused on asset allocation (which was mentioned in points #11 and #25.
Maybe point #1 could have been titled “You’re buying individual stocks” or “You think you can beat the index” but that’s a pretty minor quibble. If you want your content to be read on the internet, you’re almost obligated to skew to catchy. I think WCI strikes a pretty good balance between catchy and factually correct/actionable.
Great wisdom in that list! Those are hard to argue with, though I suspect with the many available phone apps that aggregate investments, that most of us look at our net worth much more often than we mow our lawns. In my case my wife mows the lawn so I’m a huge offender. I think it’s a minor failing since I never change my investment policy or make decisions based on what my phone tells me.
Speak for yourself. I add up our net worth only once a year. I do have to add up our retirement assets every month or two though in order to know where to send the new money. The lawn definitely needs mowed more often than that.
In reading “How to Know You Are Terrible at Investing”, it made me wonder how many points that were required to consider yourself a terrible investor. The author does not elaborate on this. While I understand the need to have a nice, round number of top FILL IN THE BLANK things not to do as an investor, it is quite a stretch to consider yourself terrible at investing if you do a few of these points. I consider myself a highly seasoned investor who started investing 32 years ago.
So, how many points did I score. There were two areas where I needed to “correct the problem”.
Point #2 – You Think You Can Pick Someone Else That Can Beat the Market
This is my primary mode of investing for the last 30+ years!!
This one I hesitate to even discuss because it is a big can of worms with the explosion in popularity of index investing and, in my opinion, the obsession over low fees rather than return. Let me be clear, I believe that index investing is THE best way for most investors out there. I consider myself an open-minded person and I have tried numerous times to convince myself that index investing is the way to go for me. I do the math (because I am not emotional about my investing) and come to the same conclusion every time. I would be much less rich if I had been index investing for the last 30 years. I don’t care about the statistics of the number of funds that do or do not outperform the market. All I care about is my specific investment strategy, my specific investments, and if I had more or less money in my pocket if I would have index invested instead. For example, $1,000,000 invested in the Vanguard 500 Index Fund 10 years ago would grow to about $2,485,772. This same amount invested in Fidelity Growth Discovery Fund would be worth about $3,174,000. These are very rough numbers. This is a difference in $688,228. I really don’t care that my annual mutual fund fees are .77% vs Vanguards extremely low fees of .04%. At the end of the day, I would have $688,228 more in my pocket after fees. You can argue that I took on more risk during that period and you would be completely correct. But again, I don’t care about that. All I care about is how much money I would have in my pocket if I would have index invested instead of my reality over the last 10+ years. I just can’t bring myself to index invest when my specific situation shows that I would have much less money if I would have spent the last 30 years index investing. My strategy is a proper allocation across asset classes of actively managed funds that are in the top 25% in their category for the last 5,10, and 15 years. I review my investment choices every 3-5 years and make changes when appropriate. My investment strategy has made me a multi-millionaire with the ability to retire 15 months from now. Does that make me a terrible investor?
#21 You Misunderstand Why Real Estate Is a Good Investment
The author states that you need more education if you believe “Somebody else is paying for my investment” and “I’m investing using other people’s money”. He states the real reason is because it has “high returns and low correlation with other asset classes”. While I agree with the latter, the former is a blanket statement which may or may not be true. It’s like saying the stock market has high returns. It’s essentially a non-statement that doesn’t really mean anything. I have invested in real estate for 32 years now. Why does thinking that “somebody else is paying for my investment” and “I’m investing using other people’s money” make me a terrible investor? Is it not true that renters are essentially paying the mortgage for you and effectively increasing your net worth with their rent payments and subsequent decrease in debt load? I would argue that my renters are paying for my real estate (which is an investment) every single month. Does this make me a terrible investor?
I think the author has unintentionally fallen a victim of point #34.
There ARE definitely wrong things to do when investing that make you a terrible investor. But let’s not fall into the trap of thinking there is only one “right” way to becoming financially independent. Or worse yet, calling people a “terrible investor” because they do not invest the way you invest. That is really the point I am trying to make here.
Regarding your point about # 2, the questions are
1) Whether there was a better way to take on more risk to get that return than choosing an actively managed mutual fund manager and
2) Did you just get lucky and happened to pick one of the winners? We know there are going to be winners out there, even in the long run, but it’s probably not the way to bet. You’re right though that any reasonable strategy, funded adequately, is likely to reach your reasonable goals.
