Wednesday, January 02, 2013

Be Careful of Investing Success Stories

I have heard about a lot investing strategies that have made money for people.  However, I don't  automatically assume these investing strategies are right for me.   Here are a couple reasons why I don't jump on the "successful" investing strategy bandwagon.

  • Only the positive outcomes are reported or remembered.   The failures are not as widely shared  or remembered as the success stories.   In the fine print, there is always a caution that results my vary or not be representative.
  • Success percentage is low.  Take any strategy and let 1000 people use it.  It is likely there will be 5-10 people (0.5% - 1.0%) who are very successful, but due primarily to chance.  The results are not likely to replicated, either by others or even the same person at a different time.
  • While the reported superior outcomes of these strategies make them sound attractive, I remember that I am only hearing about the best results.  For everyone that had a great results, there are probably 100 time more people with average or below average outcomes.
    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial or investing advice. Please consult a professional advisor.

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