The Three Most Important Charts in the World Right Now.

There are only 4 asset classes that a human can invest in. Even if an investor only has a 401(k) they still have access to 3/4s of the asset classes (bonds, stocks and currency (US dollars)).

The four asset classes we can invest in are:

1)      Stocks

2)      Bonds

3)      Commodities

4)      Currencies

If you know which asset class is beating the rest [over time] then all you need to do is put your money in that asset class and walk away until a new leader is identified.

So the question is, what asset class is going up?

Good question.

Let us look below to see how they are comparing with each other.

First look at how the BOND asset class compares to the STOCK (green line)  asset class.
BND is the total bond market, LQD is the corporate bond market and TLT is the long-term
government bond market.

Second look at how the CURRENCY asset class (gold, silver, yen) compares to the STOCK (green line) asset class.

Third look at how the COMMODITY asset class compares to the STOCK (red line) asset class.

What do you notice?

You have choices. Even if you only have a 401(k) you still have all the choices you need .

What I notice from the above three charts:

1)      The BOND asset class is kicking the butt of the STOCK asset class.

2)      The CURRENCY asset class as measured by gold, silver and Yen is kicking the butt of the STOCK asset class.

3)      The COMMODITY asset class is beating the STOCK asset class but just barely.

Conclusion: Bonds, Yen, Gold and Silver are rockin. While the US stock market hasn’t looked good in 10 years.

Remember. Get the asset class right and you get everything right. 90% of successful investing is getting the asset class right and not necessarily what individual stock you own.

If you have a 401(k) or your money has not grown in the past 10 years then I can show you a simple, but powerful system that effortlessly make sure you money is on the right side of market. Here it is.

Together, we are growing and protecting your wealth,

Fearless Wealth | Investment Independence

PS – Are you interested in permanently changing your investment approach and mindset forever? If so then you and eleven others will sit down with me and force your investments to overcome every obstacle that’s been freezing, holding back, frustrating you.  Here is your next step.

If you have purchased gold in the last five years,
drop everything to read and listen to this.

All gold is not created equal.

Right now people are buying the wrong gold, over $50 billion dollars worth and counting.

The people buying the wrong stuff think they are buying gold but what they are actually buying is “paper promises” also known as derivatives, in this case ‘gold-derivatives’.

Just like with the sub-prime lending fiasco of 2007 when people were buying “paper promises”. There are going to potentially be a lot of people in for a rude awakening…they just don’t know it yet.

If you are buying or are going to buy gold or silver make sure it’s the real stuff.

There is paper gold.
There is physical gold.
There is ETF gold.
There is derivative gold.
There is futures-gold.
There is bullion gold.
There is domestic gold.
There is international gold.

Below is a price chart of the gold ETF called, SPDR Gold Trust (NYSE: GLD).

Do you notice anything about it? GLD is being compared to the actual price of gold in this chart.

Click the audio player below to listen to my audio about gold and the chart below.

On the audio above I mentioned a few ticker symbols of gold and silver ETFs, closed-end-funds and investments. If you did not hear them or could not figure out what the exact letters were, I’ve written them below.

Please note that I may have positions and my clients may have positions in some of these ticker symbols.

GTU – if you want to buy a respected fund that owns physical gold
PHYS –if you want to buy a respected fund that owns physical gold
CEF – if you want to buy a respected fund that owns both physical gold and silver
AGQ – if you want to go 200% long silver
DGP – if you want to go 200% long gold
GLL – if you want to short gold

If you like to read more about gold ETFs, I have attached a 50 page PDF from Hinde Capital. Hinde Capital is a UK based Hedge fund that has deep knowledge about the gold sector.

Together, we are protecting and growing your wealth,

PS – Would you like your investment approach and mindset forever changed so you are never caught short again?
48 hours of your life that will permanently change your investment approach and mindset forever. Here

The Strategy For People Who Hate Investing – Beat Wall Street With One Stock

What to do if you don’t care about investing but
you know you need to do something.

It just happened this morning while talking with a friend of a client.

The friend summed it up perfectly.

The friend said,

“RC, I know I need to do something to protect my money and I know Wall Street can’t help but I just don’t care that much about investing, I don’t have the time.”

I said to him, “What if I could get you what you want in one ticker symbol.  No trading. No looking. Just one ticker symbol that has you get what you want.”

