Posts tagged with: Goals

Newsflash: If a financial advisor or fund manager brags to you about “beating the market”, it’s NOT what you want to be hearing right now!  In this episode, I debunk the popular myth that you should be trying to “beat the market” when times are good.  I also lay out the questions you must ask instead when evaluating a mutual fund or investment manager.  Don’t get caught chasing high-beta strategies after one of the longest bull markets in history has already unfolded.  Investing and trading are contests of endurance, not of raw speed.


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Section 1: Today’s Market in Historical Context

  • There are bull markets, bear markets, and range-bound markets
  • Long-term chart of the S&P 500

Section 2: The Unpleasant Truth: How Mutual Funds and Managers Beat their Benchmarks

  • Cherry-picking returns
  • Sketchy math
  • “Marking the close” – see Resources section below
  • Leverage
  • High-beta stocks
  • Illiquid portfolios
  • Lack of diversification
  • Asymmetric risk profiles
  • Very few: superior management
  • Focus on how they did during the more challenging years in the market
  • Size of fund: rapid growth can limit future opportunities

Section 3: The Questions to Ask Instead

Section 4: The Real Way to Beat the Market Over the Long-Term


Study: Mutual Fund Managers “Mark the Close” to Manipulate Quoted Returns

Mutual Funds & Performance Manipulation


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In this episode, I go through the most common goals that investors seek to achieve and teach you how to use the financial markets to achieve them.  Most investors will want to pursue several of these goals, with one being a higher priority than the others.  Traditional retirement, early retirement, income, capital preservation, and fun are very different goals that each require a unique approach to investing.

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(CC image by Al King on Flickr)


Section 1: Capital Appreciation for Traditional Retirement

Section 2: Capital Appreciation for Financial Independence or Early Retirement

  • Use retirement accounts, but you’re usually better off if you DO NOT max them out
  • Direct more capital towards alternative investments like: your own business, rental real estate, REITs
  • Use options to generate income, including more aggressive strategies
  • Be a more active investor – trade the intermediate-term cycles for extra profit potential

Section 3: Income

  • Appropriate for someone who already has reached, or is very close to, financial independence or retirement
  • Stock selection
  • Preferred stocks
  • Use options to generate income, but conservatively

Section 4: Capital Preservation

  • Laddered portfolio of bonds
  • Preferred stocks
  • Stock selection
  • Use options to limit downside and sell some upside

Section 5: Fun!

  • Futures, FOREX, small-cap stocks, day-trading, etc.
  • Anyone can have an aggressive trading account as long as the risk to the personal balance sheet is kept under control


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