When an adviser bases their recommendations on evidenced based investing. It requires them to build a globally diversified portfolio. To be clear, globally means to invest in equites and fixed income from across the globe.
When dealing with a globally diversified portfolio. There will often be sectors/countries that are doing better than others. Right now, U.S. large cap growth stocks are leading and by a substantial margin.
To be able to attract more investors, many advisers will recommend portfolios heavily loaded with the hot sectors. Unaware investors will assume this adviser is better than the evidence-based adviser.
Many of us get frustrated with their advisor because they are not always making them money. Many of us expect our advisor to be moving our money from poorer performing sectors/countries to the best sectors/countries.
In many cases the investor will make a change just before the hot sector cools off and the cold sector begins to heat up. They are in effect buying high and selling low.
When the market is in a downturn, like we are experiencing right now, investors want their advisers to do ‘something’. We need to control our emotions during downturns.
Remember, crashes of the past are seen as buying opportunities while current and future crashes are seen as risk. When experiencing a ‘crash’ keep your focus on the long term and ignore short term volatility.
The best advisors follow a prudent strategy and keep their clients and themselves from making an emotional change to their portfolio when the economy or whatever is going against them.
A prudent process and discipline to that process will guide you to a successful outcome in the long term.
To succeed in reaching our long term financial goals we must own equities…globally diversify….rebalance. Remember sometimes rebalancing means buying poor performing asset classes and selling better performing asset classes. Which goes against many investors instincts.