Make Them Prove It!!!

This week I am struggling to find something to write about.

I don’t want to talk about politics, OMG I don’t want to talk politics. Because your investment are not affected by politics over the long term.  Over the short-term politics can cause significant volatility.

I don’t want to talk about the markets. Because the equity markets are random and unpredictable.

What I have decided on is how ‘advisors’ lure clients away from their current advisers. And you guessed it has to do with fund performance. Imagine that.

Many advisers will put together a portfolio of top performing funds over the last 5 or 10 years. Present to the client as the best way to increase their wealth with little or no risk. And neglect to tell them that they have not been using these funds until today.

Investors should as these ‘advisers’ How many of your current clients have been in this exact portfolio over the last 5 years?  Ask them to show you redacted statements showing this exact portfolio.

Believe most will not be able to answer these questions.

It is easy to find the 5 -star top performing funds of the past. It is a completely different thing to predict which funds will be top performing in the future.

The leading fund rating firm, Morningstar has stated that their star ratings have no predictive abilities.

So, what should investors do?

Look for an investor coach/fiduciary adviser to help build an evidence-based portfolio. One that includes structured funds rather than actively managed.

To be clear actively managed means stock picking and market timing. In other words, trying to predict the future. Which is really hard.

Stop using the art of investing and start using the scientific side and then stick to it.

If the adviser will not provide evidence that their strategy has worked in the past. Look for a new adviser.

You can even go one step further and ask the adviser for their Global Investment Performance Standard (GIPSÒ). This is an audited account of their past performance. You will have a difficult finding and adviser using this standard.

To succeed in investing you need to own equities along with high quality short term fixed income….Globally diversify…..Rebalance!

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