As an investor, do not lower your expectations. Some such as Charles Ellis, author of Winning the Loser’s Game, think you should. He found that 80 to 90 percent of money managers underperform the market. His conclusion? Investors should lower their expectations.
He’s not alone in his findings on under performance. Burton Malkiel, author of A Random Walk Down Wall Street, found over 80 percent of money managers underperform the market. Robert W. Baird & Co also found that over the last 10 years only 370 out of 4,000 money managers beat the Standard and Poor’s 500 (S&P 500) by an average of one percent.
Do these success rates, or lack thereof, scare you? Do they make you wary? Maybe. But, I don’t believe they should keep you from investing. Nor do I believe you should lower your expectations. I won’t and neither will my clients.
Then how to be a successful investor? Stay ahead of the curve. Investing is not a zero sum game. It’s not a one-size fits all box. You need to be aware of what’s going on in the world and the changes that are taking place.
Take for example the predicted shift in consumerism. Currently, the United States is the top consuming country in the world. The Hong Kong and Shanghia Banking Company (HSBC), one of the largest banks in the world, conducted a study. It showed, in the next 40 years, the United States’ conspicuous consumption will be replaced by the rest of the world.
International investing is complicated. I’m not a fan of diversifying your portfolio by investing in overseas companies, but when the major consumers move, your investment needs to follow.
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