He rolled his eyes in contempt and said,

“Yeah right!”

So I pulled out my computer to prove it to him.

I said:

1) This one ticker symbol will beat 99% of Wall Street advisors over any twenty year period.
2) You never have to pay attention to it.
3) It will keep you in the top performing 15% of Wall Street advisors year after year.

And then I said, “Here’s the secret:”

Wall Street advisors are incredibly easy to beat.

Wall Street advisors don’t want to lose clients so they stick right next to the performance of the S&P500….regardless of what the S&P500 returns, they stick to it like glue.

Even if the S&P500 falls for ten years in a row, like it has done from 2000 to 2010. They’re right there next to it.

So when someone says they can beat Wall Street advisors what they are really saying is, they can match the S&P500 year after year.

Not even beat it, just match it.

And since you are not paying fees to an advisor you can keep the difference and invest it.

Now, 86% of advisors cannot even match what the S&P500 does each year. So the first place for you to start is by simply buying an ETF (exchange traded fund) that mirrors what the S&P500 does.

You can do that with the ticker symbol (SPY).

But I’m going to give you something better right now.

How to beat the S&P500 with one ticker symbol.

You buy a ticker symbol that owns all 500 stocks in the S&P500 but you find one that puts equal dollar amounts in all 500 stocks.

This is called ‘equal weighting’.

By doing this you are putting the same percentage of your money in large, medium and small stocks within that list of 500 stocks.

The S&P500 has stocks in it that range from $280 billion to $150 million in size.

Equal weighting works really well because a stock like Exxon Mobile probably won’t double from its very large market cap of $280 billion.

But maybe a stock like Teradyne, Inc (TER) could go up 10X in the next ten years. Today Teradyne is a $2 billion market cap stock and part of the S&P500.

Teradyne is up over 200% in just the past 16 months.

So with one ticker symbol you are getting the power of the S&P500, while getting the diversity of small cap stocks, mid-cap stocks, large cap stocks, growth stocks, dividend producing stocks, international stocks, domestic stocks, etc. You get them all equally.

Here check out a picture of an equal weighted ticker symbol (black line) vs. SPY (green line).

How One Stock Beats Them All

Over the last seven years, this equal weighted ETF outperformed the S&P500. The name of the equal weighted ETF is “RSP”.

The equal weighted ETF is up 22% over the past seven years
The S&P500 ETF is up 0% over the past seven years.

So for those of you that know you have to do something to protect and grow your money but hate the idea of investing; maybe an equal weighted ETF if for you.

Do me a favor and look again at the picture above.

Do you notice that very large valley where both lines fall off a cliff into a very deep valley? That is a 58% plus fall.

If you are curious how you can avoid such a traumatic lost to your accounts, I can show you.

In fact it’s simple and easy.

If you are curious about avoiding the next fall click here.

Together, we are protecting and growing your wealth,

RC Peck, CFP

PS – There is a small group of investors that are thinking ahead of the news and crowd. Can you be one of them? Click here.

I just got off the phone with a new client that said, “investing is
crazy complicated, I can’t keep up with the news, the numbers
and all the terms, there’s just too much new stuff happening every
day and I don’t have time.”

I said to him, you’re right. There is a lot of numbers and news and
technology that constantly feeds information to you about the markets.

BUT if you’re paying attention, this one minute email will save you
a decade of stress and frustration.

If you believe protecting and growing your money is about more
information and faster information and better devices to deliver that
information to you AND that you must keep up with the latest ‘bit of info’
then you will for sure be in a constant state of overwhelmed.

AND you will never actually be able to make a smart decision about your
money consistently.

Every time something new and shiny comes out about investing you’ll
think, “That is the silver bullet”. And before you know it, you’ll be dragged
down to the depths of the ocean filled with pockets of ‘silver bullets’.

Here’s the real truth.

There is one thing. One piece of information that will tell you what to be in.
It never lies and it doesn’t change that often.

It is better than news.
It is better than sheets filled with numbers.
And it is better than any new iPhone App.

You don’t even need to look at it every day…or even every week. Heck you
might only need to look at it every month and maybe even every quarter.

And the best part, it’s free. You just have to know where to find it.

