True Market Insider Presents… The “7 Deadly Sins” of...

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True Market Insider I 1 Dear True Market Investor, For individual investors, it’s hard to know who to listen to. Everyone has a system… a set of foolproof indicators… an investment approach that “can’t lose.” It’s confusing, to say the least. The good news is that you can totally do this. You don’t need a financial “expert” and you don’t need to reorganize your life and spend all day in front of your computer to become the master of your own financial destiny. But you do need to avoid some of the most common mistakes that everyday investors make. Fortunately, you can easily prevent the most common setbacks. Learn to spot (and avoid) these “deadly investing sins” and your gains will stay where they belong – in your account. So here are the seven most common mistakes individual investors are prone to... ...And the steps you can take to make sure you never fall prey to them. True Market Insider Presents… The “7 Deadly Sins” of Investing (And How to Avoid Them)

Transcript of True Market Insider Presents… The “7 Deadly Sins” of...

Page 1: True Market Insider Presents… The “7 Deadly Sins” of Investingmedia.truemarketmavens.com/reports/TMI-7DeadlySinsOfInvesting.pdf · “Deadly Sin” #7 – Believing That Investing

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Dear True Market Investor,

For individual investors, it’s hard to know who to listen to. Everyone has a system… a set of foolproof indicators… an investment approach that “can’t lose.”

It’s confusing, to say the least.

The good news is that you can totally do this. You don’t need a financial “expert” and you don’t need to reorganize your life and spend all day in front of your computer to become the master of your own financial destiny.

But you do need to avoid some of the most common mistakes that everyday investors make.

Fortunately, you can easily prevent the most common setbacks.

Learn to spot (and avoid) these “deadly investing sins” and your gains will stay where they belong – in your account.

So here are the seven most common mistakes individual investors are prone to...

...And the steps you can take to make sure you never fall prey to them.

True Market Insider Presents…

The “7 Deadly Sins” of Investing(And How to Avoid Them)

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“Deadly Sin” #1 – Buying Into “Buy and Hold”

You can tell that the myth of “buy and hold” has taken hold because it is the one myth that most grandmothers probably believe. That is, it is a myth that has thoroughly permeated the mainstream.

Nevertheless, the fastest way to go broke is to leave your portfolio “static” and inflexible through bull markets, bear markets and everything in between.

Because the economic climate can and does change, your asset mix must change with it. That’s not to say there’s never a time to “hold.” During strong secular bull markets, it’s a good idea to ride the trend higher.

The danger comes when the market turns (which it will). Then, you’re caught napping and your profits evaporate.

For example, according to a report by NBCNews, between October 2007 and March of 2009 (17 months), the S&P lost more than 50% of its value. Buy and hold investors got creamed.

How to stay safe: Because different asset classes and market sectors “rotate” in and out of favor, you should review your portfolio every quarter. You should rebalance out of sectors that are under-performing and into ones that are showing strength.

“Deadly Sin” #2 – Blindly Following Your Advisor

You might think your broker or advisor is “on your team.” That’s not always the case. Remember, these are business people. As such, they naturally have their eyes on their own bottom lines.

Too often they’re incentivized to put their clients into stocks and funds solely to generate fees and commissions. Equally often, their “book of business” is large enough that it would be silly to think that they’re giving your account any individual attention.

How to stay safe: There are two ways to avoid this deadly sin. The first way is to make sure your advisor is not just a “broker,” but instead is what’s called a “fiduciary.”

The difference is: a broker is held to a lower regulatory standard. He or she only has to show that their

investment recommendations are “suitable” for their clients.

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This leaves ample room for your broker to put you in and out of all manner of investments that, while they generate commissions and fees for the broker and his firm, do little (or nothing) to make you money.

A fiduciary is held to a higher standard. They must act in their client’s “best interests” even if that means the advisor’s firm sees lower profits.

The second way to void this deadly sin is to direct your own portfolio. If that sounds too difficult, take heart. It’s not nearly as difficult or time consuming as you’ve been told. (In fact, further down in this report I’ll share with you an excellent resource you can use to start handling your own investments.

“Deadly Sin” #3 – Chasing the Mirage of “Perfect” Market Timing

Of all the illusions investors face, this one is the most seductive. After all, who doesn’t dream of buy-ing at the very bottom and selling at the very top?

Trouble is, that rarely happens, even to the smartest investors.

What’s more, even if you could time the market perfectly, you wouldn’t make that much more money.

In 2014, Sound Mind Investment ran a study comparing two investors who each put $3,000 into a fund that tracks the performance of the S&P.

One investor put his entire $3,000 stake into the fund when the market was at its lowest for the year. The other investor broke his stake into $250 portions and invested that amount on the last day of each month.

The result? Over one twenty-year stretch the investor who got in at the “perfect” bottom earned 14.8%. The other investor earned 13.6% – just 1.2% less!

Over a thirty-year stretch the gap was even narrower, less than one percent.

How to stay safe: Just remember that you really don’t have to time the market perfectly in order to make handsome profits and provide for your family’s financial security. You just need to be in the market during a large part of an uptrend and be out during a large part of any corrections.

