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Hazardous to Your Wealth
By R.Kevin O'Keefe, CIMA®, AIF®

With big moves in the stock markets lately, some investors might be anxious. The past several weeks have given almost every investor an opportunity to feel that they are right about the market—whether their outlook is bullish or bearish.

Having a strong opinion about the direction of the stock market can be very hazardous to your wealth. To invest successfully over the long term, one must begin by acknowledging that you do not know what the future holds, and neither does anyone else.

Avoid the trap of trying to be right. Trying to outguess the market is not a sensible investment process.

Every investor goes through periods during which money is lost—at least “on paper.” Whether your portfolio has been losing money or not is separate from the question about whether you have been following a sound investment process. Because of the luck, you could be making money even though you have a poor or nonexistent process; or losing money, despite having a terrific process.

Over the long term, however, a sensible investment process—which at its core, acknowledges the unpredictability of the future—is likely to serve you very well. Following a good process might not make you rich, but it will probably keep you from becoming poor. On the other hand, playing your hunches may offer you occasional wins, but over the long-term, this approach will likely produce disappointment and failure.


R. Kevin O’Keefe, Managing Member and Chief Investment Officer of First Affirmative Financial Network, LLC, chairs the First Affirmative Investment Committee and is responsible for due diligence and monitoring of mutual funds and separate account managers. Past performance is no guarantee of future results.


Posted: November 12, 2014