Discover the 6 Hidden Truths About Investing!

Anyone can invest, but only few can consistently win. And what’s surprising is it doesn’t take a genius to figure it out or have 20/20 vision. In fact, no newsletter, no broker, nor neighbor is going to give you a better performance than you can get with the right tools and education. But I think we trap ourselves into thinking investing is beyond what we can ever know.

I am here to not only tell you that you can do this, but you must. You owe it to yourself. You work very hard to accumulate what you have. Investing is too important to your future to tolerate meager returns. It is quite possible to learn what you need to know about the markets so you can have an investment plan that works year in and year out. Maybe by revealing a few truths about the market, we can lessen the anxiety toward investing on your own.

Truth 1: Using a full service brokerage versus a discount brokerage in most cases will not get you to your financial goals faster. In fact, a full service broker may actually hinder your progress: Just a 1-2% difference in the amount of fees charged by someone else professionally managing your money can possibly add up to tens of thousands to a few hundred thousand dollars difference over 30 years (based on earning an average of 6% after management fees versus managing your own account at 8%). Imagine retiring early instead of working those extra 5, 10 or 15 years to make up the difference. Find out if your broker has beaten the market after their fees.

Truth 2: Most people will fail to outperform the market by investing in a typical mutual fund. In fact, market data shows over and over again that many funds will severely underperform the market: Nearly 80% of all mutual funds underperform the market BEFORE FEES. So they end up significantly underperforming the markets WITH FEES. To look at this in another way, we have more than an 80% chance of NOT keeping up with market returns by investing like most other people. Traditional investing is not going to be enough to get you the returns you need to build wealth. Returns and long term performance matter!

Truth 3: The market is not as complicated as you think: The market appears complicated because there is so much going on, and you don’t know where to begin. The key is to FOCUS. Focus on a specific, straightforward and simple plan that is easy to understand, that makes sense to you and that you can follow over the long term without spending countless hours deciphering the market.

Truth 4: The greatest barrier to our success is sometimes us. We can’t get out of our own way. We tend to find excuses to stop us from making the decisions that lead our lives forward, or we get lazy hoping we can get the same results throwing our money into the latest and greatest fund. Unfortunately, this attitude can cost us dearly, even undermining performance. And furthermore, ignoring and putting off our decision to actively manage our nest egg today is one surefire way to hinder and possibly not achieve our retirement plans.

Truth 5: Returns matter. As much as you may feel more comfortable with conservative investments, conservative returns will significantly underperform aggressive returns over the long run.

Initial        Expected            
Investment   Return       Years       Outcome 
$10,000     3%         30          $24,568 
$10,000     5%         30          $44,677 
$10,000     8%         30          $109,357 
$10,000     12%        30          $359,496 

Truth 6: Actively building you portfolio matters even more. While that chart provides a realistic view of how much returns affect your outcome, actively putting money towards your investment every month is critical to building wealth. Just by adding $200 a month to our portfolio, we can significantly improve our results:

Initial Expected Monthly Investment Return Years Contribution Outcome $10,000 3% 30 $200 $141,407 $10,000 5% 30 $200 $211,812 $10,000 8% 30 $200 $409,416 $10,000 12%* 30 $200 $1,065,497

*Note: the S+P average generated a 12.5% return between 1980 and 2005

Even with all this information, I recently discovered some well-educated business professors at a local university still invest in traditional investments with full service brokers. (The broker himself told me). I guess it shows you that some just don’t want to take responsibility for taking the time to invest right, no matter how well educated they are. Unfortunately as we can see from our charts above, most don’t have the luxury to earn meager returns and not continue to build our investments, especially when we don’t have to. Just by altering some steps, you can start to invest right.