Get this one thing right and your future is taken care of. Miss it or disregard
it and your future is possibly in jeopardy.

So enough already, what is it?

It’s a price chart comparing three of the four asset classes you can invest in.

Your only four choices of assets to invest in are:

1. Stocks (red line)
2. Bonds (yellow line)
3. Currencies (blue line)
4. Commodities (not shown)

Find the asset(s) that are moving up against the other two or three and you know
where to place your money.

I have one more for you.

Below is a price chart of the S&P500 compared to an ETF that use to be tracking
the exact moves of the S&P500 up until June.

As you can see in the chart below the ETF (green line) has diverged from the
S&P 500 since June.

In tonight’s Insiders Club meeting I will be talking about what this ETF is, why it is
paying a 5% plus yield and why I think it will continue going up.

Join me tonight for FREE by following this link.
https://www2.gotomeeting.com/register/945975523

Together, we are protecting and growing your wealth,

Do you want to stay ahead of the crowd?

If you’ve ever wondered how to stay many steps ahead of the crowd here is
a little secret that can help.

Money flows where it’s treated best.

Find out where money is flowing and get in as soon as you can. The flow of the
money will do the rest to protect your future savings.

If your accounts are shrinking this may be one of the reasons why.

So, where is money flowing??? Look at the graph below (by Gluskin Sheff) and
you will immediately realize where money has been flowing for the past decade.

And then listen to my Weekly Investment Thought about the Flow Of Money

Download MP3

Get FREE access to The Insiders Club.
This Tuesday, July 13th at 6:30pm in-person and 7:00pm online The Insiders Club will have our monthly gathering.
Get free access right here https://www2.gotomeeting.com/register/945975523

Together, we are protecting and growing your money,
RC Peck, CFP

P.S. – Investing like in chess, the person who is playing many moves ahead of their opponent wins. If you would like to be thinking many moves ahead of the crowd then follow me to learn how you can be the grandmaster of investing.

This article was originally published for RC Peck’s Fearless Wealth Newsletter in October 2008.

It may be hard to believe, but you can make money in the current financial situation.

Yeh, right! You’re kidding me. The bottom’s falling out!

It’s true that we’re experiencing unprecedented times, and I admit that the situation is extremely stressful. It can be really, really scary to make choices and decisions right now, and the temptation is to be passive. “What can I do? There’s really nothing I can do right now.”

I think it’s dangerous to cling to those thoughts and feelings of helplessness. It’s not the time to be stepping aside and letting things just unfold.

Remember. Making no choice is a choice. The stress is high right now because of multiple pressures. Take the normal stress of having to make decisions about money, add the urgency caused by deteriorating housing and stock markets, and you’ve got a real pressure cooker.

What happened to get us into this mess? I’ll put 90% of it on government and Wall Street. Government was looking the other way while Wall Street was borrowing and leveraging to the moon. The financial markets were completely out of control.

I think we’re looking at a bad recession, at best. The symptom of the pain we’re in right now is falling housing prices, falling stocks and falling available credit.

I said I put 90% of the cause of our situation on government, and I put the other 10% on you and me—on Main Street. I include ‘Main Street’ because I sometimes have the feeling that Americans will do anything to avoid short term pain, which only leads to long term suffering.

The best quote I’ve heard so far that kind of describes what’s going on right now is from Bill Bonner He said,

“A correction is equal and opposite to the deception that preceded it.”

There are four steps you can take right now to protect your money:

1. Make all future 401(k) contributions to the most ‘cash-like’ investment choice your 401(k) has to offer. For most this will be a money market choice.
2. Do not add to any stock positions. Do not attempt to go bottom fishing. This is not the time. Bear markets have a habit of falling much farther than anyone could have imagined.
3. Get a position in gold. Put (at least) 5% of your portfolio in gold. Yes, I know it’s down but this is only temporary.
4. Horde Cash! We are going into a long cold winter. You will need liquid money when Spring arrives.

These are four steps you can take right now to help build your net worth in this market.

The fifth thing you can do is join me at my upcoming webinar “Really Smart Money.” It happens the second Tuesday (7:00 p.m. Pacific Time) of every month. The link is here; www.FearlessWealth.com if you are not already on the ezine.

To building your net worth during bear markets,

This article was originally published for RC Peck’s Fearless Wealth Newsletter in May 2008.

