WWW.TheDavidAlliance.com

Investing

 

Hey Giant Slayers, this is Tony Bolstorff, financial planner with Mariner Wealth Advisors back with you this week talking about investing.  

 

Where to start?  Fundamental analysis?  Technical analysis?  Evidence Based analysis?

 

The place to start is your investment into a relationship with the Father, Son and Holy Spirit.  If you don’t have a relationship with your Creator, you are missing out on the best advice you’ll ever get!!  Over 2300 passages in the Bible that speak to money, possessions and stewardship!

 

Is there anything wrong with becoming wealthy through investing?  Certainly not!  1 Timothy 6 verse 10:  “For the love of money is a root of all kinds of evil.  Some people, eager for money, have wandered from the faith a pierced themselves with many griefs”.  Did you catch that?  Money isn’t evil, but the love of money is!  Big difference.

 

What to invest in?  In this capitalistic country you have a plethora of choices, but which ever road(s) you choose be careful not to make that investment your God!!  You can invest into individual company stock or bonds of varying size, location, industry, etc.  You can invest into real estate.  You can invest into your own business or multiple businesses.  You can invest into gold, wheat, corn or other commodities.  You can invest into the company you work for.  The list goes on.

 

Regardless of the capital you invest in, a simple truth holds true if you want to make money.  Buy low and sell high.  If someone had the Chrystal ball of perfect timing they’d have a lot of money!

 

Have you ever heard of the difference between investment return and investor return?  Let me repeat that again to see if you can pick up on the difference…Have you ever heard of the difference between investment return and investor return?

 

An investment is an object without emotion and an investor is a person with emotion!

 

Dalbar Inc is a well-respected research company which studies investor behavior and their returns vs. investment returns and the results are astonishing.  A little outdated but not bad…for the 20 years ending 12/31/15…so from Dec. 31, 1995 to Dec. 31, 2015 (dot com, Y2K, 9/11, great recession, etc) in there, the S&P 500 Index average 9.85% per year.  The average equity fund investor earned a market return of only 5.19%.  That’s huge!!

 

Let me state it different so it sinks in a little more how much emotions get in our way of investing.  If you had $100K at the start of that 20-year period and just put it in a S&P 500 Index fund without adding another dime you’d have $655K.  If you had $100K at the start of that 20-year period did buying and selling based on the average investor you’d end up with $275K.  That’s a difference of $380K!!  Want to make it more astonishing imagine if you had $1mil at the beginning of that time period, simply add a zero to the aforementioned numbers.  That’s a $3.8mil difference between the average investment vs. investor.

 

You may say that’s outdated data, Tony.  OK, let’s look at 2018.  Remember seeing your 401K decline in December last year?  According to Dalbar, the average investor loss (9.42%) compared to an S&P 500 index that lost only (4.38%).

 

Before you go off and just invest in an S&P 500 index, look at the included attachment which tells a lot of stories starting with the fact that the S&P 500 index isn’t always the best performing asset class.  In fact, it’s only been the best performing asset class a couple of times.  This chart which looks like a periodic table or quilt shares the objective truth is there isn’t any trends or patterns which company, asset class, sector, etc is going to do the best or worst in a given year.  So diversify your investments.  Ecclesiastes 11;  2, 6 “Sow your seed in the morning, and at evening let your hands not be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well.”

 

If someone claims they have found the crystal ball, be careful!  Typically, they’ll publish a book in a year or two they got it right.  I wish they’d publish a book about all they years they got it wrong.  In other words, an investor, even the most educated and esteemed investor, may get it right in a year or two but they can’t consistently repeat according to research.  This goes for actively managed mutual funds too.  Great salespeople claiming they can beat their respective index fund but reality shows otherwise over the long haul.  Proverbs 13:16 “A wise man thinks ahead; a fool doesn’t, and even brags about it!”

 

Last thoughts on investment I’ll leave you with are the investments during different seasons of life and who to invest with.  Look at the fine print towards the bottom of your next statement.  Any words such as broker/dealer?  What you don’t see won’t hurt you and when a broker/dealer is involved typically there is a sales commissions, high internal expense ratios, 12-b1 advertising fees with actively managed funds.  I know many advisors in the broker/dealer world and they are great people.  But there is a difference between doing what’s suitable for clients vs. what’s best for clients.  In the broker/dealer world suitability and the transactional nature of the business makes things gray. I would suggest looking for a fiduciary advisor who is required to put clients first before themselves even if that means losing some revenue because of given advice.  Lastly, investing in each season of life is different but applying overarching rules of thumb such as match the amount of bonds in your portfolio to your age is short sighted and taking the big picture into account.  Work with someone that takes everything into account such as pensions, your taxes, your estate plan, your investments, your stock options, your philanthropic plan, etc.

 

I hope you found this today’s segment helpful!  Any questions or comments feel free to give me a call at 651-212-0832 or email:  [email protected]