Surprising Investing Myths

These myths are communicated by the media and the financial institutions to keep money moving. After all the financial institutions cannot make money unless it is moving. These myths will keep you from reaching the true potential for your investment goals. There are three simple rules when investing for your long term goals…own equities….globally diversify…rebalance. These three rules will guide you and you must remain disciplined.

Investment Frontiers Symposia
Investment Frontiers Symposia (Photo credit: apec2011ceosummit)

Stellar Past Performance Is a Good Measure of Investment SkillEvery year, another fund manager is anointed as the “next investment guru” based on his recent past performance. It’s more likely he was just lucky rather than skillful. It can take a very long period of time (often 20 years or more) to determine whether the performance of a fund manager was luck instead of skill. Relatively few fund managers stick around that long.

If Only I Qualified for a Hedge Fund Investment

Be thankful you don’t. If you do, avoid the temptation. In his new book, The Hedge Fund Mirage: The Illusion of Big Money and Why It’s Too Good to Be True, Simon Lack concludes that hedge fund investors as a group would have been better off if they had simply invested in Treasury Bills. Lack bases his conclusion on publicly available data from Hedge Fund Research, Inc. Hedge funds are great investments for those who run successful ones, because of the excessive fees they charge: commonly 2 percent of assets and 20 percent of profits. This fee structure motivates them to take very high risks… with your money!

Investors are continually looking for the right answer to one question. Where is the best place to invest my money? There is no answer with regard to which asset class or fund manager. The real question should be what strategy will help me reach my goal.

Please comment or call to discuss how this affects you and your employees.

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