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I finally read Ric Edelman's “Ordinary People, Extraordinary Wealth”. His book reveals 8 “secrets” of successful investors (his clients). They are:

They carry a mortgage even though they can afford to pay it off
The don't diversify the money they put into their retirement plans
Most of their wealth came from investments that were purchased for less than $1,000
They rarely move from one investment to another
They don't measure their success against the Dow or the S&P 500
They devote less than three hours per month to their personal finances
Money management is a family affair
They differ from most investors in the attention they pay to the media


They carry a mortgage (Highly Foolish)

This “finding” ranks high on the Foolish scale. Edelman's advice here is that cash is king. Liquidity is very important in times of uncertainty. Also one should free up as much cash as possible for investment in the stock market. Mortgages, as an investment, are inferior to stocks.

Using Jeremy Siegel's data from the book “Stocks For the Long Run” you see that you were guaranteed to have a positive return that was superior to that of bonds if you held stocks for thirty years or more between 1871 and 1992. Over twenty-year periods, stocks outperformed bonds a remarkable 94.17% of the time. Over five-year periods, stocks outperformed bonds 71.19% of the time. Over one-year periods, stocks have outperformed bonds more than 59.02% of the time.

Mortgages track the bonds rate plus about 150 basis points. Even with the additional basis points added to mortgages, it does not change the “winning percentage” of stocks. Sure the stock market is down two years in a row but can you pay your mortgage off in two years?

The don't diversify the money they put into their retirement plans (Highly Foolish)

Very Foolish. Edelman points out that most 401k contributions go to fixed income (bond) funds. He says, like the Fool, that your long term money is better served mostly, if not 100%, in stocks. His clients are unlike most investors. They are Foolish. They contribute most of their retirement funds to stocks.

Most of their wealth came from investments that were purchased for less than $1,000 (Moderately Foolish)

The reason I'm saying this finding is only moderately Foolish is because he's not really saying what he means here. Most of his clients did not achieve most of their wealth with small investments. The guy who invests $10 versus the guy who invests $10,000 in the same vehicle is not going to be as wealthy down the line.

The point he is making here is that most of his clients started small, but they started early. So the $10 invested years ago may very well be worth more than the $100 invested today. The Fool has a whole site dedicated to Drip (small) investing.

They rarely move from one investment to the other (Highly Foolish)

Again, what Edelman says isn't exactly what he means. Here he states that his clients aren't market timers. Neither are Fools.

They don't measure their success against the Dow or the S&P 500 (Anti-Foolish)

Maybe Edelman convinces his clients not to pay attention to these indices because he doesn't want them to hold him accountable for his investment advice. He states there no reason for his clients to pay attention to these indices as long as they are reaching their money goals.

But I gotta say that this seems very un-Millionaire Mind-like. Someone of the MM would want to know how their investment dollars are performing. Are those dollars beating the return of the general market? If not, why not put the money into an index fund or seek another fund. That would be Foolish and in this instance Edelman's clients are not.

They devote less than three hours per month to their personal finances (Moderately Foolish)

Once again, Edelman's words don't really say what he means. In this instance, personal finance means paying bills. Most of us know that paying bills is only a small part of personal finance. However, I think the point he's trying to make is sound. His clients don't obsess about their personal finances. They spend the adequate amount of time on them in order to reach their goals.

Rule Breaker principle #5 says:
We manage our portfolio under the normal constraints of our personal and work lives. It may shock you how unimpressively normal this is.

Like Edelman said, most investors would rather be watching “Oprah”.

Money management is a family affair (Moderately Foolish)

To the credit of the Fool, they make their information palatable for folks of all ages. And on occasion you'll see on the site how make personal finances a family affair can benefit all involved.

Edelman doesn't do a good job of relating the benefits of making personal finances a family affair even though he devotes an entire chapter to it.

They differ from most investors in the attention they pay to the media (Highly Foolish)

Edelman's clients have neither the time nor the inclination to listen to the Wise and neither do Fools.


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Mortgages track the bonds rate plus about 150 basis points. Even with the additional basis points added to mortgages, it does not change the “winning percentage” of stocks.
Bonds bring X% CAGR. Stocks bring Y%. Stocks outperform bonds 59% of the time (one-year periods). Now mortgages are (X+1.5)%. So the percentage of the times stocks outperform mortgages HAS to be lower than the times stocks outperform bonds
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Bonds bring X% CAGR. Stocks bring Y%. Stocks outperform bonds 59% of the time (one-year periods). Now mortgages are (X+1.5)%. So the percentage of the times stocks outperform mortgages HAS to be lower than the times stocks outperform bonds

Well think about it. If mortgage rates track bond rates, mortgages will be down when bonds are down and up when bonds are up. So chances are the years bonds loose to or beat stocks will be the same years that mortgages do so.

And it's not like stocks just barely beat bonds. The historical rate of return on bonds is somewhere near 5.5% while the return on stocks is closer to 11%. Double that of bonds. So that measly 1.5% added on to mortgage rates ain't gonna make much of a difference. The probability is that stocks will beat mortgages even over short periods of time.
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So chances are the years bonds loose to or beat stocks will be the same years that mortgages do so.
You are perfectly right, however, there could be scenarious like this:
bonds - 5%, mortgages - 6.5%, stocks - 6%
when stocks would beat bonds but not mortgages.

And it's not like stocks just barely beat bonds. The historical rate of return on bonds is somewhere near 5.5% while the return on stocks is closer to 11%.
However, this 5.5% is relatively steady while stocks jump all over the place - 59 vs 41 % is nowhere close what you would expect looking at just 5.5 vs 11.

Anyway, this discussion is pretty much pointless. You cited one fact - that stocks beat bonds 59 to 41 in one year periods. My point is that hitting a higher target is always harder, so the percent of one year periods in which stocks have beaten mortgages has to be lower than 59. Until we get the data we can continue arguing ad infinitum, citing historical averages and other indicators that wouldn't prove anyone of us correct.
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