What ‘Etrade Baby Bob’ Might Not Want You to Know About Your Nestegg
I admit I was an Etrade Baby Bob fan. We don’t see Baby Bob on the telly any more, but do a search and you can still find those old Etrade brokerage spots. I loved them all, even the Baby-Barf-on-the-Keyboard episode when Bob got excited about his gains in the market.
My favorite though? Bob’s mom consigned Bob to the crib for riding the Great Dane through the house. The added injury: she slides off the set with his crib-side trading computer in hand to boot!
Not to fear: Bob retrieves the hidden iPhone from his diaper and has another exciting day with his online-brokerage-babysitter mobile app.
The Etrade Baby Bob commercials snare you, drag you in, convince you: "You can do it! Why not take a ride with stocks and funds! More fun than riding Mom’s big doggy through the kitchen."
The Superball Lottery can barely compare. You know, the odds of succeeding (or just staying whole!) by taking Baby Bob’s lead are slim. As slim or worse than playing the lottery for most of us, you know. Probably worse since the most you can lose on the lottery ticket is $1.
Think about this. One group ranked 6996 US Mutual Funds. Many, many of them managed by very smart folks. Smarter than most of us.
But if you compare those smart fund manager results, do you know how many of those ‘really smart guys’ made it to the top 10% 3 years in a row? Only 132. 1.8%.
How many were in the top 10% 5 years in a row? One. 1. Uno. 1 in 6996. That means .0014% of those really smart people got it right 5 years in a row.1
One company, Dalbar, has been tracking how well the ‘Etrade Baby’-types have done over time. Over a 20 year period the market (S&P 500) earned almost double that of the average investor: 9.22% for the market vs. 5.02% for the typical self-directed investor. That means the US market turned $10,000 into over $58,000. What about those average ‘rest of u’s in the study? Less than $27,000. A $31,000 difference.2
(Well, okay, Mommy hadn’t delivered Baby Bob back then, but you see the point.)
Why such inferior results? Many reasons. One important reason: we fear losses so much we tend to buy funds in our excitement when they cost the most. When they’re down we afraid and we sell them when they cost the least. Our emotions take us on a rollercoaster. We all, every one of us investors, has been on that roller coaster.
Good thing we don’t follow that ‘buy high’ strategy at the local Mall!
Seriously, we really are own worst investing enemies. You have to understand some basic ideas to capture more of that 5.02% than the average investor gets. Yes, the market has risk and there is never, ever a guarantee of returns. But investing in stocks and bonds, with some critical guidelines and disciplines, increases your odds dramatically.
For each of us at Eaton Cambridge we follow these basic rules and disciplines for our own personal money. When we help folks like you we put you money in the same place we put our own money, our families' money. We trust these basic principles with our own ‘nest eggs.’ Baby Bob is cute, but he ain’t our baby.
Want to know more? Click here to get a complimentary book and video explaining simple principles to help you dramatically put the odds in your favor: (Click Here for the Complimentary Book.)
1Study done by fi360, the Center for Fiduciary Studies
2 Dalbar’s 20th Annual Quantitative Analysis of Investor Behavior, 2014 Edition