Separating Myths and Truths of Investing

Teaching investors the truth about investing is a part of our mission.

Are you an investor? Considering the ups and downs of the stock market, the struggles (or outright disappearance) of some of the best-known banks and brokerage houses, and the constant (and often contradictory) media hype—you might wonder if the best thing to do is put your money under a mattress. How do you know what to do?

Don’t despair! It IS possible to find the truth about investing, to discard long-held (and dangerous) Wall Street myths--and to become a successful investor.

Here are just four common myths that can sabotage the returns of uninformed or unwary investors:

• Stock Selection: Picking stocks that are expected to do well in the future. Have you seen the articles that promise to reveal, “Ten Best Stocks for the New Year” or something similar? One financial company’s prospectus even boasts that they use “superior fund managers” to pick stocks! Stock selection is a Wall Street myth.

• Track-Record Investing: The use of performance history to determine the best investment for the future. Have you or a professional looked for superior-performing mutual funds? Track-record investing is a Wall Street myth.

• Market Timing: An attempt to alter or change the mix of assets based on a prediction of what the market will do in the future. Did you, or someone you know, “get out of the market just in time?” Did they know exactly what day to get back in? Market timing and predicting up and down markets is a Wall Street myth.

• Costs of Investing: The belief that investing costs are limited to commissions and other disclosed fees. Many fees are NOT disclosed but can create financial leaks in your portfolio? Thinking that costs are always disclosed is another Wall Street myth.

What is the truth? The truth is that no one can consistently and predictably add value through stock selection. The truth is that an investment manager’s track record of past success has nothing to do with ability to do so in the future. The truth is that free markets work; only new and unpredictable news and events affect market prices. And the truth about costs is that what you can’t see CAN hurt you. The solution is called Modern Portfolio Theory and is based on years of academic research.

You don’t have to use traditional investment methods to be a successful investor! Would you like to know more? Make 2012 the year you discover the truth about investing. Each month we will present the class, “Myths and Truths: the History of Investing.” Call us at 893-5262 if you would like to receive a schedule of educational opportunities or if you would like to talk about it with us.

Margaret Wittkopp

Investment Advisor Representative