Many times, when I meet with investors I am asked ‘where is the best place to put my money?’ The financial institutions have taught investors that there is someone who can tell them what to do in every circumstance.
These institutions lead you to believe they know what you need. In fact these institutions sell you ‘product’ to feed your fear in every environment.
A true adviser will often tell you things you do not want to hear. Remember if your adviser only provides the product you ask for they are not an adviser but rather a salesperson or broker.
These salespeople are really facilitators. You tell them what you want or what scares you and they provide the product.
The result is, in many cases, a portfolio that is concentrated in the ‘hot’ asset classes of the day.
To succeed in investing being diversified means looking different.
Most investors are narrowly diversified into top performing funds or asset classes of the last five to ten years. They often feel diversified but aren’t.
It might be gold or annuities or cash or commodities or insurance guarantees or U.S. large cap growth or large cap value or small cap and then even internationals equities. The list is endless as Wall Street continues to generate new ‘product(s)’.
Gambler and speculators are always looking for the next ‘hot’ investment. These speculators are looking to get rich quick. They want to substitute disciplined savings and a prudent portfolio with a get rich quick scheme.
Remember the Wall Street bullies make money when you trade. They need you moving from one asset class to another. This makes the bullies money and costs you big.
To be truly diversified means including asset classes or types of funds in your portfolio that did poorly over the last five to ten years. If you do this, your portfolio will look and perform very differently from your neighbors’ or friends’.
Don’t empower these bullies and be different. Act more like you are managing a pension fund. Pension funds control risk and prudently diversify. That means some of the funds are poorly performing now or in the recent past.
From worst to first many times applies here.
Of course, there are examples of pension funds ‘juicing’ up returns to avoid contributing the necessary funds. This often has disastrous results.
To succeed in investing you must own equities…globally diversify …rebalance.
Think long term and avoid making emotional decisions during short term volatility.
This is best accomplished with the aid of an investor coach/fiduciary adviser. Not a facilitator bit rather a true adviser.