asset-management"Investors collectively spend 100 billion dollars per year trying to beat the market with managers and collectively they have not succeeded in doing so"


According to John Bogle it is a mathematical certainty that over a lifetime you cannot beat the indexes with active management (ex- actively managed mutual funds). Source: PBS



“If your advisor thinks he can pick winning stocks, choose winning actively managed mutual funds, or time the market -- steer clear!” -- Whitecoat Investor


OVERVIEW: Advisers of all shapes and sizes are looking to make money off of you either through services or by selling you expensive products that pay back door commissions. Your best course of action is to either do-it-yourself or pay for the services of a fee-only fiducairy on a one-time or one-task basis -- not on an ongoing basis (not an asset manager). Another good option is to go to a low cost light-service company such as TD AmeriTrade or Schwab.


What to do with your money? Here are your choices:



check This section has moved to this page.


2) "Robo-Adviser" computer modeling + light human advice: Buy, hold and rebalance index funds

check Companies like Schwab offer low cost alternatives to paying more money to a fee-only fiduciary adviser on a one-time or one-task basis. These companies not only offer computer porfolio selection tools, but also off light advice from a real human adviser if you need it. Schwab charges about 0.3% per year. That's quite a bit cheaper than paying an "asset manager" 1% per year. After 30 years this will shave off 9.4% from your portfolio value, whereas a 1% per year asset manager will shave 35% from your portfolio value after 30 years.


Here's some examples of free portfolio selection tools:


Blackrock's FREE core portfolio bulder

Vanguard's FREE portfolio creation tool



3) adviserPay a "fee-only" fiduciary registered investment adviser on a one-time or one-task basis: Buy, hold and rebalance index funds

check Help you design a personalized investment portfolio based on thin gs like your age, appetite for risk, your income needs (if any), your time horizon, your net worth, etc. For example if you're a young person with your whole life ahead of you then it might be appropriate to be heavily investing in stock based investments like VITPX. Or if you're at retirement age and you've already accumulated more than enough money to retire on then it might make sense to "sit on your lead" and invest more heavily in short term bond investments (like IEI or BSV or SHY) and cash certificate of deposits. Or you might decide that you aren't so much investing for yourself but rather for your young heirs when you die, in which case you might be more aggressive by favoring stock-based asset classes.


Visit this site for help in finding a fee-only financial adviser.


You will do your own trading through a deep discount brokerage firm such as Schwab (self-directed account) or AmeriTrade. A "fee-only" fiduciary registered investment adviser is legally required to to give advice that is in your best interests and may only be compensated by the fee that they charge you directly. "Fee-only" means that legally they are not allowed to earn compensation from any source other than you. This eliminates almost all conflict of interest, such as when brokers push actively managed mutual funds, limited partnerships, life settlement investments, non-traded REIT's, annuities, and other inferior investments that may pay very lucrative commissions. The one potential conflict of interest with a "fee-only" fiduciary registered investment adviser is that IF they charge a fee that is based solely on how much your net worth of publicly traded securities, and you also like to invest in OTHER things like gold and real estate which DON'T COUNT towards his fee basis, then you can see how he would be motivated to convince you to NOT invest so much in those OTHER things. This might not be in your best interests.


CRITICAL: You should always have a written contractual agreement with your adviser which states that they are acting in the capacity of a "fee only" fiduciary investment adviser (or fiduciary financial planner). In addition to accepting fiduciary responsibility to you in writing (via a signed contract), a legitimate registered investment adviser will provide you with copies of both parts of a "Form ADV", and provide you with a written disclosure of exactly how he will / may be compensated for his services and list any potential conflicts of interest. Do not work with any adviser who does not provide you with these critical documents once per year!!!


CAUTION: If you just want a one-time consultation then at some point your adviser may try to convince you that he needs to constantly manage your money (at a cost of perhaps 2% per year). Make it clear that you are not interested.


CAUTION: Note that a "fee only" adviser may also sometimes act in the capacity of a fiduciary fee-based adviser, broker, or insurance agent. Be sure that it's stated in writing that your adviser is at all times working in the capacity of a fee-only fiduciary. Be certain that for any follow up advice they will continue to work as a fee-only fiduciary. You don't want your adviser to later claim that his term as a fee-only fiduciary "expired" and then he later legally acted in the capacity of merely a "broker" (recommending expensive commission-based investments).