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“Deadly Sin” #4 – Falling for the Media’s Myth of “The Market”

If you follow the mainstream financial media, you’d swear that “the market” is the same thing as “the DOW” or “the S&P.” That’s the way most folks have been trained to think.

But those are highly inaccurate indicators.

Not only is the Dow Jones average disproportionately price weighted... but it’s based on only 30 stocks! It can actually happen that the DOW moves higher even though most stocks are moving lower.

The S&P 500 is based on 500 stocks, not 30. But the biggest 50 stocks in the index make up half the weight and contribute to half the index’s movement. So tracking the S&P 500 doesn’t give you a fair picture of where the market is heading, either.

How to stay safe: In order to see the “true market” you need to have your eye on which sectors are mov-ing up and which are moving down.

That’s because each sector – i.e. the Tech Sector, the Precious Metals Sector, the Aerospace Sector, etc. – are actually mini markets unto themselves. They can move up and down independently of the DOW and the S&P.

Tracking sector relative performance is the best way to ensure you capture the lion’s share of an uptrend and stay out of a downtrend.

“Deadly Sin” #5 – Obsessing Over Com-pany “Fundamentals”

Now, I know what I’m about to say amounts to heresy.

MEET YOUR “TRUE MARKET INSIDERS”

For more than 10 years, the guys behind True Market Insider have been making investing simple, profitable – and fun.

Here you’ll find the knowledge, tools, and confidence you need to take control of your financial destiny.

And we offer something for everyone.

We don’t care if you’re a grizzled investing veteran…

Or have yet to make your very first trade…

We’re here to help you become the best in-vestor you can be.

Our team is led by Chris Rowe. A native New Yorker, Chris retired to Florida at 32 after spending more than a decade making fortunes for wealthy hedge-fund clients.

Now he shares his investing know-how via the True Market Insider e-mail newsletter, and manages money for dozens of high net worth clients at Rowe Wealth Management.

Costas Bocelli is the latest addition to our growing team.

He spent eight years as a floor trader and market

maker in the pressure cooker of the Philadel-phia Stock Exchange before retiring to travel, write, and teach individual investors the “ins and outs” of the craft.

On behalf of Chris, Costas, and the rest of the True Market Insider team, welcome aboard!

We look forward to helping you on your jour-ney to financial freedom.

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But you need to hear it…

Fundamentals don’t matter when it comes to stock prices!

Earnings don’t move stock prices. Revenue doesn’t move stock prices. Profits don’t move stock prices.

In fact, a June report by Baron Funds talked about “the recent contraction in the stock prices of many growth stocks, despite the strong fundamentals and continued growth of these companies.”

This headline from The Wall Street Journal makes the same point.

And the same way strong fundamentals don’t move prices up…

Poor fundamentals don’t move prices down.

Again, see for yourself.

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Those are just a few examples, but you can easily find hundreds more online.

The bottom line is: Company fundamentals, while important, do not “cause” stocks to move higher or lower.

How to stay safe: The next time you read a report touting a company’s earnings (or profits or reve-nue…), don’t assume you should rush into that stock. Likewise, just because a company misses an earnings or revenue target, it doesn’t mean the stock is a dog.

In fact, if you like a stock, and its price falls following a less-than-stellar quarterly report, that could hand you an opportunity to buy that stock at a discount!

“Deadly Sin” #6 – Worrying Over “Missed Opportunities”

Nearly every investor has been there: You think about buying a stock… You hesitate… the stock soars…

And you kick yourself for “missing an opportunity.”

While nobody likes to feel they’ve lost out on something, the simple truth is that there are always opportunities to make money in the markets – bull as well as bear.

The real danger of this deadly sin is that, if you let it, it can impact your emotions. And you never, ever, want to trade based on emotion. The last thing you want is to make that first disappointment worse by blundering into your next trade out of fear you’ll miss the boat.

How to stay safe: Look, from time to time we all miss out on a winning trade. The key is to just let it go. A trading journal is a great tool to use here. For one thing, you should be tracking all of your trades in a journal. But more importantly, by putting your emotions onto the page, you’ll be able to keep them from coloring your judgement going forward.

“Deadly Sin” #7 – Believing That Investing Takes Too Much Time and Effort

We’ve saved the deadliest sin for last. If you ask people why they have yet to take control of their financial destiny, most folks will tell you “it’s too hard.” Or “I just don’t have the time.”

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Don’t fall into that trap! The truth is that countless men and women direct their own investments and manage their own portfolios. I guarantee you they’re no smarter than you are! (Plus, they live in the same 24 hour days that you and I do.)

Best of all, there are websites and other resources that are equipped to handle 99% of the work that goes into finding winning trades and spotting when to get into and out of them.

Here’s one that will send you trade ideas, along with market analysis and educational tools for just a few dollars a month.

Some Final Thoughts

As you continue your journey toward financial independence, keep an eye out for these deadly sins.

There may be others, but these are some of the biggest.

Avoid these pitfalls, and your risk will shrink even as your gains continue to grow.

And nobody will ever be able to take that away from you.

If you’d like more advice, guidance, and commentary – along with a bit of handholding as you get started, along with some specific trading ideas – check out the New Reader Special we have going right now on our Sector Focus service.