John discussed on Ric Edelman

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Happy holiday and festivus for the rest of us John how old double the LSA may ninety welcome back to the regular show things running around with me last year's worst stocks where hope it invite him last year Cody General Electric Perrigo line are applied materials Tyson foods boy I hope you didn't buy the stocks last year twenty eighteen these were the worst stocks Cody was down sixty seven percent GVA down fifty seven percent para go down fifty six one are applied materials Tysons foods down thirty eight thirty six thirty four percent in value in a single year can you imagine losing thirty to seventy percent of your money in a single stock in a single year on my goodness gracious and if you did on them I know what you did yeah seldom probably after you lost all that money well golly Gee will occurs guess what some of the best performing stocks of this year have been Cody general lecture cargo on our planetary old Tysons foods there is Cody which last year lost sixty seven percent is up seventy eight percent so far this year Jeannie which lost fifty seven percent last year is up fifty one percent this year ago was down fifty six this year it's up thirty moment when our was down thirty eight this year up to fifty two applied materials down thirty six it's up seventy eight percent this year and Tyson's foods which was down thirty four percent last year is up sixty six percent this year the point of all of this is to demonstrate the wild volatility the incredible difficulty if not flat out impossibility of trying to bet on what's going to happen next in any individual stock and this is why you shouldn't even try to play that game in fact it's not just individual stocks really need to avoid playing the game it's the broader economy as well the Wall Street journal surveys economists every single year and asks them to predict what is going to be the interest rate on the ten year treasury at the end of next year and in eight of the last ten years economists got it all wrong I mean if the economists of professionals academically trained employees earning hundreds of thousands of dollars a year if they can get it right what makes you think that you can and therefore this is why I'm so concerned about a survey recently released by each trade they surveyed their account holders their investors the people who have money at each trade thirty eight percent of them said that they're satisfied with their portfolios only thirty eight percent two thirds say that they are not satisfied with their investments twenty one percent said they're going to move their money out of their investments and and the cash and nearly as many so they're going to do the exact opposite but he's a we try that one again check this out sixty two percent say they're not happy with their portfolio and to solve the problem as many say they're going to move in the cash as say that they're going to move out of cash in other words you are probably feeling pretty smug about your portfolio you either like it or you don't and if you don't you don't know what you're gonna do about it and your feeling pretty smug and cocky and confident because you'll know what's best here's news for your pal the guy standing next year is gonna do the exact opposite as you know and he is feeling just as smog and cocky and confident as you are one of you is crazy yeah I know the other guy is well you know what they say about the other guy to the other guy you're the other guy hello here's evidence that you really don't know what you're doing a study was just released by the Ipsos behavioral science center they took a look at four oh one K. plans all across the country and as you know we do your retirement plan at work you have a list of investments available to you you look at the list every time you were trying to figure out which choices to select well how was that list sorted when you look at it online or they handed a brochure you see this last many cases the list is sorted alphabetically guess what they discovered you guessed it the funds at the top of the list at the start of the alphabet get ten percent more money from employees then the funds bottom of the last the phones in the fifth to tenth place get five percent less money than the funds at the top the study was done by professors at Seton Hall University Saint Louis University Kansas State University in addition to the abscess behavioral science center and they discovered that when they gave employees education and they said this list is randomly sorted choice at the top of the list is not meant to suggest it's the best choice even when employees were given financial education to warn them that the list is randomly sorted it didn't matter people continued to put more money in the top funds in the last then on the rest of the last so here's what you need to do resort the last manually use word cut and paste from the brochure and randomize the list so that you aren't exhibiting an alphabetical bias and how do I want you to re sort the list by expense ratio war by historic volatility such as the sharp ratios Sharpe ratio invented by William Sharpe whose co founder here at element financial engines Nobel Prize winning economist who developed volatility measure known as the Sharpe ratio because history tells us that lower cost funds tend to generate higher returns than higher cost funds and that funds with lower volatility tend to outperform funds with higher volatility course past performance is no guarantee of future results we all understand that but if you're gonna sort of west instead of doing.

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