I see this first hand every day in the Financial Services industry.  There is an illusion that we are getting better at predicting financial and economic events.  However, the law of large numbers can explain the illusion.  With so many self-proclaimed prophets predicting every possible outcome there is always someone that can claim they accurately forecasted every event.  Consider a coin toss.  One person flipping ten heads in a row is very unlikely.  However, if 10,000 people all flip coins it is a statistical certainty that one of them will flip ten heads in a row.  Problem remains, predict in advance which one will be able to do it.  Successful financial predictions are not evidence of a good prophet but rather a product of the number of prophets predicting. 

Why this growing dependence on predictions?  Are we better forecasters of the economy now than in the past?  NO!  Statistics show that even in the most important financial predictions the experts are no better than a random guess.  Nonetheless, we keep turning to proven failures for another guess about tomorrow’s outcomes today.

This addiction to prediction is growing due to our increasing need to be able to control our experiences.   There is a strong sense that a surprise means we did something wrong; we missed a piece of data, let our guard down, or forgot to do something.  We expect our car to start when we turn the key, the room temperature to be just right, no long waits at the checkout line, and our investments to earn a healthy, steady, positive rate of return – or something failed.  Failure creates uncertainty and anxiety.  Our expectations for predictable outcomes seem so reasonable that we begin to demand certain outcomes.  Financial institutions have heard our demand and are working overtime to satisfy us with an overload of new predictions.  This guessing game feeds on our willingness to continue to pay for worthless advice.  It is time to STOP!  We need to stop giving our savings away to prediction junkies! 

The real solution is not easy but it is very simple.  It starts with knowing the truth.  With all the changes in the financial markets there are some things that never change, they are always true.  Our financial Peace of Mind comes from knowing and holding on to the things that are always true.

An example:  The Free Markets reward risk.  The truth is, you cannot remove all risk and expect to get a market return over time.  The truth is, diversified risk is good, it allows for long term returns on invested assets. 

The truth is, the markets are random and you and I can have Peace of Mind in our investments.   No forecasting necessary!

Costs for $100,000 loan equals approx. $500.

Costs for $200,000 loan equals approx. $1000.

If you or someone you know is planning to get a new home mortgage, you may want to consider acting on the opportunity before the additional expenses are applied.

If you are in the process of getting a new loan and your payment is currently locked in you can avoid the increase if your loan is closed before mid-February.

If you have already closed on a new low interest rate in the past 24 mos and have no need for additional financing right now you will not need to worry about this fee. 

Call my office if you have questions and schedule time to discuss the best options.

Because our behavior is tied—more than anything else—to pleasure and pain.

Imagine a campfire. It brings warmth and pleasure as you get closer to it. But get too close and it will bring pain. As we seek the pleasure of an inviting campfire, our instincts protect us from the pain of getting too close.

Seeking pleasure and avoiding pain are hardwired to our behavior. This serves us well with fire, but not with investing our savings. Investors experience real pain when they see the value of their savings drop, and with the pain comes a strong desire—an instinct!—to get out.

Equally dangerous is the pleasure of seeing the growth in the market. Once they’ve gotten out, investors wait on the sidelines until things swing the other way. Then instinct tells them to jump back in. Sell low and buy high. As investors we know that’s exactly the opposite of what we should do, but the pain/pleasure instincts are strong.

They act against us.

But there’s an answer for our instincts…

Free Market Funds are built to combat the bad behaviors that destroy investor returns.

Coaching helps you identify the bad inclinations before you act on them.

Rebalancing is a disciplined approach to always selling high and buying low.

So enjoy the warmth of disciplined investing. Don’t get burned by bad behavior.

You can see from the chart that the mortgage bonds have stalled out at the same place they did last year. This is significant. We don’t know when the interest rates will jump up but it does not appear that they will go significantly lower from where they are today. If you know of anyone that is considering financing their home in the next few months they would do well to get things started soon to get the best terms.

Most fixed rates are between 3.5% and 4.5% depending on the length of the term (15yr to 30yrs) and the credit of the borrower. Let me know if you have questions about any of this.

What I love about this is the powerful lesson that the twins learn from their father about honesty. Their father is showing them that honesty is more important than $50,000. How often do you and I have the opportunity to show our kids moral lesson with such a quantifiable dollar value attached? The father of those twins gave his boys something worth far more than $50,000 that night. I love it!!

1. Markets are random. They go up as randomly as they go down. Unpredictable over the long term.
2. Volatility = Risk. The more volatile the markets, the more risk associated with investing.
3. 3. The market rewards higher risk with higher returns over time. More long term risk results in higher long term rewards.
4. 4. The current market volatility will provide better returns for my long term savings! I will be rewarded by staying disciplined!

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This video shows how the current volatility is a repeat of the past!  History teaches us to be disciplined and optimistic about the Free Martket!

This is only true for investors that believe in the Free Markets and invest accordingly! This is not true for actively traded mutual funds! You can benefit from the current events but not by chasing after hot stocks or self proclaimed market experts! There are three simple things that we do for our clients to get the maximum benefit from all that the free market gives to disciplined investors over time.

OWN STOCKS – DIVERSIFY – REBALANCE

Your Peace of Mind can go up as the market goes down! If you don’t enjoy Peace of Mind in volatile markets then make time to attend one of our educational events or call my office to schedule a short phone consult!