Fees and Gimmicks Are Squandering Your Investment Returns
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The following article is intended for retail investors. However, our editors believe it merits use by financial advisors for their clients.
Why do we invest? Most of us need to invest in order to fulfill our financial and retirement goals. By taking risks in capital markets, we expect a return on our investment that will at least outpace inflation. Inflation determines how much the purchasing power of our wealth will erode over time. Although investing means taking risks, not investing also means taking risks.
Unfortunately, most investors still don’t know which actions will help their odds of investment success. There is just too much noise and nonsense that confuses, scares and nudges us into making the wrong decisions.
For example, when you tune in to any financial news channel, you are persuaded with sensationalized market information. The flashing visuals about stock price movements, the conveyor belt of talking heads and the broadcasts from the chaotic, noisy floors of the exchanges enforce viewers’ anxiety about being left out of the game. It seems that every day is full of opportunities for making profits and avoiding losses. Indeed, the financial media and the investment industry want you to think that you need their knowledge. Otherwise, why would you watch? And, the more confusing investing in the markets seem, the more you are willing to pay the experts for their advice.
Investing based on the evidence
What if decades of data, peer-reviewed research and real-world evidence suggest that forecasting is a losing investment strategy? This would then say that market-timing, stock-picking and other conventional strategies that try to outguess or outwit the markets are cost-generating gimmicks. It would argue that the talking heads and the so-called market “gurus” have no more insight about where the markets are headed than you do. And it would mean that financial news and headlines have no impact on your long-term investment success. It would contradict everything that you’ve been taught about investing.