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July 19, 2019

To be or not to be a 80%’er?

Do you know how the the Paretto Principal rule – aka the 80/20 rule works in so many areas of life? The short explanation of the Principal is that 20% of the energy brings 80% of the positive outcomes. If you look around and consider it you will find that it is definitely true that being a 20%er is where you want to live.  It is really clear that this 80/20 rule is in full effect in the money management world. Here are 5 quick ways you can know if your assets are working on the 80 or 20 side of the performance  ledger… 

  • You are invested in accounts that use “active” managers.
  • You believe or your account managers promote an ability to “beat” the markets. 
  • You or your selected firm founders – or their investment committee – created the investment philosophy being applied.
  • You or your adviser picks stocks that are intended to outperform the others. 
  • You or your adviser change asset allocation approach based on market measurements.

It turns out that the 80/20 rule is alive and well in the investment business and the statistics definitely indicate 80% of folks and their firms apply a combination of the above process’ – which explains how 80% of folks assets under-perform the markets in the long term.  To be a 20%’er requires an interest in and an understanding of the statistical truth of historic investment management results.  Consider Nobel Prizes in Economics as a starting point for that journey.

It is also a critical point of emphasis when building your Mastermind Team. Start your team building with a question  – are your Mastermind members 20%’ers? 

Count me always available to discuss how the power of the “proven” approach (20%) offers you freedom from financial insecurity versus the “opinion” approach (80%) and how to begin to apply it today.