I think you’ll agree that couples can have problems when it comes to talking about money, and that the four ‘problems’ we talked about in Part 1 of this article can interfere with that dream of happily ever after: 1) Unrealistic expectations; 2) Fighting about money; 3) Thoughtless action or inaction; and 4) Men and women handle stress differently. And there’s another one (as if these four aren’t enough): People have different money personalities, and chances are good you’ve partnered with someone who thinks differently about money than the way you do.

Take a test with me right now. Read the following three categories and choose the one that describes you best, and then the one that best describes your partner:

Are you more of the Top Ramen or filet mignon type of spender? A Top Ramen spender controls his or her spending. A filet mignon spender acts as if he or she is sure to get hit by a bus tomorrow, so they better spend everything they have and then a bit more.

If you’re living way beyond your means and have credit card debt, then you are closer to the filet mignon type of spender. If you are a saver and live within your means, then you’re closer to the Top Ramen lifestyle.

The next category is about risk tolerance. Are you the roulette wheel investor or are you more likely to be the tic-tac-toe investor? How do you feel when you invest? Does investing get you excited and make you want to learn day trading?

If it does, then you are closer to being a roulette wheel investor. If, however, your investing approach is to put money in a CD or cash, then you’re closer to being a tic-tac-toe investor. Neither extreme is good for your wealth.

This last category is about being a team player or a captain. Are you a team player, like in doubles tennis, or do you like to solve problems on your own, the way a captain would? If you like to solve problems on your own, and have low interest in consensus building, then you are probably closer to being a captain.

If you like to build consensus and work as a team to solve problems, then you are more likely to be a doubles tennis player. I find that the couples who thrive in regard to their wealth management work as double tennis players, and not as two captains or a captain and a mate.

At this point I’m hoping that you’re asking yourself what you can do to improve the way you and your partner interact so that you can grow your money. You have many choices, and I have found that the four steps below work extremely well.

Four Solutions for Improving Wealth Management Team Work

1. Develop a Financial Plan that you will actually follow. The key words are actually follow. I’ve seen too many couples who bought a plan and then put it on the shelf, never to look at it again. You’ll need to work together to set goals that complement your wants (a financial plan has to be developed before it can be followed and monitored).

   I know this my sound obvious, yet very few people are willing to spend the time it takes to make a plan. What you’ll want is a plan that reflects your dreams, and then you’ll have to act to put the plan to work. The plan should include your goals, a list of all your accounts, a section that shows your monthly income, a section that shows your monthly expenses and a section that shows your current investments.

2. Share Responsibilities. You must work as a team to get what you want. It is critical that you both become involved and keep aware of what is happening with your wealth.

   Be certain that both of you can clearly articulate your partnership’s assets and debts, and that you both know how to locate back-up documentation. Sharing responsibility means that one partner may manage the short-term goals, long-term goals and investments while the other is managing the income, expenses and account balances.  Teamwork builds intimacy.

3. Monitor Your Money. This may be the most overlooked step. Once you have a financial plan and are sharing the responsibilities, you will then want to monitor your wealth every month.

   Yes, you read that correctly. Every month. For 60 minutes you will sit down with your partner and take a look at what your wealth has done for that month. You’ll start to notice that if you can monitor your wealth, then you can grow it, and grow it more effectively. Monitor what you save, what you spend and what you grow.

4. Get a Third Party Advocate. Danger! Do not try this on your own. As you already know (or maybe you don’t), money conversations are charged with energy. You’ll want to bring in a third party advocate who can support and guide you in getting what you want. That person, at a minimum, should be a Certified Financial Planner® who has worked successfully with couples in their money management. It will be worth your investment to get that third party expert to work with the two of you to build a plan.

The process of building the plan that matches your and your partner’s dreams can be an exciting and, actually, a relationship building experience. Enjoy.

This article was originally published for RC Peck’s Fearless Wealth Newsletter in April 2008.

Money may not be the root of all evil, but it is the root of almost all arguments between couples—there are few issues that have more impact on life as a couple.

When it comes to finances, you and your partner are probably working in opposite directions and wondering why creating wealth, or even talking about money, is a struggle.

