When people find out I am in the investment business, they usually ask me where they should invest. They ask if it is better to be in stocks, bonds or real estate. They want hot tips like, are U.S. stocks better than international stocks? What about China and Brazil? Etc., etc. Next, they tell me their horrible investment experiences. Typically, they are convinced that anything they invest in is destined for doom. This leads me to ask, "Why do the majority of investors have bad experiences?" It doesn't help that for the past 10 years, the stock market and real estate markets haven't gone anywhere. After mostly going up during the '80s and '90s, the markets went down hard between 2000 and 2002. From 2003 through 2007, they did great. But, what came in 2008 to early 2009 was one of the worst bear markets in history, after which the markets rallied once again. It's understandable investors have had it tough. However, studies have shown that the average investor did poorly during the good times, too. Historically, retail investors have underperformed horribly when markets are bad. No wonder investors are frustrated and disillusioned. So, are people hard wired to invest in the wrong place at the wrong time? Yes. And I'll tell you why: emotions. Most investors invest based on emotions, driven by a constant tug of war between fear and greed. Will Rogers said investing is simple: All you do is buy low and sell high. The problem is when prices are low, everyone is consumed with FEAR. And when people are afraid to invest, prices plummet. The other side of the cycle is when markets have gone up. Investors tell their friends about the 20 percent return they got last year, and all of a sudden the 1.5 percent they got in their CD doesn't look so great. So then they, along with millions of other investors, come piling into the market consumed with GREED. This cycle of fear and greed repeats itself over and over. Consider where the masses invested the past 10 years. Back in 2000, record numbers flooded the stock market right before a horrible three-year bear market hit. Investors in the NASDAQ watched their accounts lose 80 percent of their value. Many of those investors said they would never invest in stocks again. So they piled into real estate to be safe. As we saw in 2008, it wasn't safe after all. Depending on which part of the country they were in, they experienced losses anywhere between 30 and 80 percent. Some leveraged real estate investors wiped out completely. For the past year, we've seen investors piling into bonds. Bonds have been pushed to the lowest yields I've seen -- simply because everyone is buying them "to be safe." The bond bubble looks a lot like the previous stock and real estate bubbles. Odds are that investors who buy bonds for safety are about to get crushed. At Paragon Wealth Management, we avoid emotional investing by following our quantitative models. We do not care what the media is saying or what we hope or how we feel. Our models process the market data and we invest accordingly. We constantly adjust our portfolios to what the market is actually doing. Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.
Article Source: http://www.bizymoms.com/expert-advice
Dave started his career as an entrepreneur. He successfully started over a dozen businesses in the early 1980s. In 1986, he sold his businesses and wanted to invest the proceeds, but he was unable to find an investment company that met his needs. As a result, later that year he began managing his own portfolios and later started Paragon Wealth Management.