A conversation frequently repeated in my office is that of the “Inverted Bell Curve”
To begin, I should first have a conversation about a regular bell shaped curve.
You might recall this curve which decided your letter grades in school. There’s a huge ‘average’ in the middle with those on either side spilling out to the left or to the right.
For most of my career, investors have basically fallen in the middle, wishing to take on what was believed to be ‘average’ risk to their portfolios; then to either side, I would find some who might be more conservative and some who might wish to be more aggressive in their expectations for rates of return.
What I’ve noticed recently is that the curve has become ‘inverted’.
I refer to it as the Death Valley Curve, because it seems to have fewer people in the middle than ever before. Now most people fall to the extremes.
Folks either have an unrealistic expectation of double-digit returns year after year or there are those who simply wish to pursue a three or four percent rate of return each year, where the return of their money has become more important than the return on their money.
The people in the middle have virtually vanished, hence the Death Valley Curve. Which are you? Are you an extreme investor? Are you overly optimistic or are you overly conservative; and how are those choices effecting the potential outcome of your own financial plan?
