In two recent articles, I explained how attempting to predict the near-term future is not investing. It’s speculating. So then, what is investing? Successful investing requires a combination of science and determination. The science is the easier part, so let’s first explore your best investment behavior.
The fact is, we’re often our own worst investment enemy, because we’re inherently hardwired to be bad at it. Numerous studies suggest that most investors’ portfolios ultimately underperform the investments they hold by around 1–3%.
You may have heard that today, June 9th, the long-awaited Department of Labor’s (DOL) “Fiduciary Rule” goes into effect. Do you care? As an investor, you should. It’s probably the biggest thing to happen to brokerage industry regulations since the Securities Exchange Act of 1934.
Now, when your broker advises your employers’ company retirement plan or advises you on your IRA, they must put your interests ahead of their own.
What “the Experts” Can’t Know About Investing
In my last column, I discussed the difference between speculating in the market’s short-term moves, versus patiently participating in it as a long-term investor. But what about those “expert” opinions from those who seem to know more about the market than you do? Can you depend on their predictions instead of your own?
Before we explore the question in the context of investing, consider last fall’s presidential election. Throughout the process – and even the day before the election – the political experts were largely wrong.