We live in a noisy world where wisdom is hard to discern. Here are a dozen financial truths honed from more than three decades of observation.

1. The primary reason many investors end up with overly complex, inappropriate insurance/investment products boils down to two words…sales commissions. The “Pyramid of Temptation” that engulfs most financial services firms pays brokers, sometimes wrongly called financial consultants, wealth managers, etc., the largest sales commissions for selling packaged products like annuities (I have more on annuities later).

2. Except by chance, no manager, firm or individual consistently “beats the market” for the long term. Yes, I know that is exactly what large brokerage firms sell, but it is untrue. Some may succeed for awhile, but the outperformance rarely persists. Don’t confuse luck with skill. Instead, invest to capture the returns freely provided by the global markets.

3. Real estate isn’t the best investment in the world. I know, that’s close to heresy but let’s examine facts. Actual observed long-term returns from residential real estate over the past half-century or so have been roughly the rate of inflation, plus or minus one percent per year. Don’t confuse the positive utility that you receive from owning a house to the investment aspects of home ownership. Overall, owning a home might be a decent storehouse of value but that’s all.

4. The long-term expected return of gold is, (wait for it), …ZERO. Yep, 100 years ago an ounce of gold would buy a very nice men’s suit. Today, an ounce of gold will buy a very nice men’s suit. Like real estate, a storehouse of value perhaps, but zero long-term above inflation returns.

5. There are two sides to every investment transaction. If you sell a stock or a mutual fund because you believe the market is “overvalued”, the person on the other side of that trade is buying because they believe the market is “undervalued”. Think about it, with almost 100 million participants each day in the global stock market, do you really know more?

6. The two most dangerous words for investors are maximize and minimize. As a lifelong student of economics, I fully understand what these words represent in theory, BUT they can be very damaging to individual investors. Always trying to maximize returns, for example can expose your portfolio to unnecessary risk. Focusing on minimizing taxes, for example, can easily fold over into a portfolio that is far too technical and constrained. Drop these two words from your investing vocabulary.

7. How much you save, and for how long, matters more than investment returns. You can’t make up for years of neglect with a few years of high returns. Save for your future or it will turn into a future determined by someone else.

8. No one can predict the future. No one knows what inflation, taxes, or stock market returns will be next month or next year. Uncertainty is part of the investing deal. Accept it, embrace it.

9. Your neighbors finances and goals are not your finances and goals. You can’t achieve long-term financial goals unless they are highly personal and meaningful to you.

10. Annuities are a very complex, expensive and almost always a very poor insurance/investment solution. Actually, they generally create more problems than they “solve”. Their use is usually inappropriate and driven mostly by excessive sales commissions. Still don’t believe me? Try to get out of an annuity and see how much fun that is.

11. You likely will live longer and spend more in retirement than you think. You will need more financial resources than you think. You will need to prioritize and be willing to make tradeoffs.

12. You can’t maintain your lifestyle throughout retirement without being a permanent investor in the stock market. Inflation is the silent killer in retirement and this simply can’t be outpaced in any other way.

Everyone has financial blind spots and biases. Fiduciary advice, counsel and coaching is the solution. Ready for a real conversation?

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