Weight loss and wise investing share a very important characteristic: they’re simple, but not easy.
Let me explain.
Every year, Americans spend billions of dollars in weight-loss related products and services. Magazines that promote the new “secret Hollywood diet” fly off the shelves; strangely, people forget the last year “secret” diet in favor of the new one. “Diets” come and go, and products that promise to lose weight “without diet or exercise” are increasingly popular. People are willing to starve themselves to fit in a dress; if they succeed, they give their secrets to their friends, who will also buy the new miracle product. If they don’t succeed, more than likely the blame will go to the product or to other outside factor.
In a similar way, Americans spend as much as $100 Billion a year (as reported by The New York Times) in their efforts to “beat” the market. Magazines that show the latest market “guru” or the secrets to “Retire Rich” fly off the shelves; strangely, people forget last year’s guru or the “guaranteed” stock-picks in favor of the new ones. People take immense amounts of risks, and when their bets pay off, they take the glory, but if they don’t, the blame goes to the magazine or the stock picker.
The similarities are striking. But it’s time to open our eyes.
The only secret to real, durable weight loss is eat less and move more.
The only secret to achieve market rates of return is to have a diversified portfolio in which you buy low, sell high, and rebalance on a periodic basis.
The thing is, these are not really secrets, everybody knows them!
That’s were a good advisor adds value: by helping you understand how markets really work, by helping you determining the ideal amount of risk you need to take, by helping you to stay disciplined and to deal with the emotions inherent to investing.
That’s why I said at the beginning: simple, but not easy.