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Investment advisors and individual investors do not underperform because of the investments they select or because of current market conditions or the market outlook, they underperform because they do not—do not know how to—properly actively manage the investments they select in response to current market conditions or anticipation of the market outlook while hoping that time will somehow bail them out.

• There is no theory, modern or otherwise, that can be ordained, no computer that can be programmed, no software that can be designed, no investing tool that can be contrived, and no equation that can be divined to quantify, evaluate, and predict the primary forces that drive the financial markets and investment prices; human consensus, mood, and behavior; intelligent and not, knowledgeable and not, reasoned and not, rational and not, and logical and not.
• While confusing, comparing, and applying the concepts of order, causes, connections, effects, and rules (Newton's three Laws of Motion, for example) as found in the sciences and systems of the universe and as explained with mathematics with the chaos, incidences, coincidences, chances, correlations (none of which are causal; but, assumed in order to make MPT math work) and no rules as found in the artistry and complexity of investing and managing capital in the financial markets in an effort to predict investment outcomes, Modern Portfolio Theory (Modern Portfolio Theory Disclaimer), the Olestra™ of investing, and all of its illegitimate relatives—Monte Carlo Analysis, Efficient Frontier Analysis, Technical Analysis (worth a glance), Beta, and Brinson's Asset Allocation—using yesterday's news as an investment crutch, are just other ways to record and to illustrate investment history without valid analytical, interpretive, deductive, predictive, or directional investment value because they assume and suggest, incorrectly, that the financial markets' cycles of the past and the valuations of underlying investments in the past—because they are somehow mysteriously connected as part of an orderly, sequential financial system—will repeat themselves similarly or exactly in the future as they did in the past in much the same order and with the same frequencies, durations, levels, relative valuations, and volatilities; absurd, as anyone who has spent a nanosecond in the financial markets would, should know.
  • Given:
    • Investment advisors and stockbrokers announce and individual investors are aware of the required, responsible, and absolutely true investing footnote, "Past performance is not a guarantee of, …is not necessarily indicative of, …is not a true indicator of future investment results."
    • Modern Portfolio Theory, Monte Carlo Analysis, Efficient Frontier Analysis, Technical Analysis, Beta, Optimizers, Stock Screeners, and Brinson's Asset Allocation use past performance investment data to suggest/predict future investment results.
  • Therefore:
    • Irrespective of these facts, investment advisors, stockbrokers, and individual investors proceed to use these investment tools to build the foundation for and the logic of their investment advising and individual investor investing cases and to predict future investment results!
  • Investing and investment performance hindsight are neither investing and investment performance insight nor investing and investment performance foresight.
  • History will show that these investing hoaxes did for investing what peanut butter and jelly sandwiches did for medicine.

• The conventional and (un)inspired investment advising and investing wisdom of the day is to have investment advisors and investors, in effect, concede that neither one of them has the management skills nor the qualifications to manage investments and time investing and that, therefore, the best solution is that investors should buy unmanaged investments to eliminate investment management and timing; great concept, take all of your hard earned capital and invest it for the future without management or timing.
• Imagine going to Warren Buffett and suggesting to him that to improve investment performance he should no longer manage or time his investments, that, instead, he should invest in index funds in which the best he could do would be to be average—striking out, bunting, and hitting singles most of the time while never really having the opportunity to hit doubles, triples, and an occasional home run—and, worst of all, while actually assuming greater investing risks, not less, than most other investments because index funds are missing the two critical investment performance components that really matter, that actually determine investing outcomes; investment management and investment timing.
  • 'Out of control investing,' what a great money management concept!

• When investments are 'packaged' into 'new and improved' investments or 'unpackaged' as 'exotic' derivatives by Wall Street's marketing 'imagineers,' the value added most often accrues directly and immediately to investment firms and advisors in the form of 'new and improved' revenues for the former and 'exotic' commissions for the latter; but, without adding substantive investment value to investors' investment portfolios at any time while, in most cases, masking added investment risk.
• Investment advisors and investors need to understand that better and safer investing will not be found in 'new and improved' investment products but in 'new and improved' investment advising and investing skills and capital management.
  • The notion that an investment is safer and that an investor is more secure by investing in index funds, for example, than in individual equities does not follow; both can go up and down—a little or a lot, for a short time and for a long time.
  • Investment safety and investor security fall in the lap of investment selection and management, a sense of the markets, and a plan for all possibilities, eventualities, and certainties.
    • Management process, not investment product.
• The best of all investment advising products is the forgotten, and for many never acquired, art form of creating and overseeing unique investment portfolios for individual investors.
  • Now you truly have something of value to offer.

