“If you can’t beat ‘em, join ‘em”

This is a phase that quips the failures of some and their joining the ranks of the winners. As negative as the phrase sounds, this realization is a must before most people will succeed as investors.

Going into this investing thing, most of us are conditioned to think we can and should beat the market. The market is somehow against us and there are winners and there are losers in the “game” called investing. Where does this thinking come from? I think it’s driven into us all our lives.

Almost all of us have a rich relative who “was very good in the stock market.” This is a common way of talking about someone who we perceive has “won” in the game of investing.

We’ve all seen the news articles and 45 second spots on television highlighting the mutual fund manager who really made a good prediction last quarter or who for the past few years has been gaining returns that are better than the returns of the S&P 500.

In high school economics we entered into a game of buying and selling stocks and creating fictional portfolios where in the end the “winner” was crowned. This too adds to our belief that some people just “have it” and some don’t. The guru exists, and for one brief semester that guru’s name was Sally, the shy blond girl with the headgear and the pigtails. Who knew?

Even in the board game called Life (a socialist game that promotes mediocrity and should not be played by children in the free market) the market is “played” by placing money on a number and spinning a wheel. You win if one of your numbers is spun. Your money reverts to the bank if you miss it. Shucks, lost again!

One of the most important steps in the process of bringing a new client into our firm is the process that we call The Investor Inventory. This is an interview style meeting where I ask questions of potential clients to determine if they have the right understanding about how markets work. I’m essentially looking to find the answer to one question:

Does this client somehow understand that markets create return and not managers or financial planners?

I’m looking to work with families who will have faith in markets and who will not put their faith blindly in retail mutual-fund managers or financial planners. The last thing the world needs is an active mutual fund manager who believes that he or she can beat the market for 65 years in a row. There is zero evidence that money managers and financial planners can beat the market for long periods of time because of skill, although many will do it out of sheer luck for short periods of time.

There is an unending amount of evidence that the global stock market creates immense wealth for those who are disciplined to remain owners for the long haul!

I’m taking my clients where the evidence is.

The market cannot be predicted and it can’t be beat by anyone who is going to sell you a mutual fund. But don’t let this get you down. The market is a team player and it wants you. So, if you are convinced, as I am, that markets work to create return, leave the dark side of active trading and come into the light. There’s plenty room here for more winners.