This Single “Trait” Could Cost You 2% of Your Portfolio Every Year…
Because if you are anything like the millions of other sports fans out there, you could be making ONE single investment mistake that could cost your portfolio as much as 2% a year…
Without a doubt, changing this single behavior could make your life much richer than it was before.
If you’re like me, you grew up with a favorite baseball player. Being a Philadelphia native, mine was Mike Schmidt. Considered probably the best third baseman of all time, Schmidty led the league in home runs for eight seasons and RBIs for another four, and he sits at number 15 on the all-time home run list.
He was a true slugger -- and I loved every bit of him. With every great hit, every great throw -- I was constantly arguing the case for my favorite player.
But was I just following the big headlines and the wrong stats?
I was emotionally invested. I was biased.
As Michael Lewis recently pointed out in his Best-Selling book Moneyball, stats can be deceiving in several ways, especially when you’re already biased in one direction.
Stats magnify essentially small differences and confuse circumstances with skill, and they’re often looking at the wrong things in the first place…
We place absurd emphasis on home runs and RBIs. RBIs are considered an individual achievement but to knock runners in – runners have to be in scoring position already! The best swing in the world won’t earn RBI points if the bases are empty.
And it turns out that RBIs are poor predictors of success.
The metrics that matter – on-base percentage (OBP) and slugging percentage – aren’t nearly as well-known as home runs or RBIs.
So who are the great baseball players then…
Johnny Bench? Reggie Jackson? They definitely come to mind as some of the best players of all time.
But what about Stan Musial or Mel Ott?
They’re barely known, yet the stats that matter are just as good for them as they are for Bench or Jackson. They’re on the all-time list for walks and they have higher on-base percentages -- and they have World Series rings as well!
So what does this have to do with YOU making money?
Believe it or not, the same problems with stats happen as much in investing as they do in sports.
The exciting, emotional, “easy-to-find” numbers often obscure the deeper stats that make the real difference between picking the right or wrong stock.
Traders are too often quoting moving averages…
Reacting to the latest dire news released by the Fed…
Debating whether “hot” markets are on their way up or down...
Simply stated: those are just topics that create emotion.
Investors that rely on their emotion typically buy stocks when they are HIGH and sell them when they are LOW.
In fact, I just read a provocative study by an expert investment research firm that said from 1993-2012, the average investor lost 2.0% compared to the market.
Because they were TOO EMOTIONAL and sold at all the wrong times!
That’s a $2,000 loss on a $100,000 portfolio – every year!
What, then, should you do?
Smart investors know they need to take emotion out of the investment process.
They need to look for companies with a PROVEN track record…
They need to look for companies that have been VETTED in a serious manner…
They need to look for companies that they are COMFORTABLE investing in...
In other words, success starts with a few safe home-runs.
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