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Friday, May 16, 2014

Don't invest with your gut

Most investors use their gut to guide their investing choices. Perhaps that's why so few are prepared for retirement.

MarketWatch had a good article on this subject this past week.

Many investors have unrealistic expectations for future returns. They think they need 10% returns above inflation to reach their goals. But, after inflation, returns over the last 50 years have been 5-6%--half of what investors think they need.

Also, more than half of investors want to generate returns with minimal risk. But, is it possible to generate above average returns with little risk?

Almost 80% of investors say they follow their gut instinct to invest while only 25% say their investment knowledge is strong. If you are using your gut and know it's unknowledgeable, you're in trouble.

Your gut is great for telling you that you are hungry, or ill, or infatuated, but it's not a robust tool for investment decision making.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

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