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“Wall Street is the only place where people drive in a Rolls Royce to get advice from those who take the subway.”  -Warren Buffet


When I get people talking about their retirement, I usually run in to three groups of people.  There’s the “I’ll figure it out” crowd who don’t have a clue what tomorrow will bring.  There’s the “It’s too late for me” crowd, who used to be the “I’ll figure it out” crowd. They’ve come to the conclusion that their retirement will be sustained with a reverse mortgage if they are lucky, and more likely than not have tons of debt.  And then there’s the last group.  It’s the group I hope I’m reaching.  It’s the group that is on the brink of mastering their financial future. They just need to learn a few key understandings. I call them the “I’m doing the right thing” group.


Members of this group really have their act together. They plan for the future.  They advance themselves in life. They save, budget, and invest in their future.  They come from all walks of life. Some come from money, but many don’t.  Many have degrees, but some don’t.  They have adopted the essential discipline of delayed gratification, and it’s what sets them apart.  


However, what I’m going to discuss right now isn’t how wonderful they are.  It’s about who is taking advantage of their hard work and effort.  The problem is that what they have been convinced is the “right thing” to do is, in fact, historically proven to be the wrong thing to do.


Over the past century, the market (The Dow Jones Industrial Average) has appreciated at an average annual rate of about 8%.  It’s gone from about $60.00 to about $16,000.00.  So 8% should be the standard.  If Average Joe puts money in the market, he should expect this rate over an extended period of time.  So if 8% is our benchmark, why am I constantly seeing 4% to 6% returns in all of my friends’ managed portfolios?



As we speak, millions of baby boomers are entering their retirement years and they have a major problem.  They don’t have enough to retire on.  In fact the average baby boomer has less than $50,000.00 to carry them through their retirement years.  Forget about passing something on to their kids, they won’t even be able to retire.  


They have been doing the “right thing” their whole life.  Throughout their working years they have confided in their reputable banker. This generation relied on working hard, saving money, and becoming home owners.  The last piece of the puzzle was of course, their portfolio.  Mutual funds were the choice vehicle for safe, sure returns into retirement.


So why has the financial industry been unable to answer this need?  Why are mutual funds that make 5% or 6% annually still being called a solution for those who can barely put away $100 a month?  Obviously debt and overspending are major factors. But something far more subtle has been leaving retirees wondering why there’s so little waiting for them upon reaching their stage of their lives.


There is a common theory believed by the majority of financial professionals who work both on Wall Street and in your local bank.  The highest paid fund managers, financial advisors, stock brokers, and even CEOs have all been taught this principle.  This theory has been taught in the most prestigious business schools, and is a standard for mandated testing. It is known as the Efficient Market Theory, and basically what it states is that the market is never wrong.  That means the people in charge of our retirement believe that….


• It is impossible to know whether a particular stock will go up or down.

• There is no such thing as a cheap or an overpriced stock.

• The best you can do is spread out your bets via diversification and dollar cost averaging.

• There is a direct relationship between risk and reward.


What I’m trying to tell you is that people who have gone to the best schools, have the fanciest degrees, have the most expensive suits, and are deemed savvy professionals are incapable of doing much better than random.  I don’t know about you but when I hire a professional, I expect them to do much better work than I could do on my own.


So what can we expect by relying on the “professionals”?  Between September 1st 1985, and September 1st 2015, the Dow Jones Industrial Average rose from $1,334.00 to $16,001.00 yielding an average annual return of 8.6%.  


Studies have shown that mutual funds tend to underperform when compared to the market, particularly the actively managed ones.  Based on an article by world famous life coach Tony Robins, “Why Pay for Poor Performance?” over half of fund managers in all categories underperformed in comparison to the market.  On average they charge you 1.5% to for that subpar performance. Here’s the difference it can make for a young adult looking to retire in the next 35 years.



7% performance – 1.5% in commissions = 5.5% annual return.


$10,000.00 at 8.6% growth for 35 years becomes $179,491.00


$10,000.00 at 5.5% growth for 35 years becomes $65,138.00



If you hired a contractor who stopped after building half of your house, you’d think they are nuts, and you certainly wouldn’t pay them.  A professional should be able to outperform the amateur.  And yet, the entire financial industry relies on having investors believe underperformance is the best you can do. I have a problem with this. So does Warren Buffet. So does Tony Robbins.


I could write pages on why the financial industry operates this way, but that’s not my purpose here and now.  Rather, I’d like to point out one simple piece of information.  Why spend 1% or 1.5% of your retirement every year on someone who can’t even justify their expert status?  Why not instead, invest in a vehicle that matches that 8% standard for almost no cost at all.


They call them Exchange Traded Funds, and you can buy them like a stock, and stay diversified like a mutual fund.  It will get you closer to that 8% benchmark, and it will cost you under $10.00 to buy or sell.


The bottom line is this. Things are not always what they appear to be. This is especially true when an industry stands to make huge profits by keeping you in the dark.  Speaking to you as a private investor and stock market coach, this is where everything I do comes from. The market isn’t efficient, and a real professional like Buffet have results to prove it.  If you plan to be the passive investor, don’t be fooled into letting an underperformer skim off your profits.  You owe yourself more.  Keep your costs low and your growth on par with the market.  It’s a sprint not a marathon. That doesn’t mean you need to carry someone else along the way.



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