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Why CEOs And PhDs Are Bad Investors

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I’m convinced most people are hardwired to be terrible investors.

Even very smart people who are extremely successful in other walks of life – doctors, CEOs, PhDs – are often bad at investing.

Think about this: If you put just $1,000 into the S&P 500 in 1950, you’d have $2.2 million today. I’m not saying $1,000 a year. By investing $1,000 into the market one time and leaving it alone, your money would have grown to $2.2 million.

Almost anyone can do that. Yet, most people don’t retire comfortably—let alone rich. The average 60-year-old has about $400,000. Forbes says you need $1.7 million to retire.

What’s the problem?

Some people fail to save and invest. We can’t help them.

But most Americans work hard, save, and try to invest right.

Their #1 mistake? They’re focused on picking stocks.

They’re so concerned with choosing between Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN), or Berkshire Hathaway (NYSE:BRK.A), they’re missing what REALLY matters:

Focusing On Asset Allocation

  • It’s 1,000X more important to focus on how much of which different types of investments you own.

You’ve probably heard this referred to as “asset allocation.”

A study from the Financial Analysts Journal concluded that 94% of the variation in a portfolio’s returns comes from asset allocation. Stock-picking and market-timing, together, accounted for just 6%.

In other words, compared to asset allocation, stock picking barely matters. While stock-picking is a good source of entertainment… and can move the needle on your net worth quickly, in certain circumstances… it’s simply not the most important driver of most peoples’ investing returns most of the time.

Asset allocation is.

Cornerstone Club is the advisory I head up at RiskHedge. It’s the only advisory I know of designed to help individual investors smartly allocate their assets every month.

I’ve personally used this to manage most of my family’s money since 2016.

The Cornerstone system starts from a proven principle:

Owning Major Asset Classes

  • To have the most robust portfolio, you should own a mix of quality financial assets from all over planet Earth.

“Mix” means you don’t just own stocks. You must own all the major asset classes: stocks, bonds, commodities, and real estate.

“All over planet Earth” means you don’t just own investments from your home country. Americans should own stocks from emerging markets and Europe. They should own foreign bonds. They should own a mix of quality assets from everywhere.

BUT—and this is where many folks go wrong—you don’t need to own everything all the time. There’s a time for every investment.

Cornerstone aims to put you into the right investments at the right time.

There’s a time when it’s profitable to own emerging market stocks… like from April 2005 to October 2007, when they soared 156%.

There’s a time NOT to own emerging market stocks… like from November 2007 to November 2008, when they fell 69%.

The Cornerstone system sorts this out for you. It tells you what to invest in and when. If a major asset class is “working” somewhere in the world (prices are going up), Cornerstone makes sure you own it.

The Cornerstone Method

  • Cornerstone is a strategy for your core portfolio.

Cornerstone Club launched last year. It’s our first advisory designed to help manage your core portfolio.

In short: I recommend “building around” the Cornerstone method. Use it to earn strong returns on the part of your portfolio you can’t afford to take big risks on.

Then, use other services—which include much higher-upside individual ideas like microcaps and disruptor stocks—to speculate with a small slice of your portfolio.

By the way—I said earlier that stock-picking barely matters. That’s a slight exaggeration. There are corners of the market where a great analyst can carve out a true edge: cryptos, microcaps, tech disruptors, and trading, to name a few.

Today’s Markets

  • .. what’s Cornerstone saying today?

Last year, Cornerstone directed me to be in mostly cash and commodities. That turned out to be the right move, as Cornerstone sidestepped most of the damage done by 2022’s bear market.

Now, it’s a different story. Cornerstone is 100% invested.

In fact, Cornerstone turned full-on bullish last month. Stock markets soared in a broad-based rally in July, and Cornerstone posted a 4.6% return—its best month since 2021.

Article by Dan Steinhart – Publisher, RiskHedge

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