Like everyone else I receive numerous unsolicited emails every day. Most, if not all, are unwanted.
This weekend, on a rainy Sunday afternoon, I decided to look at an email from an investment company. More specifically, a seller of investment strategies.
This particular firm stated it average 16% over the last 10 years. This caught my eye, like it was intended to do. Digging deeper I found they used passively managed ETFs. Even deeper used 12 different asset classes, ie, large cap growth, large cap value, small cap growth, small cap value, international, etc.
Each month they stated how to allocate to the different asset classes. Based their technical analysis they were able to earn the previously stated 16% but with a maximum drawdown of 12.9%. WOW!! Now they had my attention.
Until I looked at their disclaimers. It was stated in the email that these were hypothetical results. In other words they designed the strategy based on historical data. Which is called optimized trading. They continued on stating they would not guarantee the same results in the future.
The statement all investment managers must use. Past performance is no indication of future results. This rings true time after time.
Because as I have said in the past the equity markets are random and unpredictable. Sure, you could get lucky. But that’s what it is LUCK!
The future cannot be consistently predicted.
We must own equities with high quality shorter term fixed income, globally diversify and rebalance.
We may not look good for periods of time but over the long term this strategy will prevail.
This is because we are controlling risk. Most investors have no idea how much risk they are carrying.
The email with the unbelievable results can only be repeated historical data. This may or may not repeat. Your investment dollars do not and should not be used gambling and speculating.