WARNING: A "fee-based" adviser is not the same as a "fee-only" adviser. There may be well intentioned "fee-based" advisers out there but so-called "fee-based" advisers are legally allowed to "double dip" by also earning commissions from brokerage firms, insurance companies, partnership companies, mutual fund companies, etc. For this reason the door is open for conflict of interest. I say avoid "fee-based" advisers.


WARNING: Something fishy is going on if your "adviser" charged you a fee but never provided you with a signed fiduciary agreement which details that he is working in the capacity of a fee-based or fee-only fiduciary adviser. Contact an attorney to evaluate your case.



fly4) Pay a "fee-only" or "fee-based" fiduciary asset manager to constantly manage your money (Sometimes called a "wrap account"): Buy, hold and rebalance index funds

warning It's one thing to hire someone to help you design a personalized investment portfolio and "game plan" based on your individual situation, but is it really worth paying someone to constantly manage it, typically for an annual fee of perhaps 1% to 2% of the value of your managed assets per year? What are they really going to do to justify an annual management fee of even just 1%?


According to Vanguard a full-time fiduciary adviser will do the following:


1. Act as a behavioral coach by stopping you from making stupid decisions such as selling low (as many panicked investors did in 2008 - 2009).


2. Apply an asset location strategy (diversification). Anyone can easily do this buy investing in ETF's.


3. Buy cost-effective investments. Anyone can easily do this by investing in ETF's.


4. Maintain the proper allocation through rebalancing. Anyone can easily do this.


5. Implement a spending strategy. Anyone can calculate / estimate this. Simply account for expected annual returns, while accounting about 3% per year for inflation and while subtracting how ever much you will be withdrawing each year.


warning Take note that timing the market, moving your money to safety in the event of a stock market crash and outperforming the market averages is not on the list of what an adviser does!


Are you likely to beat the market with an asset manager? First of all a fiduciary adviser should not be trying to beat the market. In theory an adviser should only diversify according to your appetite for risk, hope for the best and rebalance your portfolio as one asset class outperforms the other. The efficient market hypothesis says that you can't beat the market. Everyone has access to the same news, and stock prices reflect that news instantly therefore nobody should have a chance to beat anyone else to the punch (as they once did in the days before the Internet). Remember that investors collectively spend 100 billion dollars a year trying to beat the market and collectively they have not succeeded in doing so!


Nobody can predict when the next market crash will happen

Nobody can predict if a crash of [pick any number]percent will lead to even more decline

It's been said that "Economists have predicted 10 of the last 3 recessions"


crashThere is a false perception that asset managers will predict market collapse (or continued collapse) and pull your money to safety before it happens or before it continues. But the efficient market hypothesis says that market timing does not work and studies have shown that there's actually more danger of being out of the market than being invested in the market. When you study mutual fund return statistics you realize that Wall Street managers don't perform better in down markets. So why would you assume that the "asset manager" down the street would outperform the market averages? Again, in theory all an adviser can do is diversify and rebalance. This is not rocket science.

Think about how much that annual management fee compounds year after year. Pocket that 1% to 2% management fee for yourself and just continue to invest in "passively managed" index funds (ETF's) and then rebalance your portfolio as needed.


WARNING: When working with an asset manager be sure to do your own trading through a deep discount brokerage firm such as Schwab or AmeriTrade. Never let any adviser have control or access to your money or accounts.


WARNING: You should always have a signed contractual agreement with your fiduciary registered investment adviser which states that they are acting in the capacity of a fiduciary financial adviser. They must provide you with copies of both parts of a "Form ADV", disclose exactly how he will / may be compensated for his services. Do not work with any adviser who does not provide you with these critical documents on an annual basis.


WARNING: Even with fee-only advisers a conflict of interest could exist if the adviser is paid based on the size of your managed account. For example if you ask a fee-only adviser whether to pay off a large loan then it follows that they stand to gain financially by telling you to instead invest that money even though that might not be in your best interest.

Any other financial advice that might affect the size of your portfolio such as gold bullion investing might be biased if that money does not count as part of your "managed account". For example if a fee-only adviser does not officially include such things as your gold holdings as part of the percentage of your "account" that he manages then that would become a conflict of interest. The adviser would have a financial interest in convincing you to not own gold even though that advice might not be in your best interest.


WARNING: Avoid the "fee-based" guys because a conflict of interest still exists. There may be well intentioned "fee-based" asset managers out there but the door is open for them to make money from sources other than you, which may cause them to select inferior or more expensive investment products.


The Wall Street Journal says "Beware of market-beating brags. Warren Buffet outperforms the market averages. There aren’t a lot of people like him. If you have an initial meeting with an adviser and you hear predictions of market-beating performance, get up and walk away."


