Ignore the Hype

Chapter 2Don't Play a Game That's Rigged

So, if attempting to mimic the behavior of institutional investors by analyzing and reacting to the day-to-day gyrations of financial markets is unlikely to produce the outcomes you desire, what should you do?

The answer is fairly simple and one that you've undoubtedly heard before. You should start with a financial plan that clarifies and specifies your financial goals. Then, you should find an investment approach that works for you and stick with it for the long haul. And of course you should do all of this in a tax-efficient manner, since a dollar saved is a dollar earned.

Of course, that's “boring” financial advice and also easier to say than to do. Therefore, the remainder of this chapter will attempt to provide you with a better understanding of why financial advisors often give this advice. This chapter will also demonstrate the downside of deviating from your long-term approach.

The Upward Path of Markets

The Grand Canyon is one of the world's most iconic sights. I've known many people who have visited, and none have ever come back disappointed. The sheer immensity of the crevice gouged from the earth boggles the mind. Standing on the cliffs and looking at the floor of the canyon 6,000 feet below, you see the Colorado River. At that height the river looks small, which makes it even more amazing when you stop to consider that ...