I was taken aback by the question: "What is the single most important investment I can make right now?"
Not by the question itself - I get that one a lot.
But because of who was asking it and what they excluded.
It was put to me by Jason, Susan and Hao - all of whom are juniors at Skidmore College where I was lecturing last week.
They wanted to know what they - as college students - could do to ensure their financial future.
Not only that, but they specifically asked me to exclude specific investment choices that a more seasoned, older investor would consider.
I thought about it for a few minutes, then responded: "It's discipline."
Investors are faced with a unique challenge, I explained. Many are not at the mercy of the markets as they believe, but are actually subjected to the whims of the person they see in the mirror every morning.
That's why consistent investment results are often more dependent on behavior than actual performance.
Put another way, investors who "behave" themselves by being disciplined tend to do far better than those who don't.
Beating the Markets Takes Discipline
For example, DALBAR, a Boston-based research firm ,released a 2011 report that showed investors had achieved a mere 41.9% of the S&P 500's performance over the twenty years ended December 31, 2010.
In other words, investors managed to leave a staggering 58.1% on the table.
According to the report, the average investor achieved a mere 3.8% a year versus the 9.1% annualized return of the S&P 500 because they tended to jump in and out of the markets at the worst possible moment depending on their emotions.
This reinforces something I talk about all the time in my presentations around the world - investors lose billions by trying to time their decisions based on nothing more than greed, fear or simple paralysis.
In my opinion, it's why the single biggest investment anyone can make is "discipline."
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Buy, Sell or Hold: When to Buy Shares of Facebook
You might have heard....
Facebook Inc. (NYSE: FB) is the most awaited initial public offering (IPO) since Google Inc. (Nasdaq: GOOG).
The recent registration of the company's IPO documents means it won't be long until Facebook shares begin trading freely.
But will Facebook shares make you rich beyond your wildest dreams like mural painter David Choe?
Or would you be better off watching from the sidelines before you buy shares of the social media giant?
The Details behind the Facebook IPOHere's what I've learned from Facebook's S-1.
Some of the data points buried in the IPO document are eye-opening, to say the least.
Chief among those are Facebook's assertion that 6% to 7% of the entire world population logs in every day. More importantly, they stay logged in for a significant amount of time.
However, what will happen in the future to drive the stock's share price after it's brought to market is buried deeper in the details.
It's these details that make Facebook's IPO a hold if you already own shares, but also a "wait to buy" if you are like most people and want to own them.
In a nutshell, what I've learned is the banks are bringing Facebook to market fully priced.
My opinion is the bankers have gotten greedy and decided to push the valuation numbers above the levels that I believe are sustainable.
The company is being valued at $75 billion - $100 billion dollars at launch. This would make it one of the most valuable companies in the world, yet its actual revenue, let alone profitability, is at a more mundane level.
Currently, Facebook is reporting about $4 billion in revenue and profits of $1 billion.
That means if Facebook prices in at the top of its estimated range ($100 billion), based on current disclosures it would have a 100-to-1 price to earnings (P/E) ratio.
In other words, it's only going to take about 100 years for Facebook to eventually earn what it may price at. Compared to other blockbuster stocks, that's quite rich.
By comparison, Apple Inc. (Nasdaq: AAPL) has $100 billion in cash and a P/E ratio of 11 while Google's P/E is 20.
That's why it's time to "Hold" Facebook (**) or wait to buy it until insiders get a chance to sell their shares and bring the price down to levels common people can realistically afford to purchase.
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Are Federal Reserve Presidents Gaming the System?
The presidents of the U.S. Federal Reserve may not have used their knowledge for personal gain, but a look at their assets does show several apparent conflicts of interests.
More than 600 pages of disclosure documents were released last week after Bloomberg News filed a Freedom of Information Act request.
The most troubling revelation concerned Atlanta Fed President Dennis Lockhart.
Two weeks prior to the Federal Reserve's November 2010 decision to go ahead with the second phase of its Read More...