Want Better Investment Returns? Hire a Coach!

If you research many of the most successful people in the world, you will notice a commonality:  Involvement with great coaches.  Now what is it that great coaches do?  In sports, they are often able to create structure and discipline among athletes, allowing them to excel through the synergy of the team.  But most of us aren’t as concerned with sports as we are with the everyday challenges of paying the bills, savings enough for our kids education, and retirement.  So let’s take a look at how investment coaching can put you in the best position for long term success with your money.     

Since October 2007, many investors have seen their portfolios plummet, and with it, any peace of mind they may have once had around their money.  Looking for answers in the media, investors became more uptight, and quickly found themselves void of any financial strategy to lead them through the coming months.  So they did what most would do with their financial future on the line:  Sold out.  Now anytime someone sells their investments when the market is down, it always feels like the “right thing to do”.  We can tell friends, “Boy I am sure glad I got out of the market when I did, or I might have lost it all!”   

Now if you are thinking, I would never sell when the market is down, there is a company named Dalbar, Inc that studies investor behavior, and the numbers don’t lie.  Every time the market goes down there are major mutual fund redemptions, and when the market rises there are significant new purchases.   

Let’s look back for a minute at the golden rules of investing that most of us already know: 

1. Buy Low
2. Sell High
3. Diversify
4. Buy and Hold Long-Term

Now let’s be clear that the average mutual fund has not performed that poorly, those are the returns the average investor has received investing in equity based mutual funds.  What that means is that the actual behavior of the investor is what is costing them the return.  Decisions like selling and buying during different market conditions, and chasing returns of “hot” markets.   

Inside the Numbers 

If you happen to have $100,000 at the beginning of that time frame here is the comparison:  

If you are an investor, you fall into one of two categories:

1. Investing on your own
2. Investing with an advisor

For those of you that have an advisor, be as objective as possible, and determine if they are helping you comply with the golden rules of investing.  If there are often changes to your portfolio, or phone calls about new investment opportunities, they may not be helping you succeed.  As noted above, make sure you have a report that shows your long-term rate of return against market indexes.  Ultimately, that will tell you if you are failing or having success as an investor.  

The Moral of the Story 

The equity markets consistently provide a generous rate of return over time.  Investors often decrease those returns with the decisions they make along the way.  If you start out with a solid investment structure and can maintain discipline, which normally requires some help along the way, you can have a tremendous amount of success with your investments.  What you really need to know is if your current investment strategy is providing market returns, or is your wealth being destroyed through decisions being made along the way.  If you fall into the second group, find yourself a great coach that will educate you and help capture market returns, whatever they may be.