If you argue and struggle enough, you may end up experiencing your biggest expense, and maybe even more than once. No, it’s not taxes; it’s divorce. Divorce costs big money, and comes with high costs in the areas of relationships and emotions. It impacts kids, communities, jobs and friendships.

Imagine what it would be like if you and your partner had agreement and alignment around money. In such a scenario you and your partner would have a financial plan and would be working on it as a team.

As a result of building a plan that matches your dreams as a couple, and taking actions that match the plan, you build greater intimacy with your partner. This sounds pretty good, right? So let’s find out why this does not occur naturally with couples.

We will have to start even before the marriage or partnership officially begins. There you are, and the person of your dreams is next to you. All you have to do is think about this person and you get giddy.

Perhaps you have visions of the two of you sitting in a cozy beach cabana in an exotic country with people waiting on your every whim. Your drinks are sweating from the heat but they are cool to the touch.

This is paradise, and this is how the rest of your relationship is going to be; you’ll live off the land (read live off credit cards) and everything will be happiness ever after.

Well, that’s not really how relationships work. Once you’re together, instead of sharing the beach cabana you’ll find yourselves having conversations about balancing the checkbook, 401(k) choices and spending habits, which will lead you to ask yourself, “How did I get from beach cabana to balancing check books and talking about 401(k)’s so fast?”

Fantasy and reality collide head on at the wedding ceremony (or the commitment ceremony). You spend $40,000 for a one-day event (that day you’ve always dreamed of) and expect to live happily ever after. Right? Hmmmm … let’s look at the reality here. There are at least four problems that you can expect to surface and get in the way of “Happily ever after.”

Problem Number One: Unrealistic expectations. Relationships just don’t work in real life the way they do in fantasy. If you are currently in a committed relationship, you already know that conversations about spending, balancing check books and money for the kids’ college fund are far more likely to happen than conversations about exotic fantasy vacations. This first problem typically manifests as something like “This is not how I envisioned it.”

Problem Number Two usually follows closely on the heels of problem number one: fighting about money. Couples rarely talk about their wants related to money and how they are going to support each other in fulfilling those wants because when they do, they fight.

They don’t really want to fight, so they just stop talking about money. And there it is; the second problem manifests as “Don’t talk about money unless we absolutely have to because we don’t want to fight.”

Problem Number Two leads quite naturally to Problem Number Three: Thoughtless action or inaction. Since the couple doesn’t talk about money they either do nothing about growing their wealth or they find themselves forced to do something to deal with the consequences of doing nothing.

In response to this feeling of not knowing what to do, but feeling that something must be done, the couple unwittingly buys a high-risk condo in Miami without doing the due diligence (read: fill in any rash bad investment choice), or the risk assessment or any type of research and assessment.

The “We must do something” can be as dangerous as “Let’s do nothing because we don’t know what to do.” What often happens is that the action resulting from “We must do something” is ill-formed and does not fit the couple’s risk or risk tolerance profile.

Because the couple feels something needs to be done, but can’t talk about it, they do the “something” without first building a plan. In other words, their plan is no plan with a bunch of hope that it will all work out, and when the ill-formed action doesn’t work out it only further supports their unconscious choice to do nothing, and it creates a vicious cycle.

This problem manifests as “We don’t know what to do so we’ll do nothing” and leads to the fourth problem.

Problem Number Four: Men and women handle stress differently. The male’s approach is to solve issues linearly. Hit the problem head on and take care of it. A male will ask himself “How do I solve the problem?” And the emotional part of his brain shuts down so he can solve the problem.

When a female is under the same stress she says to herself “I want to talk out the problem, and I want my feelings about it to be heard.” When a woman is under stress the speech part of her brain lights up AND, at the same time, the emotional part of her brain lights up.

Men’s brains handle problem solving and emotional management as two separate functions. Women’s brains integrate them into one process.

Most men will define their value in terms of income or net worth. Most women will define their value by the quality of their relationships.

Most men will show and express their love by giving or doing something. Most women will show and express their love by talking or by giving support. (For more information, read Why Men Don’t Listen and Women Can’t Read Maps by Pease and Pease, 2000.)

Let’s say a woman says to a man “We need more money.” The man’s reaction will most likely be to turn his emotions off and go into problem solving mode: I must work more, I must work harder, I must be more of a man, and he might even retaliate by saying to his wife “Well, you spend all our money. It’s you who bought that $200 pair of shoes.”

