The mutual fund industry, ie, the Wall Street bullies, continues to generate new stock picking stars each year. These stars generate great returns that make the investor cringe in jealousy. ‘Why can’t I find these stars? Why doesn’t my broker find these stars for me?
These ‘investors’ are on an endless journey to find the stars before they become stars. This has been proven to be a fruitless search. Of course, some get lucky. But most end up disappointed.
Keep in mind most big brokerage firms have hundreds if not thousands of analysts picking stocks. Firms like Fidelity will hire a large number of analysts knowing that each year some will succeed. The firm then promotes the stars and entices investors to buy their stars.
In fact, the industry has a ranking system, through Morningstar you can determine the stars of the past. The best performers receive 5 stars the poorest 1 star.
Each year there are new 5 stars and new 1 stars. Unfortunately for investors the 5 stars seldom repeat. And this years’ 1 star could become next years’ 5 star. There is no reliable way to determine which will be the 5 star of the future.
In fact, in a recent Wall Street Journal story it was proved that relying on 5 star funds would result in disappointing performance relative to the overall market. Morningstar of course, tried to defend their system but to no avail. There is no predictive ability in the Morningstar methods.
We must always remember. The equity markets are random and unpredictable. Any attempt to beat the equity markets with predictions will lead to disappointing results. Unless of course, you are one of the lucky ones.
When you are relying on luck and predictions you are actually speculating and not investing.
Speculating is fine, don’t get me wrong. As long as you realize you are speculating. Many believe they do not need to save and prudently invest. They can and will be one of the lucky ones and hit it big.
When you have a long-term goal, like retirement. You should be prudently investing and not speculating. The stakes are far too high. Your future and your families’ future, depends on it.
You must protect the future you from the current you. You need to fire your broker/agent and hire an investor coach/fiduciary adviser.