Managers on the financial channels speak with such conviction
about their expectations for future investment performance. They very
convincingly predict which stocks will do best and which ones will lag. It
would be easy to turn your money over to these advisers with hopes of getting
these superior returns and they are hoping you will do just that so that they
can charge you a high fee. One very
confident investment manager on CNBC discusses the buys and sells in the ETF he
manages. With all his confidence, you
might expect that his fund would do well in exchange for the fee you pay him
but in reality, his fund has trailed a low-cost, unmanaged S&P 500 Index
ETF over the last 1-year and 3-year periods.
Over the last 3 years, owning his fund would have cost you over 1.5% per
year in returns (per Morningstar). And if
that doesn’t sound like a lot, consider that a $500,000 starting portfolio
might grow by $140,000 less over 10 years with that performance difference. The
moral of this story is to take investment advice from the pros with a grain of
salt no matter how confident they seem and stick with a low-cost portfolio
allocated in an appropriate investment mix for your needs. (Past performance may not be an indicator of
what to expect in the future and your individual circumstances should be
considered in any investment choice.)
Larry Pike, CFA
Client Priority
Financial Advisors LLC
www.clientpriority.com
Hourly, Fee-Only Financial Planning
and Advice.
No Commissions. No automatic, annual fees.
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