WARNING: Avoid asset managers who hand pick stocks. This is not 1990 any more. Picking stocks is antiquated and costly. The efficient market hypothesis says that you are wasting your money by paying a "stock picker" in hopes of beating the indexes. Anyone who may have previously beaten the market averages in recent years (and this can be verified by GIPS) probably simply took on more risk and just got lucky. The statistical evidence says that you should be buying "passively managed" index funds (ETF's) instead. When people work with stock picking asset managers they also inherently have to continue paying them for ongoing advice.


WARNING: Sometimes people pay full time asset managers who essentially do nothing. For the know-nothing investor it may be difficult to tell if an asset manager is neglecting your account rather than justifiably doing nothing. In the end it's best to simply rebalance on your own without unnecessarily paying some asset manager every year.


5) Pay a "fee-only" or "fee-based" fiduciary asset manager to constantly manage your money and attempt to time the market

bad There are some fiduciary asset managers who adhere to the strategy of using a stop-loss strategy to hopefully get out of the market in advance of further market declines and then hopefully get back in after the market has resumed going back up. One such adviser frequently advertises on radio, asking for listeners to attend a free seminar. This market timing strategy goes against what the respected experts say to do. For a detailed explanation why, please visit this page.


fee6) Avoid Brokers: Illiquid, expensive, inferior products and as many transactions as he can convince you to let him execute

bad NEVER NEVER EVER go to someone who is working strictly in the capacity of a broker (AKA a "registered representative") for any type of personalized advice on investment decisions, including selecting investments, designing a portfolio, retirement planning, estate planning, etc. Brokers do not legally work for you. This is covered in great detail on page one. They are merely salesmen looking to convince you to make as many transactions as is allowed by the legal "suitability standard", which is inadequate. Investors often feel comfortable working with brokers because they don't directly charge you anything, when in fact brokers are anything but "free"! You indirectly pay them when you invest in the expensive products that they sell you! If you buy a mutual fund with a front end load then you have obviously been fleeced. But sometimes investors get tricked into simply buying expensive investment products. For example, a mutual fund that has no front end load may seem like a bargain, but in reality they simply make up for it with higher management fees during the years that you are invested. One way or another you are fleeced.


If you still believe that you can trust full service brokers then take note that a former Goldman Sachs employee went public in 2012 in a now famous NY Times article that exposed the conflict of interest. At full service brokerages it's all about making money for the company.


WARNING: The other sneaky trick to beware of is that brokers may hold various certifications (CFP, ChFC, etc). Certifications mean nothing unless your adviser is legally working for you (as a "fiduciary"). Also brokers may call themselves just about any title they want including "financial planner", "financial consultant", "money manager", "wealth manager", "retirement planner", "estate planner", "investment strategist", "president", "asset manager", "portfolio expert", "registered representative", "independent broker-dealer", etc. Regardless of what they call themselves they should be regarded as nothing more than brokers (or "salesmen who legally work for their investment company or themselves). Their goal is to earn large commissions as often as is legally possible. By default, expect a broker to sell you inferior products such as "actively managed" mutual funds (which are expensive), annuities, life settlement investments, limited partnerships, non-traded REITS, promissory notes, and other duds.


Also note that some brokers may also work as fiduciary feed-based or fee-only advisers. If you choose to hire them as a fiduciary then be sure that this is memorialized under signed contract only.


fly7) Avoid Insurance Salesmen: Expensive and Illiquid Annuities, Indexed Universal Life, Universal Life, Variable Life, Whole Life Insurance.

bad NEVER NEVER EVER go to an insurance salesman for any kind of personalized advice on investment decisions, including selecting investments, designing a portfolio, etc. Insurance salesmen do not legally work for you. It is even explicitly stated in insurance company brochure small print that their agents do not provide investment advice. Insurance needs to be insurance and investing needs to be investing. Never ever combine the two! Unfortunately unsuspecting investors often feel comfortable working with insurance agents who may also be certified financial planners or because they don't directly charge you any fees, when it fact they are anything but "free"! You indirectly pay them when you invest in the inferior, riskier, and/or more expensive products that they push on you. Beware that insurance salesmen / brokers may call themselves other titles including "financial planner", "financial planning consultant", "money manager", "wealth manager", "retirement planner", "estate planner", "investment strategist", "president", "asset manager", "portfolio expert", or just about any other title that would lead you to believe that they are working for you. Make no mistake. They are NOT in your corner! Legally they do NOT work for you! They are nothing more than salesmen.


