Robert Rolih describes himself as a regular guy with no special talents, born in a small country with a population of just two million people. He and his wife started a business from their student dorm with an impossible dream and no money, building it into a six-figure annual income in just a few years.
Success created a new problem: what to do with their money. Rolih realized that he knew nothing about investing, so he did what most people do – he handed his hard-earned money over to professional money managers.
“When I started to invest, I trusted financial advisers, bankers and investing gurus. I thought that the world of investing is fair and that I can win the financial game of life by trusting their advice,” Rolih explains. “I lost a lot of money because of that. And I am not alone.”
In his book, The Million Dollar Decision, Rolih describes six “dark forces” (three external and three internal) conspiring against investors that causes them to lose money. The first external dark force is the hidden, destructive power of commissions. According to Rolih, investors lose a very big part of their potential investing returns just by the way the financial industry typically charges commissions and fees. “I sometimes make a joke that the odds of winning in Las Vegas are better than winning on Wall Street,” Rolih says. “The problem is not the commission, but the effect of these commissions over a long run. Our brains are not equipped to understand the true cost.”
The second external dark force is the rewards and sales incentives built into some investment companies. Rolih says that these programs are used to motivate employees to sell products with the highest fees, but quite often, “The most popular financial products are the worst ones for the customer.”
The third external dark force is too many “bad guys” in the financial industry. Rolih defines a “bad guy” as someone who knowingly sells bad financial products. “They are not necessarily bad people,” Rolih points out. “But they are not working in the best interest of their clients if they profit from giving harmful financial advice.”
Next, Rolih turns to three internal dark forces, the first of which is “thinking that gurus can see the future.” He cites data collected from 68 market forecasters from 1998 to 2012, showing that the experts were correct on average just 47% of the time. “In other words, you can beat these famous investing gurus by just tossing a coin,” says Rolih. “The fact that somebody correctly predicted the last crisis or the last big price move doesn’t mean that they have reliable predicting abilities. They were just lucky.”
The second internal dark force Rolih teaches is “using the wrong ROI calculation.” Rolih believes that the traditional way of calculating return on investment is misleading because it fails to account for additional expenses such as trading software, training courses, or the largest single expense: hours spent learning, researching, and trading. “Not accounting for the cost of time is one of the biggest mistakes I see in the investing world,” Rolih says. “Once you calculate how many hours per week you spend investing you realize your real ROI is much lower than you thought.”
Rolih’s third internal dark force is “trying to catch the next big thing.” This can come in the form of a statement like, “If you had purchased $1,000 of Apple stock in 2003 it would be worth one million dollars now!” Rolih says this misleads people into believing that somehow they can pick the next big winner. “Investors who read and hear these kind of claims all the time can get the feeling that it’s normal and quite probable to get very high returns on their investments.”
Robert G. Allen, New York Times bestselling author of The One Minute Millionaire, recommends Rolih’s book with enthusiasm. “This book is very straight to the point and Robert worked really hard to simplify all the complex investing concepts and technical terms,” Allen says. “That makes this book one of a kind.”
For a limited time, Robert Rolih is offering a free digital chapter from his book, The Million Dollar Decision, that fully illustrates and describes the six dark forces investors need to be aware of. To download this chapter visit RobertRolih.com/six-dark-forces-free-chapter for free access.