The market pushed to a new high this past week, as I expected, as the continued push of liquidity from the Fed, and the ECB and BOJ, offset such silly concerns as another country going belly up and wiping out depositors. For some background (click on the link or the Chart below) read my post: “Get Ready For A Run To All Time Highs.” 

I have spent much of last week doing interviews on what the push to all-time highs means. In reality, for most individuals, it means very little. That is the crux of this week’s missive which is the disconnect that exists between portfolio performance and index performance.

The sad commentary is that investors continually do the wrong things emotionally by watching benchmark indexes. However, what they fail to understand is that there are many factors that affect a “market capitalization weighted index” far differently than a “dollar invested portfolio.”

These misunderstandings lead to emotional decisions to buy and sell at the wrong times; jump from one investment strategy to another as well one advisor to the next. While these actions are great forWall Street, as money in motion creates fees and commissions, it does little to solve the bulk of the problem with investor’s portfolios which is simply emotional mistakes based on unrealistic expectations.

The single biggest mistake that investors make is the fallacy of chasing a benchmark index (i.e. the S&P 500) thinking that it is something\ they must beat. But why wouldn’t they? This is what they are told day in and out by the media. It is the mantra that has been drilled into all of us by Wall Street over the last 30 years. However, what we fail to understand is that this is for Wall Street’s benefit and not our own.

I will cover several of the major reasons why you will NEVER be able to beat the S&P 500 index over long periods of time. It is simply a function of the math.

>> Read More. Download This Weeks Issue Here.