• After selecting and buying investments, many investment advisors and stockbrokers and most individual investors typically.
  • Opt to passively distance themselves from the required ongoing investment planning and the day-to-day investing decision making and action taking processes while seeking comfort in the widely used and ever popular non sequitur of investing underperformance excuses; 'It'll come back.'
  • Prefer to 'sit on the investing sidelines' and be stubborn long-term investors seemingly indifferent about recent developments regarding an individual investment currently held, the current market conditions, or the market outlook.
  • Choose to evaluate, pass judgment on, or lay blame on someone else or something else when something goes wrong—which is a certainty—rather than placing blame directly where it belongs; themselves and their lack of investment selection and management skills.
    • Many investment advisors and stockbrokers mistakenly believe that because they have passed the Series 7, possibly are CFPs, that they are qualified and able to advise effectively and to tell others how to invest.
      • Many fail to recognize that there is a big difference between knowing the rules, the positions, and a few plays and having a sound game plan, selecting the best plays, and executing those plays effectively.
• If surgeons where held to the same skill, discipline, procedural, accountability, and performance standards as Wall Street, most investment firms, many investment advisors, and most individual investors who invest for themselves, if the techniques and tools they used were of the same quality and integrity in their specific fields of medical expertise as those used by Wall Street, most investment firms, many investment advisors, and most individual investors who invest for themselves in their respective circles of responsibilities, few patients would survive their operations.

• Wall Street's training tends to be focused on the initial discovery, presentation, recommendations, and investment action process of what investors need to do; however, investment advisors, in general, have only a vague idea of what they need to do and how they are going to do it to achieve an investment objective over time; their steps concerning their own, specific investment advising responsibilities, policies, procedures, and actions that they have in place to manage capital and investment portfolios as part of the ongoing investment advising decision making and action process.
  • As a result, investment advisors often present illogical, irrelevant, and felony stupid Standard Investment Plans that are lacking in a specific action plan and decision making process for future portfolio modifications.
    • They offer considerable information about the form and the frame of the plan but little about the design and the structure to give the investor an investment direction and really nothing about the motor that will drive the investor to his or her investing destination.
      • My favorite report actually has a footnote that states that, "For specific investment recommendations please consult your financial advisor."
        • That is what the investor wanted in the first place; specific investments and why.
    • Most investment advisors use the latest investment advising language of the day, 'pie chart.'
  • You would agree that you would have grave reservations about the skill levels of professionals in other fields of advising expertise who would use pie charts to explain what you should do if you sought their advice.
    
    • Your Accountant: "I prepared your tax return for you in a detailed pie chart format to give to the IRS."
    • Your Attorney: "You will save some money if I do a multicolored pie chart corporate restructuring for you."
    • Your Doctor: "Here are your pie chart physical results. The pie chart indicates that we should remove all of the yellow and add a little more red when we go into surgery and open you up in a few minutes. By the way, you are in luck because the sliver of black in the pie chart seems to indicate that anesthesia will not be necessary while we operate on you."
  • Investment advising is all about process; going from one point to another thoughtfully and intelligently.
    • Products and investments are merely the means to achieve an investment objective, not the destination.
      • All investment advisors have products to sell, investments to recommend; just learn the facts, be compelling, hope you get the order, hope it goes up, and stumble along waiting for the next idea to sell.
    • Most investment advisors and stockbrokers talk about and stop 'advising' @ product and seldom get into the investment advising process; where investment advising and investing really begin.
    • The degree of investment advising success will be determined not by how well you know and sell the 'nuts and bolts' of an investment, but by how much thought you have given to the details of the process of investment advising.
      • To make the transition from investment salesman to investment advisor, start by creating your own investment advising track to run on and your own personal investment advising prospectus which details your own investment advising process; the what, when, why, how, and what ifs of investing in detail.
        • Doing so, you will seldom have to talk about product because the investor will know that your investment advising prospectus and plan will focus on attention to detail and include suitable investments.
    • For those of you who are new to our business and say that you do not like the business of investment advising and for those of you have not been successful in the business of investment advising, how can you say you do not like it if you have really never been in it?
  • Extinction of the noble and important profession of investment advising, as we know it, is a distinct possibility because all markets eventually close the inefficiency gaps between value and price, competent and unqualified, skilled and unskilled, serving and self-serving, and most of all, good investment advising judgment and bad investment advising judgment.
    • The leading indicator of this increasing and expanding trend is the exodus of investors from traditional sources of investment advice to the ever expanding 'investment advising' Internet where, at worst, they will find for free what investment advisors offer for fees and commissions as they seek what is so rare, very hard to find, and priceless; disciplined investment judgment and sound investment advice.
    • Investment advisors must ask themselves:
      • "Would I do business with me?"
      • "Would I build a financial future with me?.
      • "Would I entrust my life savings with me?
  • When things go wrong, as they have in the past and most certainly will in the future, advisors and investor are usually adrift and they most often just try 'wing-it;' choosing to rely on and respond to analysts' opinions and revisions (usually coming well after the fact), explanations and excuses, flawed investment tools, and the irrational hope that the investment past will somehow repeat itself and be the investment future.
  • Investment advisors need to develop their own 'personal investment advising prospectus' describing and detailing who you are, what you represent, and how you conduct your business, how you select investments and design investment portfolios-from tee to green- to establish that you do, in fact, know what you are doing, and that you have a unique, proprietary investment advising value to separate you from the rest of the pack.
  • Investment advisors must create an organized, efficient, and disciplined investment advising environment in which each investor, regardless of investment need, knowledge, experience, and the amount of investment capital, will be honorably, properly, intelligently, and efficiently served consistent with each investor's investment profile and investment goals, the current market conditions, and the market outlook and as the financial markets and relative investment values change; nothing learned the hard way, do it right the first time, suitable, hopefully timely investments, full disclosure, investor informed, economic best interest investing in specifics and in detail.

