Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
They worked hard and saved enough to retire with dignity—or so they thought. In the stock market crash of 2008 and 2009, few were spared the market decline, and even fewer hung around for the rapid recovery beginning in 2009.
Instead, relying on their brokers and advisers, many “fled to safety,” heeding the doomsday predictions of Nouriel Roubini (“Dr. Doom”) and many others.
We can’t change the past, but we can learn from it. Here are two simple decisions you can make that could significantly increase your investment returns over time:
1. Stop using a broker.
Why are you using a broker? Brokers can’t time the markets. They can’t pick stocks that will outperform other stocks. They can’t pick mutual funds that will outperform other mutual funds. They don’t understand risk, much less measure it.
It gets worse.
If you suffer losses due to misconduct of your broker, you are unlikely to recover them. Why? Because brokers game the system.
When you opened your brokerage account, you agreed to arbitrate all disputes before a panel appointed by the Financial Industry Regulatory Authority (FINRA), a misnomer for a trade association of brokers. Basically, the judge and jury of your dispute will be part of the same industry you are suing! I don’t like your chances.
Most of the sad stories investors send me involve misconduct by brokers who represent themselves as having an expertise that doesn’t exist.
The solution is simple: don’t use brokers to manage your money. Instead, learn how to do it better yourself.
2. Don’t try to “beat the markets.”
As an investor, you have a clear choice: you can rely on emperors with no clothes who tell you they can “beat the markets” (also known as “adding alpha”) or you can capture market returns, less low transaction costs, with 100 percent certainty.
Here’s the dirty secret your broker or adviser doesn’t want you to know: Your chance of “beating the market” is very slim. It’s statistically far more likely your returns will be a fraction of market returns.
Here’s a better way to invest:
1. Understand your tolerance for risk. This will guide you in dividing your assets between stocks and bonds (also known as asset allocation). You can determine your asset allocation by taking a free risk-capacity survey. Find one on my website: SmartestInvestmentBook.com.
2. Buy three low-cost index funds.
These three Vanguard funds are good examples of what kind of index fund to look for: Total Stock Market Index Fund (VTSMX), Total International Stock Index Fund (VGTSX), and Total Bond Market Index Fund (VBMFX).
3. Rebalance your portfolio once or twice a year. Rebalancing will keep your asset allocation intact or allow you to change it if your investment objectives or tolerance for risk change.
That’s it. You’re done.
Depending on your asset allocation, the long term average annual returns of these portfolios have ranged from roughly 8 percent to 11 percent. The portfolios with the highest allocation of stocks have yielded the highest returns.
Don’t be fooled by how easy it is to implement these decisions. Using this strategy instead of using a broker can dramatically impact your returns and make you one of the smartest investors!
Does this make sense to you?
Dan Solin is a Senior Vice-President of Index Funds Advisors. He is the author of the New York Times best sellers The Smartest Investment Book You’ll Ever Read and The Smartest 401(k) Book You’ll Ever Read. His latest book is The Smartest Retirement Book You’ll Ever Read.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.