Mallouk - The five mistakes every investor makes and how to avoid them: getting investing right

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Library of Congress Cataloging-in-Publication Data:

Mallouk, Peter, 1970

The 5 mistakes every investor makes and how to avoid them: getting investing right/Peter Mallouk.

pages cm

Includes bibliographical references and index.

ISBN 978-1-118-92900-1 (hardback); ISBN 978-1-118-92902-5 (ePDF);

ISBN 978-1-118-92901-8 (ePub)

1. Investments. 2. Investment analysis. I. Title.

HG4521.M285 2014

332.6dc23

2014016780

Over my career as a wealth manager, I have met thousands of individuals in search of a better way of investing. I noticed early on that most of the clients coming on board with my firm were terminating a prior advisor. It became clear to me that these clients weren't getting what they had hoped from their former advisors. While at times the issues were related to communication, relationships, and the like, sometimes the change was because the client wasn't getting the returns they had hoped or their former advisor had blown up their portfolio. Mistakes had been made along the way.

Many investors don't enjoy investing, don't have the time for it, or don't feel they are particularly good at it. It is this type of investor who searches for an advisor to alleviate the burdento show them the way. Unfortunately, many if not most advisors make the same mistakes individuals often make. This is the tragedy of the financial services industry.

As I have watched fortunes made, lost, and sometimes rebuilt again, I have observed the main problems that led to the deterioration of wealth. The conclusion is quite simple: In most cases, if an investor has greatly underperformed from an investment perspective, it is not because of the markets, but because of their own, or their advisor's own, mistakes. All of us, at times, are susceptible to at least one of these mistakes. Many of the greatest investors of all time acknowledge they have made them, or are aware of them and actively put up mental roadblocks to prevent themselves from making them. For years, I have spoken about these mistakes, and this book will cover how to avoid these pitfalls as well as show a clear path toward achieving investment success.

This book wouldn't be possible without the ongoing efforts of Molly Rothove, Jessica Culpepper, James DeWitt, Brenna Stewart, and Jim Williams, all of whom contributed to this effort as well as to my newsletters, which are the constant source of in-house comedy prior to the editing process.

Special thanks to all of the incredibly talented people at Creative Planning, including those who helped with the research for the behavioral section of this book: Sarah Ayler, Kevin Dorsey, Andrew Horsman, Jeff Juday, Ashley Moulis, Meghan Perry, Conner Sivewright, Stacy Smith, and Chris Wolff.

A huge thank you to the clients of Creative Planning. I have learned so much from my clients over the years. Most importantly though, I learned that these are the type of people who make America what it is: the greatest place on earth to live. These folks make the economy go and grow and many of them have lived or are living the American Dream. My constant search for every possible way to help them has resulted in many of the things we do at my firm, and in the contents of this book.

To my mom who tricked me into believing I could do anything. I believed it until I was too old for it to matter. And to my dad, who taught me enough about investing at an early age that it became my passion. I especially cherish his advice to ignore almost everything. Thanks to my beautiful wife Veronica, who spent a lot of time driving on our family road trips while I worked on this book, and to my three wonderful kids Michael, for always keeping me focused on the most important things in life.

Finally, thank you to those who helped edit and shape this book. All errors are my own.

He must have asked half a dozen times: Is anyone going to read this book? Thanks for updating me on the NCAA tournament scores while I was writing. Thanks for the hugs, delivered almost every hour on the hour!

Peter Mallouk is the #1 independent financial advisor in America (Barron's, August 2013). He is the President and Chief Investment Officer of Creative Planning, an independent advisory firm managing over $10 billion for clients in all 50 states.

Peter has made appearances on CNBC, CNBC Worldwide, and Fox Business News, and has been interviewed by the Wall Street Journal, CNBC.com, Yahoo! Finance, and many other financial news providers. He graduated from the University of Kansas in 1993 with four majors, including degrees in business administration and economics, and went on to earn a law degree and master of business administration in 1996, also at the University of Kansas. He has also earned the Certified Financial Planner designation.

Peter lives in Kansas City with his wife, Veronica, and their three children.

Risk comes from not knowing what you are doing.

Warren Buffett

You might be wondering why this book appears to be flipping you the bird right out of the box (see with the returns by year.

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