Grand Rounds: Can You Handle The Truth?
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Welcome to this session of grand rounds, a collection of posts I have discovered in the blogosphere and have found of interest and hope you do too.
This offering of Grand Rounds deals with certain investing behaviors/philosophies that we are all guilty of.
With the longest bull run in history for the stock market, everyone is looking like a financial genius.
Beware of investor hubris my friend for what goes up must eventually come down.
How will you react when feelings of elation turn to despair and there is blood on the (wall) streets as the bear awakens from hibernation?
Fred Leamnson, of Money With A Purpose, poses this very question in, “Are You Emotionally Prepared For A Market Meltdown?”
We have all heard it before, Market Timing is bad.
In order to win at market timing you have to be right twice, when to sell and when to get back in.
Make a mistake with either step and it can cost you dearly.
So despite the vast majority of us agreeing to the premise behind this, we are still known to keep “Cash On The Sideline.”
I know many colleagues who do this and I sure you do too.
The premise is that cash is sitting in a money equivalent account and when the market dips and “stocks are on sale” you have the ammunition to make a killing.
Is this not the very definition of market timing?
Full Time Finance drives home this point and the flaws that go along with it in the post, “Don’t Keep Dry Powder.”
I started out my investing career on a bad note, with a bad experience from a financial advisor who I thought had my best interest at heart.
Even though now the amount seems little (around $6k I believe), back then as a resident it was a sizable contribution.
I was funneled into a high front loaded mutual fund and, because I didn’t know better, I went along with it until I discovered index investing and promptly sold it.
The world of finance is strange to most physicians and there are so many fees that we are just not aware of, some hidden, some not.
Rick Ferri did an outstanding interview with The White Coat Investor on “Passive Investing And Financial Advisory Fees,” in which he reveals some of the things companies do to help transfer money from your pocket into theirs.
When someone in the industry speaks about practices he or she felt uncomfortable about doing I take notice and so should you.
“‘Cause I gotta have faith.
I gotta’ have faith.
Because I gotta have faith, faith, faith.
I got to have faith, faith, faith.” – George Michael
The investing world has always preached that you need to have stocks in your portfolio as stocks over the long run will always go up.
Sure history has backed this statement up so far.
However if you have read the warning label of any mutual fund prospectus you have come across the statement, “past performance is no guarantee of future results.”
So are we just having blind faith that the system will go along as planned and we will reap the rewards?
Or will we be caught with no swim trunks on when the tide turns?
Mr. Tako shares his insight and a nice history lesson to boot in, “The Seas Of Change.”
Losing money is not fun.
I remember how awful it felt when I lost $1k as a resident (it made #4 in my multipart series of “I Have Pretty Much Made Every Mistake In The Book.“).
So has Physician on Fire completely lost his mind when he states that he actually wants to lose 7 figures?
Find out if the good doc accidentally took some of that nighty nighty gas he uses in, “Life Goal: To Lose A Million Dollars.”
[And being just the kind of guy I am, if POF does indeed want to lose 7 figures in a hurry, I do accept cash or checks.]
Hope you enjoyed the reading material.
Have a great rest of the week.
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