Suppose a husband makes the we need more money statement to his wife. Her reaction will most likely be something like “How will this situation change our relationship? Will I get to spend as much time with him? What will happen to our involvement with the community?”

Her brain will make her want to talk it through before even beginning to solve the problem. And the more the husband goes into problem solving mode the more the wife is going to want to talk, creating a loop in their conversation that could quickly lead to a fight.

This of course leads back to Problem Number Two: We fight about money, and since we don’t want to fight we will stop talking about it.

(to be continued… please see part II)

This article was originally published for RC Peck’s Fearless Wealth Newsletter in March 2008.

Are You Co-Pretending About Your Money?

Follow me on this visual exercise to find out if you and your spouse or partner are afflicted by one of the most common mistakes couples make when it comes to money and finance.

When you do this exercise, notice the emotions that come up.

Picture your home (where you live, even if you are renting). Notice what the outside of your home looks like and how it makes you feel. Notice what the neighborhood is like (is there noise or garbage on the street?).

Proceed to the inside of your home and notice how it looks and how it is laid out. What is the lighting like? What is the first thing you notice when you walk in?

Observe the part of your home that gets the least attention (there may be several parts, and it’s likely that you and your partner will see different things). It might be the guest bedroom, maybe a closet, or the garage, or even one of the drawers in your kitchen. These are areas that are being neglected.

For some of you the neglect might manifest as being dirty, or cluttered, or even unfurnished. This may be the part of your home where stuff gets thrown when you don’t know what to do with it.

You might even have old paint, or peeling wall paper, in this area of your home. And as you observe this part, silently acknowledge that you already “know” about this neglect.

When I work with couples and their money we all three work as a team to build agreement, alignment and partnership so the couple can have what they want.

I call the process I use “Clean Your Financial House™,” a name I chose because your home is a metaphor for your wealth. There are areas of your wealth that are currently being neglected, just like in your home.

Notice that you and your partner engage in a pattern around this part of your home. The pattern goes something like:

1. You ask your partner to attend to the neglected part of the home, and then you both pretend that she or he will attend to it.
2. Or maybe you both simply ignore the neglected part of the home and hope something will change on its own.
3. Or (my favorite) you think you will get to it one day.

What’s actually happening is that you are “co-pretending” that either: 1) This part of your home is not really a problem (maybe because you can compare your home to someone else’s in worse condition); or 2) You will actually get to it when the time is “right.”

Some couples spend their entire lives “just about getting to it” without ever getting to it and this is where it gets really interesting. Couples use the same routine to co-pretend with their wealth.

And because not being wealthy is scarier than not being clean or organized, the reflex to co-pretend that everything is okay is even more powerful.
Take a moment to silently acknowledge the routine that you and your partner have gotten into, and what may be the cost of co-pretending. Ask what it is that you are co-pretending about in your home, and notice that co-pretending perpetuates the neglect.

Now think about all the ways you and your spouse use the same routine with your wealth. When working with couples I find that it is very common for an entire section of their wealth to be neglected. One of the most common areas of neglect is stock market money, or more specifically 401(k) and IRA money.

Close behind 401(k) and IRA neglect is neglect in the monitoring of spending and saving. I’ve found this to be true for couples who earn $50,000 or $850,000 a year.

Co-pretending does not change with the size of the home or the amount the couple earns. In fact, I have found that the working rich (people who earn over $300,000 a year but cannot stop working because they do not have an effective plan) co-pretend more than others because they have the belief that they earn enough that they don’t have to pay attention.

Money neglect carries a much larger negative charge then a neglected basement, so for many couples, both individuals are completely blind to the neglect. And sometimes the worst and most damaging neglect can’t be seen, like termites.

The termites might be there, but the couple may think if the paint on the walls looks good there must not be a problem. And neglected money spreads to other areas of their partnership faster than a leaky faucet dripping on wood causes fungus or dry rot.

I suggest that couples work with an objective financial professional (someone who does not sell insurance, annuities or mutual funds) for help with both the visible and invisible neglected parts of their wealth.

The professional will not only identify neglected areas, but will help implement a plan to fix them.

Cleaning up your money is one area that I recommend not putting off. You’ll find, when looking back, that giving attention to the maintenance of your wealth is one of the best things you can do for your marriage and your family.

