Transforming The Investing Experience And Protecting Your Assets

Traditional investing may be failing. I say this because when I look at the 2021 DALBAR study, which shows the average investor returns for 30 years (since 1992), I see that the average investor has done 7.13% per year while the market (as measured by the S&P 500 Index) has done 10.65%.1 This is concerning because the market returns (less some investing costs) are available to investors. To understand the delta between these two numbers, just imagine if you had $1 million that you invested over 30 years. Not taking fees into consideration, if you had you been able to invest in the S&P 500, you may have $2,823,110 more than the average investor.2 And you can only Imagine all the people that got below average returns, yuck!

I believe the reason for the lack of market returns is that people do not behave as long-term investors. They attempt to time the markets by trying to research (or pay someone to do so) and pick which areas to overweight or underweight based upon their analysis (prediction) of the future. They either pick for themselves or hire an advisor to try to pick which stocks that they think are going to be the most successful in the future. They find money managers that quite possibly did well in the past, and they expect that to continue in the future. Essentially, they try to beat the market with a prediction of the future! There is one truth I know and that is that no one can predict the future, no matter how smart they are. Thus, this is my belief that traditional investing may fail if it attempts to predict the future in an effort to decide what to buy today. I would argue that all the knowable information is already in the price of stocks and only new and unknowable information will change pricing moving forward. However, it does tend to raise an important question. If I’m not going to time the markets, try to pick the right stocks, or find someone that, in the past, has been able to do one of those things for a period of time, what on Earth am I to do?

I’d say the first thing you’ve got to decide is that my original statement is true, that no one can predict the future. If you need more data, look at the SPIVA scorecard that just came out in 2022. It showed that over the past decade, fund managers lagged their benchmark index. In fact, 86% of them did so. This means that you could have quite possibly beaten 86% of the smartest, wisest, and brightest professional money managers in the US just by buying the benchmark index. If the best can’t do it, I would argue it is impossible so just accept that trying to beat the market is far more likely a costly endeavor than a profitable one. Once you discover that many of the traditional investing methodologies are more likely not to work, than work, you can look for another way.

What if you go the index investing way, this also begs the question of which benchmark indices should you be looking at? Let’s explore that.

Most people are unaware that there is an entire world of academic investing principles that use science and math to build portfolios. There have been brilliant concepts, papers, and books written by Nobel Prize winners, such as Eugene Fama and Harry Markowitz that explain the academics of investing. There are incredible concepts that explain why investor results are so poor. They investigate the cost of capital concepts, the efficient market hypothesis, modern portfolio theory, and factor investing models.

But even if you knew all the X’s and O’s of investing and read all these books and could understand high-level statistical math, it wouldn’t be good enough. Why do I say such a thing? It is because we are human. We have instincts and emotions such as the fear of losing money and the fear of missing out. We have all kinds of biases. In fact, according to Visual Capitalist and Wikipedia, there are over 188 number of biases that will impact our decisions in all areas of life, which of course includes investing and financial planning. A few examples include familiarity bias, herding bias, and false patterning bias. Human Biases may be helpful in life but I believe they are terrible for investing as they just turn everything into a “feeling”, and that sounds like gambling to me.


I have found that the only way to battle against these biases, where you can actually create the possibility of successful investing, is through coaching and proper planning. I look at financial coaching as the ability to empower and help someone discover things for themselves so that they can maintain discipline even when times are tough. Yes, maintain discipline when markets are crashing, inflation is rising, the bond markets are dropping, and the real estate markets are losing values, just like we are dealing with now. I believe that coaching should occur with groups of investors and one-on-one, and I believe that some of the most powerful transformational coaching is through workshops, such as the American Dream Experience.

This type of coaching allows people to discover for themselves what does not work when it comes to investing and why. It helps them to understand their own humanness and how destructive it can be to their future financial success. It helps them understand on a deep and profound level the difference between traditional investing and academic investing principles. It also helps them discover what is an appropriate risk level for them, so they do not get caught by surprise, as so many have recently. By going through this type of workshop, you can come out on the other side of it having created the possibility of total confidence in your investment strategy. We believe that people need a coach to be successful, not only in winning athletic endeavors like the Superbowl, but also in the business world and in the world of investing.

If you then combine investment coaching, proper financial planning, and the understanding of how all of your assets are generating the appropriate cash flow, you can put yourself in a position to maximize the income that you can receive today and, in the future, when you’re retired. This involves looking at all the different strategies in your financial plan. How should you be utilizing your 401(k) and/or pension plan, along with your outside investment portfolio? How should you be using insurance assets that you may own to not only help protect your loved ones with a death benefit, but also as life insurance cash values when it comes to retirement?4 Would that be a place from which you could take money when you do not have the income you were expecting from your real estate, or your bond or stock portfolios are down?5 Could your death benefit free up your ability to spend you’re your investment portfolios while you’re alive knowing it will can be replaced for your family when you kick the bucket? When you start to incorporate proper planning using a holistic view, you actually find that it’s quite possible you can get a lot more cash flow from lower amounts of money than you previously had thought.

The point of all this is that if you actually transform the investing experience, you can protect your assets and have the right balance. It may not be as exciting as Wall Street is in the Hollywood movies, but if this delivers, if this enables you to achieve your true purpose that you have for your money and your life and your family, then isn’t that what truly matters? Find a good coach, engage in life, and stop worrying about your assets!

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity.

1. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market.

2. Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. All investments contain risk and may lose value. Equities may decline in value due to both real and perceived general market, economic and industry conditions.

3. and list of cognitive biases.

4. Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

5. Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 3040 Post Oak Blvd, Ste 1150, Houston, Texas 77056, 281-220-2700. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Rethink Wealth is not an affiliate or subsidiary of PAS or Guardian.CA Insurance License # 0D04370, AR Insurance License # 1301962 2022-148287 Exp.1/2024