{"id":7720,"date":"2016-07-28T06:47:10","date_gmt":"2016-07-28T13:47:10","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=7720"},"modified":"2016-07-28T06:47:10","modified_gmt":"2016-07-28T13:47:10","slug":"1-investment-myth-effectively-managing-your-own-investment-portfolio","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/1-investment-myth-effectively-managing-your-own-investment-portfolio\/","title":{"rendered":"#1 Investment Myth \u2013Effectively Managing Your Own Portfolio"},"content":{"rendered":"

In today\u2019s world there is a lot of noise regarding do-it-yourself investing.\u00a0 If you Google \u201cDo-it Yourself-Investing<\/a><\/span><\/strong>\u201d, over 44.8 million search results are generated.\u00a0 The internet\u00a0has built a\u00a0mentality in us that we can figure out everything on our own in an instant.\u00a0 This is\u00a0extremely\u00a0unwise especially for investors trying to manage their own investment portfolio.\u00a0 Why? \u2013 Human Nature!<\/p>\n

Greed and fear<\/a><\/span><\/strong> drive us as we manage our money and the results are not in our favor.<\/p>\n

Greed (or excessive desire) is damaging to growing your own investment portfolio. The internet boom <\/a><\/span><\/strong>\u00a0in the late 1990s is a great example.\u00a0 From 1997- 2000 internet related stocks, hit a market high and investors got greedy.\u00a0 This greed lead to stocks being extremely overpriced, which created a bubble.\u00a0 The bubble burst<\/a><\/span><\/strong> in mid-2000 and major indexes were depressed through 2001.\u00a0 This get-rich quick mentality is difficult to maintain long-term and former Federal Reserve chairman; Alan Greenspan<\/a><\/span><\/strong> addressed this mindset as \u201cirrational exuberance<\/a><\/span><\/strong>\u201d.<\/p>\n

Greed tells us to hold on as the market is trending upward. However, markets do not always go up. So investors hold on and ride the loss down\u00a0hoping the market\u00a0will turn around quickly and bailout once they break even.<\/p>\n

Fear is equally harmful to growing your own investment portfolio.\u00a0 For example, fear tells us to sit in cash during the United States bear market of 2007-09<\/a><\/span><\/strong> when the S&P 500 lost approximately 50% and the Dow Jones Industrial Average (DJIA) in June 2008 lost 20% of its value.\u00a0 In other words, the pain during 2007 through 2009 got so severe investors\u00a0got out of the market and ran for cover.\u00a0 They stand on the sidelines and invest into cash (investments with no earning potential) and as the market rebounds miss out on any chance to make back the losses they suffered as the market recovers.\u00a0\u00a0 Greed and fear<\/a><\/span><\/strong> drive investors to make irrational decisions that hold back growth within their investment portfolios.<\/p>\n

The solution is to have an investment management based system that is based on time tested evidence and analysis and not emotions.\u00a0 In my previous article, There is a Better Way! \u2013 Why No One Talks About the Stock Market the Right Way<\/a><\/span><\/strong> discusses in more detail my approach to investment management through tactical portfolio management<\/a><\/span><\/strong>. This type of investment process takes emotions out of the investment management process in order to minimize your risk and grow your investment portfolio over time.\u00a0 Your portfolio will be positioned to provide growth in a bear market (when prices are falling) and\/or a bull market (when prices are rising).<\/p>\n

Can you Effectively Manage your own Investment Portfolio?<\/u><\/strong><\/p>\n

Recently, Vanguard which is the world\u2019s largest mutual fund company is known for catering to \u201cDo It Yourself Investors\u201d admits that working with a financial advisor pays off.\u00a0 The conclusion of Vanguard\u2019s study, \u201cQuantifying Vanguard Advisor\u2019s Alpha\u201d working with an advisor increases client\u2019s investment returns by 3%!\u00a0 To put it in perspective, 3% of $200,000 is $6,000 and compounded over 5 years is $231,854.81.\u00a0 However, if you\u00a0were working with an advisor providing 7% in net return your total value would be over $280,510 in 5 years!<\/p>\n

Therefore,\u00a0I am a strong\u00a0proponent in working with well-trained, experienced and fully licensed financial professionals.<\/p>\n

Guidelines to help you determine what type of financial professional to work with:<\/p>\n