Regarding # 21, that’s the same as saying Wal-mart shoppers are paying for your investment (or paying off the mortgage or paying for your retirement) because you own Wal-mart stock. Nobody says that, but it’s just as true with stocks as with real estate.
I guess disagreement on only 2 out of 35 is pretty good.
This was a good read, I’d add however that with stocks, you can’t leverage OPM to purchase real estate, nor can you control the cash that you pocket from that investment (through capital improvements, improved property maintenance, better tenants, etc.). If you’re strapped on cash, there are ways you can make good returns on real estate investments using the right strategies. Increasing your returns this way, with such control AND with little money out of pocket I would say makes a savvy investor. However, simply stating that because someone else is paying for your investment makes it inherently good is the wrong way of looking at investing. You need the whole picture, which is what I believe you may have been going with it and where I’d agree with you.
Sure you can absolutely use leverage with stock investing just like you can with real estate investing. Easiest way is margin, but you can also borrow from your 401(k), against your life insurance, car, or house. I agree that it’s easier and you often get better terms with real estate though.
As far as control, no you don’t control Wal-mart, but you also don’t control a real estate syndication or REIT. I control my small business, and I can control my small real estate investment. That’s not a real estate specific thing.
A better benchmark for the index fund comparison would be VUG, vanguard growth ETF. The Fidelity Growth Discovery Fund still beats it. 1 million in 2012 would be 4.2 million in VUG vs 4.8 million in the fidelity Growth Discovery Fund. Still wins, but they’ll always be some active fund that beat passive, over a 20-30 year period less likely to continue to outperform.
Let us go and see in the next 10 years! GL.
“All I care about is my specific investment strategy, my specific investments, and if I had more or less money in my pocket if I would have index invested instead. For example, $1,000,000 invested in the Vanguard 500 Index Fund 10 years ago would grow to about $2,485,772. This same amount invested in Fidelity Growth Discovery Fund would be worth about $3,174,000. These are very rough numbers. This is a difference in $688,228. I really don’t care that my annual mutual fund fees are .”
It is a gross oversimplification to say that ESG investing is a political statement – it can be but certainly does not need to be. ESG investing does use more data to judge risks associated with investments. Also, an overwhelming number of investors believe that an ounce of prevention is worth a pound of cure. Why invest in companies that create a disproportionately larger set of problems that have to be cleaned up by everyone else. Donate to your favorite charity instead? So, take a pill to address your heart disease instead of adjusting your diet and making exercise a part of your lifestyle to minimize or eliminate the risk all together?
We’ve had this discussion before and I don’t expect you to change your mind.
https://www.whitecoatinvestor.com/low-fee-socially-responsible-investing-an-oxymoron/
But the idea that one can “prevent” badness through ESG investing is highly unproven at best. Not investing in “bad companies” doesn’t affect the company except at IPO. After that you’re just swapping shares with other investors. And the pill/diet & exercise analogy is downright bizarre.
I think there is an awful lot of virtue signaling going on with ESG investing. People feel good about themselves for doing it and then skip out on doing the things that really can make a difference.
Yes, we have had this discussion before. I do agree with most of the recommendations you make and have recommended your site. I do appreciate that you operate a forum where topics can be discussed in a relatively productive way. We all benefit from evidence-based advice, wealth or health.
I would agree that the ESG area isn’t perfect. Neither is non-ESG investing, or the practice of medicine for that matter. Over the past 10 years there has been a steady increase in the use of environmental, social and governance data (from about 1 in 12 dollars professionally invested to 1 in 3).
I do not agree that divestment or investor perceptions are only relevant at the IPO stage. Let’s use tobacco stocks as an example. In the 1950’s there were commercials pointing out how doctors recommended smoking. In time, there were several events that diminished the projected earnings one may have assumed in the 1950’s if there were not bad facts piling up. Is the tobacco industry profitable? Yes, but not at a rate that may have been the case if they had a product deemed to be healthy. Stock prices are based on supply and demand for the stock. Supply and demand is influenced by investor perception of future earnings.
How awful is it to provide an investor with the option to use a low-cost index fund which screens out tobacco stocks? Some investors would be uncomfortable taking the profits and the simply making a donation to the American Cancer Society.
There are diversified low-cost funds that follow a variety of indexes, sustainable or otherwise. The S&P 500 is not a static listing and weighting of stocks – it, too, reflects a worldview.
