Random Thoughts From A Former Stockbroker


A rising tide lifts all boats. It’s not until the tide goes out that you realize who’s swimming naked.” Warren Buffett

There are 2 big reasons why I gave up my securities license back in 2005 to focus on income planning and annuities.

The first was, after I lost everything and my clients got destroyed in 2000-2002 I finally said “I will never, ever sell someone something that can lose value again.

The 2nd reason is more interesting.

I started reading the annual Dalbar report which made me question what value I was bringing to the table.

Dalbar works for the mutual industry and every year they come out with a report that tracks Market Returns vs Actual Investor Returns.

For example…

The 2014 report came out recently and here’s the results.

Over the last 30 years the SP 500 has averaged 11.11%.

The average equity fund investor has averaged 3.69%.

That’s not a typo.

Heck, there’s index annuities that backtrack alot higher than 3.69% with no risk to your principal. But anyways…

So the average person went through all the ups and downs over the past 30 years, to average 3.69% while the market averaged 11.11%.

Why?… a couple reasons. People let their emotions take over and buy and sell at the wrong time.

Also, the average holding period for most mutual funds is under 4 years, so all the buying and selling, trying to beat the market, actually causes you to do worse.

And then you read articles like this that show that well over 90% of all professional mutual fund managers can’t outperform the market. Especially when you add in the fees.

And on top of that… you throw in the financial adviser who is buying and selling these underperfoming funds for his clients to make it seem like he’s actually doing something to justify his fee (on top of all the Wall Street fees.)

But the data suggests that instead, the adviser is almost guaranteeing that the client will underperform.

So my epiphany was “You can do better than 90% of all the experts on Wall Street if you just buy a Low-Load SP 500 index fund and hold it for 30 years. So why would anyone need me?”

This is not investment advice. Just my random thoughts.

I know… I know… that’s not you. That’s not your adviser. You are much better than average and you have done great over the past 5 years.

But that’s just the last 5 years.

And that’s another thing. Human psychology tells us most people really only look back about 5 years with investing. So most of you have already forgotten about 2000-2002 and 2008 and losing 50% twice.

One thing I learned back in my stock broker days is when the market is going up…a blind monkey throwing darts at a newspaper can do really well too.

So what’s my point?

I guess it’s this. If you make sure your retirement income needs are met with contractual guarantees.(What I help people with now)…then you can invest your leftover money however you want.

You can allow your investments to go up and down over time, and not freak out, because you are NOT getting your income from them.

You are getting your income from products that have contractual guarantees, so you don’t have to worry.

But, keep in mind, the data shows that most people don’t do nearly as well as they think in the market.

And there are some really simple ways to give yourself a really good shot at beating all the experts.

Just don’t freak out and don’t touch the money for 30 years.

You can see the Dalbar Report here. Just click on Advisor Edition Report Free Look

Take care,

Carl Ostenson
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P.S. Disclaimer. This blog post is for educational purposes only. This is not to be construed as investment, tax or legal advice. Please consult with the appropriate professionals before buying or selling anything. Carl Ostenson is not securities licensed. Carl Ostenson has the proper licenses to sell the annuities and insurance products that he recommends.

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