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tony

If Markets Can Make You Rich Why Are So Many Americans Poor

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Over the years, I have regularly addressed the psychological and emotional pitfalls that ultimately lead individual investors to poor outcomes.

The internet is littered with a of articles promoting the ideas of “dollar-cost averaging,” “buy-and-hold” investing and “passive-indexing” strategies to help you achieve your financial dreams.

However, as I addressed in “The Illusion of Declining Debt to Income,” if these are effective solutions, why are most of Americans so financially poor?

Read More:

http://www.marketwatch.com/story/if-the-stock-market-can-make-you-rich-why-are-so-many-americans-poor-2017-07-26/print

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I don't think people are well served by reading this author.

• Why aren’t those 401(k) balances brimming over with wealth?

• Why aren’t those personal E*Trade and Schwab accounts bursting at the seams?

• Why isn’t there a yacht in every driveway and a Ferrari in every garage?


The author never seems to acknowledge that so many people don't make enough to both live and invest in any substantial way.

what is clear is that a basic form of price movement analysis can provide a useful identification of periods when portfolio risk should be reduced...What I am suggesting is that when sell signals are given, it is time for some basic portfolio risk management...If you use some measure, any measure, of fundamental or technical analysis to reduce portfolio risk as prices/valuations rise, the long-term results of avoiding periods of severe capital loss will outweigh missed short-term gains


The author advocates market timing.

The author goes on to seemingly make an incoherent case against a "buy and hold" strategy.

Investors are often told that holding cash is foolish. Not only are you supposedly “missing out” on the rocketing bull market, but your cash is being eroded by “inflation.” The problem is the outcome of taking cash and investing it into the second-most-overvalued market in history...While cash did lose relative purchasing power because of inflation, the benefits of having capital to invest at lower valuations produced substantial outperformance


More market timing and the false choice between cash and stocks as if fixed income doesn't exist.

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  • Cut losers short. Let winners run.
  • Follow the trend.
  • Don’t let profits turn into losses.
  • Avoid adding to losing positions.
  • Remain neutral or long in bull markets. In bear markets increase cash.
  • “Buy” and “sell” signals are useful only if action is taken.

 

All of this time I've been investing every time I'm paid without regard to trends or buy/sell signals. I've been foolish enough to let my profits turn into losses and I've never once had the foresight to sell stock at a loss during a bear market. Worst of all, just to maintain some worthless asset allocation I've been adding to my losing positions every single time! Stupid, stupid, stupid.

 

These people disgust me.

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I apologize for posting this one. I guess I was lured by the title. I try to read and reread articles before posting these articles. I missed the boat (and the yacht) on this one.

 

Tony

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I'm happy you posted it. If there are lurkers on this site it is good to see examples of what not to do when investing. These guys can talk people into anything if others aren't around to point out the nonsense.

 

On a side note, what wealthy people park yachts in their driveways? Come on!

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I'm happy you posted it. If there are lurkers on this site it is good to see examples of what not to do when investing. These guys can talk people into anything if others aren't around to point out the nonsense.

 

On a side note, what wealthy people park yachts in their driveways? Come on!

 

I think this age old fantasy for retiring "wealthy" has been debunked finally, is owning and operating a vineyard. A VINEYARD!? It's hilarious!

 

The average millionaire lives in a house next door, sends their kids to PUBLIC schools, drives a 150 Ford truck, and dines in his and her finest, dungarees at home! From the fabulous book, Millionaire Next Door!

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