Question #1: Do you spend time watching the financial media?
Question #2: If you do watch the financial media, what do they seem to spend their time talking about?
Question #3: Have you ever tracked the predictions of anyone in the financial media to see how accurate they are? If so, what is their track record when it comes to predictions?
Question #4: Here is a tougher question. What is your own track record when it comes to predictions?
Question #5: If you have already started investing, do you work with a professional?
The next 5 questions are only for those who are working with investment professionals.
Question #6: How exactly does that professional get paid?
Question #7: Does the professional receive any form of commissions or kick-backs?
Question #8: Are you confident that the professional is acting in your best interests?
Question #9: Does the investment professional chase performance, pick stocks, promote active management, try to time the market, or claim to be able to make predictions of any sort?
Question #10: If the answer to any of the questions in #9 is yes, how has that professional’s active management compared to simple index investing? In other words, what are you paying for?
Now here are questions for everybody:
Question #11: Do you participate in market timing, performance chasing, or stock picking?
Question #12: If the answer to Question #11 is yes, do you compare your own active performance to a simple index? If so, how have you performed?
Question #13: This question is worth asking no matter what sort of investing strategy you use. Do you have a method of calculating whether your performance is worth the time, effort or stress you put into investing?
Question #14: Do you believe in “safe” investments? If so, what makes an investment “safe”?
Question #15: Are you afraid of the markets?
Question #16: What does “risk” mean to you?
Question #17: Think about your current investments. Can you easily tell what the risks are, and how your investments are performing?
Question #18: Have you ever invested in anything that seemed too good to be true? If so, how did it work out?
Question #19: Sometimes people want active management because they don’t want to settle for “average” performance. They want to out-perform the indexes. It’s easy to tell if some form of active management out-performed in the past. How is it possible to know whether that out-performance was due to skill, luck or hidden risks?
Final Exercise: How much do you focus on questions like how much you need to save, how much risk are you taking, versus how much do you focus on questions like whether now is the right time to invest, which stock should I invest in? Which set of questions is going to determine whether you retire the way you would like to?
If you’d like to talk about your answers, feel free to email email@example.com
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