Thinking You’re Smarter Than the Market
Somewhere near 2010 I spoke with a retired real estate guru who had liquidated his $6 million real estate portfolio at a good time several years back. He had been so successful at real estate that he decided he could just as easily turn his talents to the stock market. Within three years, he had day-traded his account down to $3 million.
He came to see me thinking a “professional” investment advisor would be able to trade it back up to its original value within a year or two. He was looking for an investment advisor who could time the stock market the way he had timed the real estate market. I told him that wasn’t me. I don’t make promises I know I can’t keep. Seriously, buddy? If it was that easy, why would I need clients?
What Should You Do Instead?
There’s a lot of smart people placing trades every day — and for each trade only half can be right. I don’t care how well you did in your prior profession — that doesn’t translate into market timing skill. Investing is a process. That process has a name, which is called asset allocation. The process works, but only if you use it. Learn the basics in Market Timing vs Asset Allocation.