Research from S&P Dow Jones consistently shows that mutual funds that have outperformed their peers very rarely continue to outperform in the future. When news outlets and magazines make claims about the top funds to buy, they unfortunately are making most of their recommendations based on past performance. However, when it comes to the “best new funds,” past performance most definitely does not predict future performance. In fact, there is a better chance of rolling double sixes five times in a row than the top performing funds staying at the top of the leaderboard for five years.
To be successful as an investor, discipline and patience are paramount. And most often, if indeed you have a properly invested portfolio, this means understanding that doing nothing and leaving your portfolio alone is key. However, for most individuals this is difficult to do when one is continuously and dangerously bombarded with financial media 24 hours a day. In this brief video you will find extremely helpful insights as to why an investor’s single worst enemy is himself, and why acting on impulses can be destructive.
With the financial world rapidly becoming more and more complex every day, for many, developing a long-term relationship with a trusted financial advisor can be invaluable to you and your family. However, finding an experienced advisor who will always put your best interests first, isn’t quite as easy as it might seem. In this brief video you will find some very helpful things to remember when considering working with a fee-only financial advisor both now and in the years ahead.
Over and over, reams of academic evidence clearly show that actively managed mutual funds rarely outperform their respective index. What is SPIVA? The index versus active scorecard produced by S&P/Dow Jones Indices. They track a database of thousands of mutual funds and update their findings every six months while making an objective, comparative analysis across asset classes. The results and the reasons behind those results speak for themselves. Watch this informative, three-minute video to learn more.
Having a reasonable estimate of what future expected returns are likely to be is important to developing a long-term financial plan. Typically those estimates are based upon historical market data. That being said, one can never guarantee future performance based on past results. Warren Buffet, also known as “the Oracle,” has notably stated, as many other of his contemporaries, that people should expect lower “real returns” (after inflation) than they have been previously accustomed to over the course of the last century.
If indeed we are entering an era of lower investment returns, it’s more important than ever to make sure that we capture as much of the financial markets’ returns that we can. This is one of the biggest reasons why using investments with very low expenses is so important. But above all else, remaining disciplined and patient as an investor, while never attempting to time the market, is paramount to your future financial success.
Whether future returns for financial assets over the next decade are lower than they have historically been will remain to be seen, but it’s always prudent to be conservative in planning so that the only surprises we have, are hopefully good ones.
Many investors often fail to understand that financial planning isn’t a one-time task, it is a lifelong process. Depending on life events and other factors, there may be times when you will have to update and make changes to your financial plan and portfolio. There may come a time when you’ll need to make tough financial decisions, and during these times it can be invaluable to have an experienced, caring advisor in your corner. When people try investing on their own, they often fail to properly and regularly rebalance because the idea of selling something that has gone up, and buying more of something that is temporarily down, seems counter-intuitive. But maintaining the appropriate risk-adjusted return profile of your portfolio is most important, and vital to your future financial security.
Technology can be an invaluable tool in many areas of our life. However, when it comes to helping you reach your financial goals and guiding you through times of market volatility, it is paramount that you have a caring, personal financial advisor. And as the following brief video highlights, advice given by a robo-advisor, via an algorithm, will never be a substitute for personal interaction with an advisor at times when you may need it most.
Diversification, supported by academic evidence, is the most highly recommended investment strategy for managing risk and leveraging higher expected returns over the long term. Though not guaranteed, the probability is much higher for a well-diversified portfolio to grow over the long term, while helping reduce risk. Although a small fraction of investors occasionally “get lucky” by picking the home run stock, country or industry at the right time, the odds of that happening are less than what one would expect by pure random chance. Thus, it’s strongly advisable to those who are looking to preserve and grow their assets over time to invest in a beautifully diversified portfolio of low-cost, broadly diversified institutional asset class funds, or index funds. By doing so, diversification eliminates the lucky chance of making a killing, but most importantly you won’t get killed.
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