Many potential clients ask me about the past performance of ‘funds’. This is not unusual, because most of us have been taught by the Wall Street bullies that the investment choices makes all the difference. We have been taught to believe that there is someone out there who will lead us to investment success through savvy trading. We believe there is someone out there who can tell us
- What stocks to buy and or sell?
- When to get into and out of the equity markets?
- Who is the best money manager right now?
What the Wall Street bullies won’t tell you and don’t want you to know is that there is no such person or entity. No one can consistently predict any of the above. There are two groups when it comes to predicting the direction of the equity markets.
Those who don’t know where the market is going and those who don’t know they don’t know where the market is going.
The way these bullies make money is when money moves. Trading generates fees regardless of whether you make money or not. The bullies make money on every trade.
DALBAR is an independent analysis company that specializes in studying investor behavior. Each year DALBAR publishes the rolling performance. The recent analysis is for the period 1984 thru 2013.
- S&P 500 11.10%
- DALBAR Average Investor – Equity Fund 3.69%
- CPI (representing inflation) 2.80%
As you can see a simple buy and hold of the S&P 500 beats the recommendations of the Wall Street bullies. There is a better way to invest. It does not involve:
- Stock picking
- Market timing
- Track record investing.
If you are working with an adviser who does whatever you tell them fire them now and hire an investor coach/fiduciary adviser. Your adviser should help you build a prudent portfolio and keep you disciplined during market ups and downs. Your coach will help you follow three simple rules
- Own equities and high quality short term fixed income.
- Globally diversify.
Most importantly your adviser should keep you disciplined. I believe the following quote from the Father of our country will make the importance clear.
“DISCIPLINE is the soul of an army. It makes small numbers formidable; procures SUCCESS to the weak, and esteem to all.” -George Washington
Fire your broker/agent (facilitator) and hire an investor coach/fiduciary adviser.