Let’s face it—it is in the best interests of the media and large financial institutions to keep the public as confused as possible when it comes to investing. They profit when the consumer is confused.
The rules of prudent investing are really very simple. Just remember the Number 3!
First, there are three myths or lies that you must learn to recognize:
1. Stock Picking — the myth that someone out there knows which stock or stocks to pick; he or she knows which stocks will be a home run and which ones to avoid. This is a myth/lie—no one can consistently pick stocks.
2. Market Timing — the myth that someone out there knows which sector of the market will soar and which will sag. No one can consistently predict the market; they are just gambling and speculating with their your money.
3. Track Record Investing — the myth that stocks that did well in the past will continue to do well in the future.
Secondly, you must learn to recognize the three types of Wall Street Bullies who attempt to use the three myths/lies to manipulate people, hold them in fear, and control their money. The three Wall Street Bullies are
1. The Con Man (think Bernie Madoff);
2. The Prognosticator — those people who attempt to predict the future; they claim to know what will happen before any of the rest of us do; and
3. The Guru’s – those who claim to have some highly analytical tool that allows them to see patterns, trends, and market movements hidden by the rest of us.
Once you can readily recognize the three myths/lies of investing and the three Wall Street Bullies who utilize these myths/lies, you are ready to see the three simple rules of prudent investing:
1. Own Equities
2. Diversify, and
These three simple rules of investing are built on three academic theories:
1. Efficient Market Theory,
2. Modern Portfolio Theory, and
3. The Three-Factor Model.
It really is that simple! However, applying these rules to your portfolio is complex. Do yourself, your family, and your portfolio a favor — learn to recognize the three myths/lies of investing and the three Wall Street Bullies who use the lies and myths to manipulate investors.
Become a prudent investor by following the three Simple Rules of Investing based on the three academic theories of sound investing.
Find an advisor who will work with you in achieving your family’s financial goals. GOOD LUCK!