Hate New Year's resolutions?

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Wonder Woman wrote:

tsptorture wrote:

Sounds like you are a "buy and holder"?

Dr. Evil, I don't identify myself as such. See my response to Pete1:

Ah, good, someone would be disappointed if you were...............

 

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tsptorture wrote:

Sounds like you are a "buy and holder"?

Dr. Evil, I don't identify myself as such. See my response to Pete1:

Pete1 wrote:

BTW, WW, I am notquestioning your intentions in posting this article. I am questioning Farrell's message. I have written an email to him about the article.

Hi Pete, No problem. I post articles that I think are interesting or that I think others might be interested in. I wouldn't identify with an article so to be insulted by a critique of it.I'm going to post some similar and f/u articles now but don't go crazy :u. W_W

http://www.tsptalk.com/mb/forum20/1100.html

 

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Sounds like you are a "buy and holder"?

 

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Hate New Year's resolutions? These 10 ideas can help you break bad investing habits PAUL B. FARRELL

By Paul B. Farrell], CBS.MarketWatch.com Last Update: 7:09 PM ET Jan. 4, 2005
ARROYO GRANDE, Calif. (CBS.MW) --Be honest. You never intended to keep them anyway. Right? In fact, you've forgotten you ever made all those grandiose 2005 New Year's resolutions.

Your heart was in the right place, but your sneaky secret little inner saboteur had no intention of living up to those silly resolutions. You tell yourself: It was just a fun thing to do; nobody takes them seriously anyway. Besides, in today's commercial world promises are just sales tools.

Stop! If you really want to change, there is one neat little trick you can play on your brain. Behavioral-finance experts call it a "paradoxical intervention." Simply put, do the opposite! Promise to overdo something you want to stop doing, but can't.

That's right, surrender to the dark side. Go overboard. That'll help make you more aware of your bad habit and the negative consequence it's having on your life. Investors can use this neat trick to break bad habits long after New Year's, when your brain doesn't have the excuse that "nobody cares about New Year's resolutions anyway."

The New York Times' New Year's editorial got me thinking about our weird human "habit of standing apart from your life as if you were two people instead of just one." That habit makes us "believe our lives are somehow external to us and that we can pick them up and rearrange them at will." When I worked as a therapist I saw this splitting all the time. In fact, I'll bet you have two people inside you, who talk to each other all the time.

So here are Dr. Paul's Top 10 paradoxical interventions: Try sneaking one into the conversation the next time your "good" side is trying to convince your dark side to give up a bad habit. Usually the dark side is addicted to an instant gratification (chocolate, eBay, online trading), and the good side is stuck cleaning up the long-term mess when the habit backfires.

Maybe one of these 10 paradoxical resolutions will tease your saboteur into surrendering:

1. 'I'll save for retirement every month, but only what's left over'

The truth is, Americans are instant-gratification addicts. We want the latest, the hottest now! Your good side knows that if you're not saving 10 percent you're spending too much. But our dark side is so much in control that 80 percent of us will never be able to retire comfortably. So play this trick on your dark side: Go on a big spending spree for a while, so that you can't even pay for basic essentials. Americans need some real drastic actions to wake up that myopic saboteur running our lives.

2. 'I'll only buy funds that will make solid short-term profits'

Fund managers are worse than you'll ever be in the split-personality arena. They encourage you to invest long-term while churning their portfolios 100 percent annually.

Individual investors aren't any better at long-term holding. People just don't notice that active trading increases costs and reduces returns by one-third or more.

Try this: Promise yourself you're going to "have fun" and buy or sell at least one security every day for a month. (Then tote up all the costs, lower returns, and the time you wasted.)

3. 'I'll buy only the "best" funds my favorite columnists mention'

We estimated that there were 43,000 securities recommendations made just last year by so-called experts on cable and in the press. Here's a little trick: For the next month, count which stocks or funds get the most recommendations and buy as many of them as you can. Have fun!

And when you're fully invested, keep following your favorite gurus, counting their selections; sell the dogs you bought, and invest in some new ones. (By the way, studies prove that securities hyped on cable underperform the market.)

4. 'Asset allocation's OK, but sometimes you must time the market'

The truth is, most little investors and big money managers only pay lip service to diversification and asset allocation. We all love tinkering with our portfolios. We are convinced we have a secret talent at predicting future economic and market cycles.

So, for one month, each morning, actually write down where you think the S&P 500 will be at the end of the day, and at the end of the month. Wall Street gurus can't do it. Check your guesses at the end of the month.

5. 'I avoid low-cost index funds because their returns are too low'

Actually, your dark side saboteur's unlikely to surrender this battle. Only about five percent of funds are indexed. The other 95 percent are held by investors who secretly love giving their nice money mangers one-third right off the top. No wonder Vanguard's founder Jack Bogle compares actively managed funds to Vegas casinos!

So try this a trick. Next week calculate how much you lost on expenses and fees to your brokers and managers and send them a check in that amount as an extra thank-you bonus.

6. 'I must win at active trading to prove I am a real, macho man'

Investing has become a psychological testosterone battleground, where a "real man" must pit himself against Wall Street to prove he's macho ... even though he knows he'll lose. There's a bizarre sense of honor in going to battle against Wall Street's Gordon Gekkos, the guys waving the "greed is good" flags.

So try this: Follow the recommendations of CNBC hypemeisters Kudlow & Cramer, and make trades like them. And keep a journal about how each trade really makes you feel.

7. 'Political ideologies will never influence my investment strategy'

Are you a truly "independent" investor? Politics has a bad habit of overriding rational thinking when it comes to investment strategies.

So for the next month, keep a little notebook about your emotional reactions pro and con to the Social Security privatization debates. Be specific. Don't judge, just write. (At the end of the month: Did you write down even one positive argument of your opponents? The Democrats ideology is blind to the pros of privatization. And Republican ideology is blind to all negatives.)

8. 'I'll find a free online program to help me discover my goals'

This week, try to tell three friends or loved ones where you'll be in five, 10 and 20 years. Most people don't have any serious goals or plans on getting there.

Unfortunately, unless you have some solid goals, your personal investment strategy will drift and shift with the latest news: Overly optimistic when news is positive, conservative when things are going bad. Your dark side will act like it knows where it's going. Call its bluff. Find out why your portfolio underperforms.

9. 'I'm an "above-average" investor and I am beating the market'

Behavioral-finance experts tell us investors accentuate the positive and minimize the negative, and that hurts our returns.

Get honest: Have your accountant go back through all your accounts from last year. Subtract out all the costs, all the fees, all the taxes. One independent research study, which has been tracking mutual fund investor behavior for 20 years, says that our after-tax returns are less than inflation. Expose the dark side this year.

10. 'I think all columnists (including Dr. Paul) are idiots'

Seriously, if you've read this far and you're still convinced you can beat the market, my hat's off to you. In fact, I really need to hear from you! Tell me why you're so certain! E-mail PaulBFarrell@charter.net