If tobacco stock prices fall without a change in their earnings because no one wants to own tobacco stock shares, they become better investments and provide higher returns for those who purchase the shares from the sellers. But it doesn’t affect how many people smoke. Can I do more good in the world with lower returns or higher returns? I think I can do more good with higher returns.
Now, would I go start a tobacco company or be a sole investor in it? Probably not. But am I losing sleep at night because I own tobacco stocks via an index fund? Not a wink.
According to stocks for the long run, Phillip Morris is the stock with the best all time return. I personally wouldn’t want to own it but there’s an example that the sin companies could be more profitable.
There was/is a mutual fund out there that only invests in bad stocks. I think it had a 2% ER (turns out it was 1.49%) though, which probably ate up any advantage there might have been. Here it is:
VICEX
https://www.morningstar.com/funds/xnas/vicex/performance
6.72% ten year return compared to 12.45% for TSM and 11.96% for value index.
Hard to get behind those returns, but here are the holdings:
Galaxy Entertainment Group Ltd
Northrop Grumman Corp
Pernod Ricard SA
Raytheon Technologies Corp
Philip Morris International Inc
BAE Systems PLC
Constellation Brands Inc Class A
Diageo PLC ADR
British American Tobacco PLC ADR
I think I’d rather own an ESG fund than that!
“#1 You Think You Can Beat the Market” is an absurd generalization that is NOT true for everyone. If someone is inclined to want to learn as much as they can about investing or trading, wants to build this skill over time and enjoys it, absolutely it is possible to beat the market on a risk-adjusted basis. There are plenty of examples of such success and often these people are not out there in the media drawing attention to themselves.
Just because the average “casual investor” following what they hear on mainstream financial media will not beat the market through a market timing strategy or a portfolio of individual stocks doesn’t mean that the top 10%, 20% or whatever will not be able to beat the market long-term by the application of effort and sound principles.
I wonder if the author would say you should not try to be a better physician than the average? That would seem to follow from such a defeatist mindset.
Surely the professional folks working full time plus to manage an actively managed mutual fund would be among that top 10-20%, right? Yet 90%+ of them can’t beat the market over the long run. Pretty telling statistic.
I agree with you that most people (and I include myself) are better off indexing, but the individual investor does have some advantages over large funds. Money flows out if they have a bad quarter / year. An individual can hold onto volatile positions for longer.
Also hedge funds have a different objective — keep rich people rich. They don’t want terrible drawdowns (after all hedge is in their name) and an individual doesn’t have this constraint.
There is also size constraints that limit funds. The renaissance medallion fund is closed to outsiders as their strategies don’t scale up too big amounts.
I don’t doubt there are some who can beat index funds and get rich relatively quickly, but most who try fail. I suspect doctors are more likely to fail than others due to overconfidence, money to burn, etc..
However at least one of 696 companies in the vanguard small cap growth will get a 30x return in the next decade and we’ll be wishing 10 years from now why didn’t I buy x just like people think the same with Tesla now. That’s the dream that keeps people deviating from indexes
I’d agree as far as high-fee mutual funds. Many managers are over-compensated at 1% or more of annual fees. Most of what the typical fund manager does can be achieved by a good individual investor with sufficient study and practice but without the hefty fees which put a big dent into long-term performance. If you back out fees, the percent of managers outperforming the market is higher.
I would also point out that there are various hedge funds or active ETFs that run strategies which are designed to reduce volatility or provide counter-cyclical returns. By design, these funds will not “beat the market” on a nominal basis, but when risk-adjusted and measured across multiple market cycles, do outperform. So, I think there is a lot more nuance in this area than would justify the claim that virtually no one can beat the market.
I agree, many managers outperform the market before costs.
I wouldn’t say that no one or even virtually no one can beat the market. I’m just saying it isn’t wise to bet that way.
Excellent list! Can you make this post a you tube spoof of Jeff foxworthy’s “You might be a redneck if…” routine?
Best,
Psy-FI MD
As to the entertaining and titillating financial media,it is fun and addicting to listen to but every item of information it gives out is already stale and already has been acted upon by someone else.
Sadly, I’m guilty of #5 and #17, but I’m making saving adequate cash reserves a priority for 2023. Personal capital makes it too easy to check your net worth/returns. To be fair, I never mow my own lawn and pay people to do that.