This article was originally published for RC Peck’s Fearless Wealth Newsletter in February 2008.

Getting the Critter Brain Out Of the Picture

We left Part 1 of this article after talking about the differences between the critter brain and the human brain, and how beliefs coded in the critter brain can raise havoc with your investing behavior.

It’s interesting to note that influencing belief systems may not be specifically about money. Other beliefs can get generalized and affect your attitude about money.

For example, your critter brain might be coded to stay with the crowd (just like it did 10,000 years ago on the African plains). This belief is very powerful (the part of the brain that lights up in response to pain is the same part of the brain that, in this case, lights up when going against the crowd). Interesting, isn’t it? Are you starting to understand how the critter brain might be working against you when it comes to growing your money?

Trying to stay safe is a big contributor to why investors inadvertently buy at the top and sell at the bottom. Buy what is hot, buy what is exciting, and in the process of staying safe investors are likely to under-perform the S&P 500.

An unmanaged S&P 500 index fund beats 87% of the world’s money managers because the critter brain is wired to run with the crowd, even if the crowd is losing money. This could be a problem if you want results different from what the crowd is getting.

Both the critter brain and the human brain are good at what they do because they learn very well. The critter brain learns quickly, early in life, and then locks in that learning to keep you safe for all eternity.

The flip side is that it’s very difficult for the critter brain to unlearn. Most of what the critter brain has learned about growing money doesn’t work, yet it continues to serve as the basic driver of our instincts.

If you want a different experience you will have to recode your critter brain.

The Solution

We have two choices: 1) Unlearn what we and our ancestors have learned over eons (this could take many years), or 2) Create a situation that prevents the critter brain from sabotaging or playing a part in stock market decisions (this takes days).

You’ll want to create a situation in which the critter is not paying attention, right? The way to keep the critter brain from participating in stock market decisions is to eliminate the “triggers” or “patterns” that the critter brain recognizes as not survivable.

In the investing world these patterns are called “investing biases.” When we are stuck in an investing bias we are prevented from objective planning; we become subjective and start guessing. This puts our critter brain in a situation where it needs to ask the question “Can I survive this?”

There are many investing biases, and some of the most common are stress biases, future forward bias, reaction bias, relationship bias, familiarity bias, story bias, self-attribution bias, over-confidence bias, false-anchoring bias, news bias and illusion of control bias. If you are human and have been born on planet earth, regardless of how you earn a living, then you have these biases already hardwired in your critter brain.

If these biases are taken out of the investment conversation, we can eliminate the critter brain’s influence; it doesn’t even think of asking the question “Can I survive this?” and then your human brain can go to work.

Eliminating investing bias involves four connected steps. The steps are simple, but they must be done congruently to prevent the critter brain from being triggered. Let me share one of them with you: If you want to bypass the critter brain you must limit contact with the stock market or your individual positions to no more than once a month, and I’ll tell you why. Losing money is coded as pain in the critter brain.

If you check your investment Monday morning and it is down $100, even if you are up $5,000 in the stock, this loss will be coded as pain and will carry a negative weight. This weight is four times heavier than a win or winning situation, and the weight will tell your critter brain that you are in danger.

Again, when the critter brain thinks it’s in danger it goes into fight or flight mode, which leads to actions that will not work for the benefit of your stock market portfolio. Under control of the critter brain, the human will do one of two things with its investments: 1) Sell its winners way too fast, or 2) Keep its losers way too long.

If you choose to look at the market every day, hour, or week, then in order for your critter brain to have a positive experience you will have to be winning five times more often than you are losing. The probability of this is so low that it almost never happens. The best investors in the world only win 40% to 50% of the time, not 80% to 90%. And so the solution is to limit your contact with the stock market. Simple, but not easy!

The three other steps, in combination with this one, will help you manage your downside risk while allowing your winners to keep growing. These four steps will keep your critter brain out of the loop and will allow your human brain to make the choices you want made.

If you make the changes I recommend, you will soon be looking back and noticing how much better your money is growing. Some of you may be satisfied with the results you are getting from the stock market. If you are, then keep doing what you’re doing. For those of you who would like different results, you will be amazed at how you can achieve them with just one or two small shifts in your investing behavior.

The best is yet to come,