Actively Managing Your Investments is Dangerous to Your Financial Health

Actively Managing Your Investments is Dangerous to Your Financial Health

I find interesting connections among my readings and discussions I have with members.

There are a couple noteworthy articles in the November 2015 Kiplinger’s Personal Finance magazine; “4 Investing Rules to Live By” on page 50 and the Andrew Feinberg article on page 51. Put these two articles together with the book, “DIY Financial Advisor, A Simple Solution to Build and Protect Your Wealth” by Wesley R. Gray and a story begins to develop.

The Andrew Feinberg article is about the difficulty of managing investments to beat the markets. Mr. Feinberg is an intelligent person who ran a hedge fund with a staff of equally smart people. They spent their lives trying to be successful for their clients and for the challenge of beating the markets. They lost and they are not alone when you consider how few mutual fund managers ever beat the market. Even the ones that do only beat the markets for limited amounts of time then they revert back to the norm.

Given all the overwhelming evidence about the difficulty of beating the markets, why do ordinary working people like us think we can do it? The data are out there that indicate the public’s inability to actively manage our investments. We fail because we think actively managing our investment selections and timing our buys and sells is the way things are done.

We have been so conditioned by various sources to think of investing as a complicated process of trading that many of us believe investing for our futures is more luck than planning. I hear all the time how investing is nothing more than gambling and how the deck is stacked against us.

Too often I’m drawn into discussions about trading stocks or mutual funds, hot tips, “put” and “call” options, alternatives (investments outside the stock and bond norm), investment programs offered by insurance firms and even penny stocks. My response is usually disappointing to most because I always state all the complexity, costs and risk are not necessary. Investing should be simple and boring. And neither the Koch brothers nor George Soros has anything to do with you building wealth.

That’s where the “4 Investing Rules” article and the “DIY” book come in. Plus there are plenty of my articles on the MOAA web. Successful investing comes down to a simple plan, discipline and ignoring the media and financial sector noise.

Fact is, we can all be successful but success rests with simple, proven, boring strategies and not fly-by-the-seat-of-our-pants investing or fancy trading programs bought at fast-talking pitchmen seminars.