There are no absolute performance guarantees in investing. However there are actions that you can take, that history shows, will allow you to earn better returns than about 60-95% of everyone else.
The truth is this. If you bet against the market by timing or selecting individual securities - trying to get returns higher than the market, or get positive returns when the market is negative (as appealing as that sounds) - you will LOSE. That's why advisers like us make sure our clients get what the market has to offer. By doing that we are in the top 30% of all advisers. (conservatively speaking)
What are the actions?
1) High levels of diversification - across and within asset classes. Best way to achieve it is with institutional asset class funds as found at Dimensional Fund Advisors (DFA). Second best way is with index funds as found at Vanguard. It is proven that diversification reduces risk while still providing exposure to the market.
2) Low expense ratio. It's proven that there is a direct correlation to low expense ratio and higher returns. (multiple Morningstar studies published) Of course the passive approach in the funds mentioned above yields higher returns, so the correlation makes sense.
3) Add a "tilt" towards "value" and "small" to your portfolio. It is proven that value stocks and small stocks out perform large and growth stocks most of the time. (The patterns of when they out-perform are unpredictable and repeat.)
4) Stay in the market. Market-timing does not work because you cannot predict market moves. (Each "market move requires two lucky guesses and also provide unnecessary worry and drama.)
5) Re-balance your portfolio as needed, at least once per year. By re-balancing you automatically sell high buy low. It's hard for a human being to sell something that is moving up and buy something that is moving down. Re-balancing provides the discipline that humans have so much difficulty doing.
The actions above are also congruent with commonly accepted prudent approaches to investing.
Investing is "weird" - you can't "out-hustle" or "out-analyze" others to achieve higher returns. Rather, you must take action to ensure that you get what the global market has to offer. Once you accept and understand this fundamental truth about markets and investing, you will
have superior experiences with investing, including performance.
Most of us elite advisors call the typical Wall Street behavior of attempting to time the market and placing money on individual securities as "speculation" or "gambling" not "investing".
Investing not only wins in the long run. A secondary benefit is an improved lifestyle. Speculating is very stressful.
