The 10Myths ofModernInvesting

By: 7 Tax Traps

1“This is agood timeto investin thestockmarket.”

Wow, now that’ssurprising to hear fromsomeone who makes

money by sellingfinancial products! Sort

of like asking thebarber if you need ahaircut, eh? Ask the

broker when it was thathe warned clients that

it was a bad time toinvest. October 2007?

February 2000?

2“Stocks onaveragemake youabout 10%a year.”

Old news and numbers.The decades of the 80’sand 90’s saw averagereturns in excess of

12%. The last 50 years’average is (arguably)

6-7%. Based oncurrent valuations, wewill likely see returns

in the 4-5% range overthe next decade ofretirement. Which

number do you want todepend on?

3

“Oureconomists areforecasting…”

The brokeragecommunity and ‘1-800’boys love to brag about

their highly paideconomists. Ask them

if the firm’seconomists predicted

the most recentrecession – and if so,

when? The track recordof most economic

forecasters is prettypoor. Their comments

are typically loadedwith a lot of ‘outs’ in

case they are wrong. Ifthe big boy’s

economists are sosmart, why have somany of their firms’clients lost so much

wealth? Hmmm.

4“Stock marketinvestments letyou cash in oneconomicgrowth.”

The Japanese havefound that NOT to betrue. Their economy

has grown 25% in thelast twenty years, yet

their stock market hasfallen 75%. Or how

about your Wall Streetinvestments that you

made in 2000? Theeconomy has grown,yet your investments

are likely down.

5

“If you wanthigher returns,you have to takemore risk.”

The only way to earnhigher returns is tobuy stocks that are

inexpensive relative totheir future cash flows.

Over the lasttwenty-five years, the

FactSet Researchutilities index has out-performed the Nasdaq

index of smallcompanies. Risk is notjust volatility; it is thereal chance you’ll lose

principal.

6

“Stocks arecheap now, witha Price/Earningsratio of ‘x’…”

This is a favorite of theold guard; it makes

them sound so smartand market savvy.

However, the truth isthat by many

measurements, P/Eincluded, stocks areactually still pretty

expensive relative toearnings potential.

7

“You can’t timethe market.”

Most often, thebrokerage world relieson this mantra as an

excuse for NOT payingattention to yourinvestments. Pay

attention to wheremoney is being made

in the various markets.Move to where thegrowth is actually

occurring; it ismeasurable and

identifiable if someonewill put some energy

into actually managingyour investments.

8

“We recommendthat you diversifyacross many mutualfund groups.”

Most often, thebrokerage world relieson this mantra as an

excuse for NOT payingattention to yourinvestments. Pay

attention to wheremoney is being made

in the various markets.Move to where thegrowth is actually

occurring; it ismeasurable and

identifiable if someonewill put some energy

into actually managingyour investments.

9

“This is a stockpicker’s market.”

Aren’t they all? Yetmost stock pickers,individual or broker,

consistently losemoney. Most of your

returns will come frombeing in the right assetgroup, and by havingenough money in that

group to actually makea difference.

10

“Stocksoutperform overthe long term.”

How broad a statementis that? How long is long

term? Does that evenapply to your

investment andretirement objectives?

“Crazy horselesscarriages, they’ll nevercatch on!” “Computersmaybe have a worlddemand of five.” And

now you have anotherten statements that

sounded right, but withtime and experience

have been proven reallywrong.

Maybe it’s time to makea few changes.

11

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Learn about:

The biggest mistakesbefore retirement.

Tips to minimize the

sting of taxes.

Strategies to maximizeyour retirement

income.