The Secrets to Better Investing are Not Secrets

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UnknownMost providers of investment guidance want you to believe that they have some kind of mysterious secret, a magic key that unlocks a hidden universe of market-beating performance. Maybe it’s proprietary company research, access to exclusive hedge funds, or the decoder ring for price/volume charts. The complexity of these secrets may make them seem important and compelling, but we know that the real secrets to better investing are not secrets at all.

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Conventional wisdom isn’t always so wise
This storyline of secret knowledge has been the accepted marketing mantra in financial services for generations. Remember this version – “My broker’s EF Hutton and EF Hutton says…” And then the whole room goes silent waiting to hear the message from this expert of experts. It’s a classic campaign and we’ve seen hundreds of variations on this theme over the years.

But that’s slowly changing. Recently a few voices of reason, including Warren Buffett, David Swensen, Jack Bogle, Burton Malkiel, and Eugene Fama, have made it clear that the real keys to sound investing are the absolute opposite of secrets. They are straightforward, evidence-based principles that require no proprietary knowledge or special access. For instance:

  • Start early – Put away money over your entire career to maximize your opportunity for growth.
  • Diversify – Spread your assets across many kinds of investments to reduce risk.
  • Control costs – Buy index funds or ETFs with low expense ratios so you keep more of what you earn.
  • Stay invested – Don’t try to jump in and out of the market; let long-term compounding work for you.
  • Accept the peaks and valleys – Understand that discouraging short-term dips in returns are the price of admission for access to long-term appreciation.

Simple, but not easy
These principles sound too simple to matter, but decades of empirical research show how important they are.

It turns out that smart investing is a lot like losing weight – simple to understand, but often difficult to accomplish in real life. We all know that slimming down is no trickier than burning more calories than we consume, but still it can be a big struggle when faced with stress, temptation or bad influences.

Likewise, you may fully understand the investment non-secrets described above, but find them difficult to follow when markets are falling hard and fast, pundits are predicting disaster, or you see friends strike it rich on an unknown start-up.

It’s amid these real life distractions where a new breed of investment advisor is proving to be most valuable – advisors who make no claims about secrets but instead focus on helping clients stick to the non-secrets through thick and thin. A small number of firms, including Osbon Capital, have built their business on providing the education, clarity, and discipline to keep investors on track in all market conditions. That’s the real secret.

Steve Mott – Guest Columnist, Osbon on the Money Editor

 


This article intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice. Various factors could cause actual results or performance to differ materially from those discussed in forward-looking statements contained herein.

Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor. 

Any references to third-party data or opinions are listed for informational purposes only and have not been verified for accuracy by the Adviser. Adviser does not endorse the statements, services or performance of any third-party vendor without specifically assessing the suitability of a third-party to a client’s or a prospective client’s needs and objectives.

Unless otherwise indicated, reference to any vendors, investment managers or funds are purely illustrative and should not be construed as endorsements of their services or offerings.  These references should not be interpreted to mean that comparable services can’t be found elsewhere.