In the last few weeks the
pundits are questioning the viability of investing in equities.  As a
result of the financial crisis, equities and real estate are down 30-50%, while
US government bonds (Treasuries) have had strong positive returns.   
Furthermore, the pundits say that over the last 10 years the performance for
equities is now below that of bonds.  (Keep in mind that when they speak about equities,
they are speaking about the S&P 500, which is only one investment category.)

 They ask:  Why take  on the
additional risks of equities when you don’t even get rewarded over a
longer timeframe of, say, 10 years?  Why
not buy Treasuries and decrease your
risk, uncertainty, and stress and still make as much money as you would in
equities?

 While
Treasuries might appear to be the safe haven, buyer beware!

 At this point in time, the
expectation for Treasuries is that they will do much worse than equities in the
coming years. Treasuries are also vulnerable to inflation (which is becoming a
more likely possibility).  Therefore, a bond-only portfolio is far riskier
than we might think. 

 There are two important rules in
investing: 

 1)  Buy low, sell high.
(Bonds are at an all-time high, stocks are at an all-time low.  Your
choice is simple.)  

In the last few weeks the pundits are questioning the viability of investing in equities.  As a result of the financial crisis, equities and real estate are down 30-50%, while US government bonds (Treasuries) have had strong positive returns.    Furthermore, the pundits say that over the last 10 years the performance for equities is now below that of bonds.  (Keep in mind that when they speak about equities, they are speaking about the S&P 500, which is only one investment category.)

They ask:  Why take  on the additional risks of equities when you don’t even get rewarded over a longer timeframe of, say, 10 years?  Why not buy Treasuries and decrease your risk, uncertainty, and stress and still make as much money as you would in equities?

While Treasuries might appear to be the safe haven, buyer beware!

At this point in time, the expectation for Treasuries is that they will do much worse than equities in the coming years. Treasuries are also vulnerable to inflation (which is becoming a more likely possibility).  Therefore, a bond-only portfolio is far riskier than we might think.

There are two important rules in investing:

1)  Buy low, sell high. (Bonds are at an all-time high, stocks are at an all-time low.  Your choice is simple.)

Do expertise, experience, and education (the 3 E’s) actually help you make extra money when it comes to investing?

Mark Kritzman of MIT just completed a  20-year study of mutual fund managers from 1/1/89 – 1/31/09.  Despite their 7 –figure salaries, their research staffs, their MBAs and PhDs,  only 3% of these fund managers were able to beat the S&P 500 index over this period.

When one simply buys all the companies in an index like the S & P 500, rather than analyzing which companies to buy, one earns higher returns virtually all the time.

Yes, there’s the possibility of reaching the top 3% if you happen to be lucky enough to pick the right manager.  But if you give up the desire to be in the top 3%, you can virtually guarantee that you will out-perform the average professional.   And then, of course, there’s the peace-of-mind and ease that comes with letting go of anxiety and stress around finances.  That’s a priceless benefit.

Not only does doing (practically) nothing (as in the S & P 500 index) make you more money, but my  Rainbow Portfolio™ takes the S &P  to an even higher level.  This is because the ultra-diversification of the 14 asset categories makes you even more money and lowers your risk.  Check it out in my book.  Or call Abacus for more information:   1-866-558-2372.

I was in the shower this morning  thinking:  “Oh, when the markets come back and the business world revives, I’ll have more money.  I’ll feel more at ease.  I’ll be happier.”  Of course, three years ago my clients and I had more money.  And I remember that my clients and I were upset about various world events, our elected officials, our jobs, our commutes.  And we were worried about our money, too.   We were no happier back then than we are now.  The opportunity for today is to let go of the myth that more money will make us happy.

If we can let go of this thought we can have happiness and peace right now. Because happiness and peace have nothing to do with the amount of money you have.  When you know that, you’re free.  You can yell at your TV “CNN, you do not determine  my happiness!”  You can choose to be happy because of your own intelligence and creativity, your potential, your community of friends and family, the fact that the sun reliably rises in the sky every day.  We are not victims of  the markets.  We don’t need to wait for the markets to come back.  Were you really happier when the economy was strong?  Or were you just worried about other things?  Cultivate the things that make you happy and your happiness will grow.

And if you really want to add to your happiness, stop watching or reading the news for 1 week.  Feel your bliss grow.