Who Wins – The Monkeys or the Money Managers

Stock Picking Fun and Games

Stock and mutual fund-picking contests are a way to test the expertise and various philosophies of different money managers.

Or perhaps, they’re a way to prove that success in the stock market is truly based on nothing more than luck and speculation.

Nothing drives this point home more than the classic man-against-monkey battle.

“Dartboard Investments: Contests, Monkeys, and a Random Market”

And no, you don’t need to go buy a monkey to succeed in investing… another reason to realize that trying to predict the market is an impossible game.

But what about rates of return? Isn’t the stock market still the best bet?

In reality, research shows that the real rates of return that investors actually make are shocking – even less than HALF of projected and assumed returns. (Few investors are earning the 8-12% returns touted by stock market enthusiasts.)

Find out what Dalbar, Inc. discovered was the REAL rate of return of investors in the market in “Inconvenient Truths About the Stock Market.” http://partners4prosperity.com/inconvenient-truths-about-the-stock-market

Average vs. Actual Returns

The Inconvenient Truths article also notes how “average” rates of return do NOT equal “actual” rates of return. Don’t be misled! Here’s a quick example how average vs. actual works:

Example A:
If you start with 100k and subtract a 50% loss = 50k.
Now your 50k has a 50% gain, which adds 25k to make 75k.

The average rate of return is zero, as (50%) + 50% = 0.
But the actual rate of return is a negative 25%.
(If this scenario took place over 2 years, the annualized rate of return would be (13.4%), or negative 13.40% each year.)

People think that if they lose 50% and gain 50% that they’ll be “even,” but the truth is, they’ll lose 25% of their account with that math!

Example B:
If you start with 100k and subtract a 50% loss = 50k, you’ll need a 100% gain just to break even.
50k + 100% gain of 50k = 100k.

The average rate of return is 25%, because (50%) + 100% = 50 ÷ 2 = 25%
Now 25% per year sounds fantastic, but the actual rate of return is obviously ZERO, as you start and end with the same amount!

And unreliable and misleading rates of return aren’t the only good reason to AVOID the stock market.

In my next email, we’ll take a look at some of the questions that Wall Street hopes you’re NOT asking (because if you were, you’d stop putting your dollars in the stock market.) Then I’ll tell you where our private clients invest for substantial growth… without downside market risk.