I agree with most of your 35. However, I have noticed in the past that you have recommended private equity and private REITs. These particular areas are extremely risky, voltile, illiquid, opaque, and are hotbeds of fraud. it seems to me that allocating a small percentage(10%) or so to wellresearched individual stocks would be much preferable to taking a shot in the dark by buying any of these questionable “investments”.
Risky? Yes, but only in the same sense that direct real estate and stocks are risky.
Volatile? Not really. Less volatile than public markets, although some of that decreased volatility may be just the fact that they don’t mark to market daily.
Illiquid? Yes. But is that a feature or a bug? I’m willing to be illiquid with a portion of my portfolio if I’m paid to be illiquid.
Opaque? Yes. But again, feature or bug? Complying with transparency regulation is expensive and impractical for a small business or real estate property. Imagine that a $5 million syndicated apartment building had to do the exact same accounting and compliance work as Wal-mart? Where will the money to do that come from? That’s right, your returns.
Hotbeds of fraud? A reasonable criticism. Certainly more fraud than in public markets, but dramatically less than in a space like crypto.
We know that individual stocks are a bad idea for almost everyone. The data is very clear. That data doesn’t exist for real estate. They could be a bad idea for most, but we don’t know that. If you can pick stocks well enough to beat an index fund long term, you shouldn’t be just picking them for your own money.
I find it fascinating to see this criticism coming this year when stocks and bonds and public REITS are down 10-30% and my private equity real estate is up 8% and my private debt real estate is up 8%. I’m pretty darn happy with those returns this year. Now maybe there’s just a delay and the pain public REITs are seeing this year will show up in 2023 for the private stuff, but we’ll see.
I really don’t want to get into a long discussion on the matter but I did want to make a couple of points. I thought we were focused on long term returns on this site so I’m not quite sure why you mentioned this year’s returns on private placements and real estate. My more important point is your valuation of your assets in these private deals. The valuations are mostly determined by whomever is in charge of the fund. These are opaque so many times you don’t know who is determining this valuation and you really don’t know if this even close to being accurate. Just trust them. Many times you have no clue if the guys you are dealing with are just clever con men. You certainly can’t sell without losing your shirt in the firs 5-10 years or more. As I said previously they are hotbeds for fraud. Sorry, but I’d much rather take my chances with transparent individual stocks for 10% of my portfolio and avoid the scammers in some of these private issues.
I agree you should not invest with someone you don’t trust. Proper due diligence is far more involved than plopping money into an index fund. Then diversification protects you from what you can’t/don’t know.
As far as not being able to sell in the first 5-10 years, I have yet to see a private syndication/fund with a 10+ year required hold. Most do have a 2-7 year required hold on the equity side and often 1-5 years on the debt side. That’s the price of earning an illiquidity premium.
short follow up. on private REITs. The upfront commissions are 9-10 percent with high yearly expenses. The GP or some other unlknown party determines the VALUE. No third party unbiased determination of the value of the private equity. This is extremely sketchy, at best. How do you even have any idea what the private equity real estate is worth? You don’t, especially if the GP is making it up as they are going along. And individual stocks making up n10% of your portfolio is too risky. (I do hope that the sponsorship of Triton does not create a conflict of interest
I don’t know what 9-10% commission you’re thinking of. The old broker-style private REITs often had loads like that, but that’s not what is being discussed or advertised on this site.
There’s nothing keeping you from appraising or paying for an appraisal on a syndication you’re looking at as part of your due diligence. Fly out, walk the property, talk to the residents etc. It’s all available to you.
I like this list a lot. I want to challenge 16. I bet on this whole list that might be least likely to be challenged. And it’s great to know your ROI exactly. For me it goes against #25. Since I’m routinely tax loss harvesting and donating most highly appreciated shares it’s not totally straightforward to track like it would be by just looking at your purchase price and current value. Could I calculate it? Sure. Do I have better things to do with my time? Absolutely. I have a written investment plan that calls for a certain asset allocation that is extremely close to Dr Dahle with small differences. I have a simple Excel spreadsheet with my assets, net worth, retirement allocations on it. I have targets for what I want to hit by certain age. I want X by 55 to be FI. So each year I see if I’m still on pace or ahead of my target. If I’m way ahead I might give away more in appreciated stock. If I were behind (which I haven’t been) I’d bump up what I invest per year. As long as you go through all the other steps of the financial boot camp I don’t know how vital it is to track my ROI on each asset. I’m not going to change it anyway. Broad market passive funds is key. Ok heresy for sure but that’s my story and I’m sticking with it.