• Investors are often exposed to hit and run investment advice being sold random, isolated, sometimes frequent investment transactions with no clear investment goal in mind.
• 'Buy, hold, and forget' is not an investment performance option.
• Investors' failure to perform occurs because.
  • The conscientious often do not know the questions to ask to distinguish between good and bad investment advice.
    • They are more concerned about the 'nuts and bolts' of investments rather than the 'nuts and bolts' of their stockbroker or investment advisor.
  • The investing naïve and unsuspecting look for investment shortcuts and instant gratification investment solutions.
  • The reckless confuse knowing what an investment strategy is and how it can work with being able to make it work successfully; naked option strategies for example.
    • Investors usually fail to think or to ask that if what is being taught, presented, or recommended is so easy, certain, and extraordinary, why are these individuals even talking to me, why do they even need me?
      
• Investors must do the planning and the work that is necessary to prosper in the financial markets and must be willing to learn or do what they need to learn and do in order to evaluate and select investments, investment advice, and investment portfolios; to either manage their own capital or to make informed decisions when they delegate investment planning and investing to an investment advisor.

• Regardless of the sources for investment ideas, the performance distribution from all sources will be about the same; some ideas up and some down; most a little, a few quite a bit, and one or two a lot—the problems, of course being, not knowing which ones, when, how high or how low, and for how long.
• Regardless of the author and regardless of the effort, all economic opinion and market forecasting will range from terrible, to close, to a few lucky calls.

• Keep in mind that those who even suggest or possibly promise annual investment returns of 100%, 50%, and 30% cannot deliver.
• If the higher ranges of these investment rates of return were possible to achieve on a consistent basis and if an investor started with just $10,000.00, it would not be too long before that investor would have just about all of the money in the world.
• Since these returns are commonly suggested to be in the realm of possibility, the purveyors, or should I say predators, of these investment returns should not have to be promoting their investment scams and each should have about all of the money in the world by now and there would not be any money left for either you or for me.
• That said, back here on planet earth that a $40.00 equity just going to $43.00 in a year, a 7.5% return on capital, a $30.00 equity just going to $33.00 in a year, a 10% return on capital, or a $20.00 equity just going to $22.00 in a year and declaring a $1.00 dividend, a 15% return on capital, are realistic investment return expectations for an investor seeking primarily capital growth and willing to assume moderate investment risk with occasional variances above and below these investment returns in extreme and unusual investment circumstances; best of all, as an investment advisor, you can deliver.

• At a 10% compound annual rate of return, capital will double about every 7.2 years; 72 divided by 10.
• At a 30% compound annual rate of return, capital will double about every 2.4 years; 72 divided by 30.
• At a 50% compound annual rate of return, capital will double about every 1.4 years; 72 divided by 50.
• At a 100% compound annual rate of return, capital will double about every 8 months (actual, 1 year) ; 72 divided by 100.

• "Wrong" investment decisions are not the primary reasons for investment failure. "Wrong" is not having investment selection and management disciplines. "Wrong" is not having portfolio management disciplines. "Wrong" is not having portfolio design and construction disciplines that define right and wrong. "Wrong" is not having price management disciplines resulting in doing nothing when right or wrong.
• All investment advisors and investors must have decision-making, action-taking investing processes in place to anticipate and to deal with being right and wrong rather than, in most cases, opting to depend on the five greatest obstacles to investment performance; 'It'll come back,' 'It's not a loss until it's sold,' 'The charts indicate...,' 'The analyst said...,' and, my favorite, the one that causes the most damage most of the time, 'I'm a 'long-term investor.'—even though the reasons and conditions for making an investment in the first place have changed since the date of acquisition.

• Under no circumstances whatsoever should the investment advising or individual investor story be, no matter how great the story, bought at @ $50.00 or accumulated @ an average cost of $50.00 and still holding @ $25.00 while explaining, excusing, justifying, hoping, and regretting.
  • 50% down means 100% back up just to break even; a daunting task and an unnecessary, unpardonable, and undisciplined investing error.
  • The reasons for a stock's decline will only become apparent well after its decline.
    • Take advantage of the greatest perks of the financial markets, liquidity, price alerts, and stop orders.
  • When a price alert is hit (5%, 10%, 15%, all manageable), let the market decide for you what to do and do what the market is telling you to do; sell at the market.