18 Questions Blog Series
At von Borstel & Associates, we ask our clients 18 critical questions. The answers to these questions determine how we partner with each client and manage their wealth. This week we’re talking about how markets work.
Follow along with us through the 18 Questions Blog Series. You may be surprised by what you discover about yourself and your financial plan!
#13 – How Do Markets Work?
The cabbie in San Francisco is betting against the butcher in Chicago. One will lose, and the other will win. That is how a stock market works. We know that 50% will be winners, and 50% will be losers! Though which half will be the lucky ones is a mystery.
Wall Street tells you that they can out-time, out-pick, and outsmart the market! In other words beat the odds. There are millions of traders making billions of transactions. Their decisions are all based on information gleaned from world events and available news.
Every time there is a trade, there is a loser and a winner.
Therefore the market is a sum zero game. Still, many believe they can beat the market. However, research maintains that this is improbable. So what is the best hope of winning?
Think about harvesting premiums that academics have proven exist and can be garnered efficiently. Research shows that 94% of the portfolio’s return is placement! 1 So why does everybody spend 98% of their time trying to pick and outsmart the market? Because it’s a myth that Wall Street pushes. It’s what makes them wealthy!
Where should we harvest premiums?
We have created The Vision to Wealth Process® that incorporates these premiums as a piece of your total financial plan.
- Brinson, Gary P., L. Randolph Hood, and Gilbert L. Beebower. 1986. “Determinants of Portfolio Performance.” Financial Analysts Journal
Investment advisory services offered through von Borstel & Associates, Inc., an SEC Registered Investment Advisor.