Read this Before You Buy Emerging Market Stocks

We Fall to the Level of Our Training

“We don’t rise to our level of our expectations. We fall to the level of our training.” Do you know the actual definition of “expectation? According to a Google search with 82,900,000 results – expectation is a strongly held belief about the future. I’ve found that people do not rise to the level of their strongly held beliefs about the future, but fall to their level of training. Similarly, our money doesn’t rise to our expectations, but falls to our level of training.

So what is your training? I mean deliberate training. Not what you’ve learned from the Big Box Advisors and the questions they ask. You learn their questions and to not ask your questions. What I see is that people find out that their training is how to align their money to the Big Box Advisor approach or the billion dollar pick-of-the-month newsletter industry.

We Fool Ourselves

We all have biases. To think we don’t have them is foolish. One of the disadvantages that I have had growing up is being dyslexic. But actually this one “disadvantage” has forced me to look at the world with a different perspective.

Look at the chart below. A lot of people think of investing with numbers or words. We are taught to look for the numbers. In the chart below you can see that according to the words and numbers you see – the U.S. actually is under-performing Europe, Asia and Emerging Markets.
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Now look at Asia and Emerging Markets in the chart. Their numbers are very similar and are out-performing the U.S. So if you look at these numbers you might believe that you need to have some of your money in Asia or Emerging Markets. And that’s because people have been trained to read words and phrases and to believe them. So again you look at this chart and you think, “Wow I need to have some of my money in Asia or Emerging Markets.”

Dyslexia as an Advantage

This is where my dyslexia comes in. Because I have dyslexia my brain has been trained differently. Let’s just look at an actual image. Check out the price chart of Asia below.

From the beginning of 2016 to mid 2017 Asia has been doing great. But again, this gets back to your level of training. So the next thing I do is ask myself, how does this compare to the S&P500? Is Asia beating the S&P500? If it’s not then why would I even consider it as an investment?

Comparing Markets

Look at the chart below. It’s the Asian Market compared with the S&P500 over the same period of time. What you see is that the line is going lower. This means the the Asian Market is under-performing the S&P500. Clearly you can see the S&P500 is beating Asia. This is how I’ve trained myself to look at the markets. Of course you have to know which charts to look at – and there are only four.

Ok. Check this out. Now let’s zoom out over an 8 year period. The S&P500 is clearly beating Asia. If you look at the chart above OR the first price chart it makes you think that Asia and Emerging Markets are a great idea. That’s what you’ve been trained to believe. But if you just look at the charts – and the charts don’t lie – you see everything. Look at this chart below.

Words vs. Images

So the question is do you want to look at pictures? Or words and numbers? Science shows that 50% of our brain is dedicated to looking at images and patterns. But we haven’t been told that we should look at images. We are trained to read letters and numbers. But that’s not how our anatomy works. 70% of all of our sensory information is located in our eyes. Look at a chart and in an instant you get the data you need. We fall to the level of our training and we’ve been trained to look at letters and numbers and try to decipher the information from there.

Ok. So Why Does this Matter? 

Because people have been trained to put their money in the Asian Markets or Emerging Markets and have been under-performing the S&P500 for years! And it’s not your fault. This is what we’ve been trained to do. And your money suffers because of it.

Pictures beat numbers and letters. They tell us everything we need to know and they tell us everything. They tell us where the price is going and where the money is flowing.

 

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RC Peck, CFP  

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