I’m surprised how much pushback I’m getting on this point. There are several benefits of actually knowing your investment return.
# 1 It gives you a realistic view of returns so you don’t fall for “too good to be true” returns.
# 2 It shows you if the return you are using in your projections is in fact similar to the return you are actually achieving.
# 3 It shows you if what you are doing, should it not be indexing, is beating, matching, or trailing indexing.
The title to #10 “Lack of a written investment plan” really needs to be rephrased, am I right?
Read “Where are all the Customers Yachts” and A fool and his Money
Both further prove how silly investors are
I love one quote. “NEVER BUY ANYTHING FROM A BROKER AT AN AIRPORT”-thats where Dean Witter put their GREEN BROKERS; after that a STEPUP to SEARS!!! Then a promotion to the TALL BUILDING
If you read a Random Walk you gotta learn the Playing field is UNEVEN and anything b ut indexing is a fool’s game
#1 bugs me because it is easy to beat the market, measured by long term rate of return (not risk adjusted), by using a little bit of leverage. It’s easy to beat the market, measured by safe withdrawal rate, with a more diversified portfolio instead of 60% total market 40% total bond. You need to clearly define both “beat” and “the market” or the statement loses all meaning. But I agree picking individual stocks is dumb
The index era is over. I’m surprised Dahle keeps this stuff up. From now on, you will be REQUIRED to pick stocks. Or at least blindly do the energy thing via ETF, etc.
Commodities, BTC, and energy in particular. The rest will get you crushed. The American Dream was over long ago, JD better hope all his real assets are safely stored. See you over in the digital gold blog post.
Ha ha. Okay. Your argument is that it is different this time? Really?
# 8 is for you. You will find that if your worldview is dramatically different from the consensus world view that you are wrong most of the time. The overall market is smarter than any of us. Not always right, but much more reliably right.
Jimbo,
What you are missing this time is that markets ceased to exist quite a long time ago. Why did you miss this? Because your blind spot was that the Fed juicing your indices was the same narrative. So, now that they don’t do that, you aren’t aware that you’ll be on the wrong side of the decade of sideways stocks at best. Don’t worry, when they return to their easing and rate cuts later next year you’ll pound your chest a bit, but I’ll remind you about inflation and your returns, which will be paltry for a decade.
You and Bernie are getting crushed in your “diversified” emerging markets theme, and you will continue to be.
For those who can read this and understand that it is fundamentally correct, you’re welcome.
Energy, BTC, commodities, etc for the win. I’ll be standing as king of the hill while Jimbo claims that “I got lucky.”
Best to you on Christmas and in the New Year, but of course, since I know what’s going on, I shorted like I told you a few weeks ago. But you can’t time the market, right Jimbo? Haha
Hold my beer.
Bad investor here. After having student loans forgiven early this year, I finally had the extra cash to open a taxable brokerage account at Schwab (after maxing out 401k and IRA options.) Unfortunately I decided to pick a few individual stocks that seemed like a bargain. One of those is now down 87%. I won’t have capital gains to offset, but should I cut my losses on the very underperforming stock and sell? Will I then be able to deduct the $5000 loss from my taxes?(or at least $3000 this year and carryover $2000 next year?). I have learned my lesson on individual stock picks and will stick with index funds moving forward. I typically do my own taxes with H&R Block software but this would be my first year entering anything investment related.
Do you still want to own it? Does the reason you bought it still apply?
Personally I don’t own individual stocks, so I would sell and diversify into index funds.
Yes, that’s the way loss carryovers work.
Perhaps we can make more predictions in the 2022 prediction blog post just recently submitted.
I agree with #1 You Think You Can Beat the Market with conservation.
Time span is very important. In any given year, it is very possible to beat the market. But the odds are very dismal in 20-30 years if fees and taxes and personal time were deducted.
I do not believe total bond market behaves the same like stock market. The odds to beat bond market is much higher.
The data supports your comment. Per Morningstar, over the last 15 years BND has only beaten 47% of the funds in its category (same number is 82% for VTI). Note that the Vanguard Intermediate Bond Index Fund (the one my parents use) beat 91%.
However, if you comopare the two, Morningstar puts them in the same category even though the second is significantly riskier (longer duration) than the first.
So you really have to make sure you’re comparing apples to apples and I’m not sure Morningstar is in this regard.