Outfox the Box

Readers of my first book will remember a game I created called “Outfox the Box.” It is a simple game of chance, helping you understand the wisdom of building a smart portfolio.

It challenges you to answer the question, “Are you interested in the entertainment value of the stock market, or is your primary goal to maximize returns and minimize your risk in an effort to reach your long-term financial goals?”

It is as simple as that.

Are you ready to play Outfox the Box? You are the contestant in this game. There are ten boxes, and you know how much is in each box. These are your choices; it looks something like this…. 

Which box will you choose? (Remember, you know how much is in each box.)

This is not a trick question. Anyone would choose the $10,000 box.

The choices you make when building a diversified portfolio are just as easy. And maybe that’s why so many multi-billion-dollar public pension portfolios make the same choices as Coffeehouse Investors.

This time let’s change the game a little. This time only the $8000 box is shown. It looks something like this:

Now which box will you choose?

If you’re not a gambler, the answer should be obvious - you would choose the $8000 box. 

Why? Because the chances of increasing your winnings are not worth the risk of choosing a lesser amount. (And if you are a gambler, you are probably following the wrong investment philosophy.)

The stock market average consistently beats 75% to 85% of all mutual funds. So it is a testimony to the advertising budgets of financial firms that so many investors forego a sure thing of the $8000 box in search of something better.

So… what is it going to be? Are you ready to maximize your returns?

Don’t bet your life savings on unknown risks. Let’s strategize and increase the odds of your portfolio sustaining you throughout your retirement.