Have you ever wondered why most of the money managers on Wall Street cannot even beat the S&P 500. The returns that these individuals achieve tends to lag the indexes, often by a large margin. For this "success", investors get to pay a significant percentage in fees.
What is at the core of this?
In short, herd mentality is fatal. The wealthiest people in the world tend not to follow the pack. In fact, they are often called crazy, insane, and an assortment of other names.
Ultimately, the masses tend to lose.
Part of the problem comes from the fact that propaganda tends to be spewed. There are a lot of agendas out there and few of them are proven to make money. A big part of this comes from the fact that many ideas arise from the world of academia. This is fantasy that often does not work in reality.
Once ideologies are adopted, they become like a religion. The tenets are held no matter what. Even after decades to the contrary, people hold onto the idea like their survival is dependent upon it.
It is a never-ending waiting game. Some day, what I think will be right. Now, bear in mind I am not talking about believing things are overpriced and waiting on the sidelines. Nor am I referring to investing in spite of the fact that a security (or the market) is not moving.
Instead, I am discussing the idea of age old ideas that have not worked still being embraced. Decade after decade we see the failure of the idea yet people with advanced degrees are all over the financial networks telling us why it is so.
Of course, they probably have a book or two to promote along with a fund to invest in.
Individual thinking is the most vital component to investing. Following the herd will eventually take you right off the cliff. Were you one of those individuals who believed the market was going to keep running? What happened since the end of February?
Did those money managers who are getting their fees warn you? Most likely not. They never saw it coming.
Or, on the flip side, were you one who sat on the sideline since 2014, believing all the debt was going to collapse the market? There were plenty of people out espousing that idea. Following this advice meant missing about 5 years of upside.
When it comes to money, it is foolish to trust someone else and not think for oneself. Question everything since there are many "age old ideas" that are worthless. Fortunately, behind each ideological idea, there is an investment that can be investigated. How did that asset perform over the years? What is the rate of return?
Standing apart from the herd is lonely but it might be the best thing for your financial future.
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