Also just because the guy has a "Chartered Life Underwriter" certification means nothing. CLU's are touted as the "Highest Standard of Knowledge and Trust in Insurance". That's nice but anyone who is not a fiduciary does not legally work for you and by default is a salesman who should not be "trusted". Anyone who recommends those dreaded annuities is almost certainly not making that recommendation in your best interests -- They are selling annuity products because the insurance companies pay salesmen irresistibly high commissions of anywhere from 6 to 12%.


bank8) Avoid Bank Employees

bad At some point you may have gotten a phone call from a representative at your bank who wanted to let you know that you had X dollars just setting in your account earning very little interest, and to see if you might be interested in putting that money into some other "better" investments. NEVER EVER take advice from a bank employee regarding investment decisions, including selecting investments, designing a portfolio, etc. Bank employees do not legally work for you. They are salespeople. Investors often feel comfortable working with bank employees because they don't directly charge you anything, when it fact you indirectly pay them when you invest in the expensive products that they sell. Remember banks are not trying to help you. They are trying to make money off of you.


9) Other

bad Lawyers, accountants, sports agents, so-called "investment gurus" holding free or paid seminars at hotels, selling books, etc. Whether they hold various certifications is irrelevant. Legally they do not work for you and therefore should never be trusted for any type of personalized investing advice.


Many athletes have made the mistake of relying on sports agents for investment advice, money advisor recommendations ("this guy is good"), etc. So if your accountant asks if you'd like to join him for lunch or dinner to talk about your investments, just say no. You hired him to do your taxes -- not help you invest your money!


Have they broken the law? Anyone can legally give financial advice for FREE. But when someone starts charging money for their advice or actually selling financial products that's when it becomes illegal unless they are registered and/or certified to do so.


10) Paid investment newsletters, etc

bad While there is usually no conflict of interest to worry about with the most reputable investment newsletters, other than the fact that they are trying to sell you subscriptions, research indicates that these newsletters generally are not going to make you any more money than if you were to just invest in unmanaged index funds. Mark Hulbert of Dow Jones MarketWatch has been tracking the performance of investment newsletters since 1980 in his Hulbert Financial Digest. In his studies he determined that if dating back to 1980 you constantly followed the investment advice of the prior year's best performing newsletter, and then each year switched to the "new" best performing newsletter of the prior year, by now you would have lost all of your money! The authors of what happen to be the best performing newsletters usually outperform everyone else by taking unusual risks, and it's that risk that eventually catches up with you. Hulbert also found that if you instead took what would at least appear to be a more sensible approach by following the investment advice of the newsletter with the best 10 year performance you would unfortunately still have under performed the market.


CAUTION: A lot of newsletters are very adept at convincing you that they have been beating a benchmark average such as the S & P index. Unfortunately it's often the case that they simply just took on a little more risk than the S & P (example: investing more in mid-cap and / or small cap assets). Often they also employ some other sneaky techniques to manipulate their studies. They cherry pick a time period that works to their advantage, they don't do a risk adjusted apples to apples comparison, they ignore fees, they ignore trading costs, etc.


DANGER: Don't ever confuse legitimate unbiased, paid subscription newsletters with free pump and dump advertisements that randomly arrive in your mailbox or via email. These fraudulent advertisements are usually cleverly disguised as "complimentary newsletters" but have small print disclaimers at the end. NEVER EVER follow the recommendations of these newsletters!


Beware of paid "news stories" that may appear as a paid link on legitimate sites such as Yahoo News. An example is the alarmist "news story" about "Billionaires Dumping Stocks, Economist Knows Why" which has been published and republished since as early as Sept 16, 2012, warning of an eminent 90% stock correction. In reality the story is just a lead up to trying to get you to pay $47 for some books. Remember that nobody can predict when the next market crash will be. Your best strategy is to diversify and then simply rebalance as your allocation ratio changes.


FREE OPTIONS: If you insist on reading newsletters, keep in mind that the same information is usually available somewhere else for FREE. For example if you want to read about what might be considered "bearish" or "alternative" points of view you might like opinions by Mike Maloney in this YouTube video, by Peter Schiff in this blog, by Stephan Molyneux in his YouTube videos, or Greg Hunter's site. Keep in mind that some of these sites may or may not have a vested interest in preaching that point of view, such as to sell products or services that they offer. Other sites may just flat out favor one point of view because negative news is what their audience base likes and what drives traffic. After all the survival instinct and being fearful is human nature. Nevertheless these sites present talking points that will interest some and they are free. What about more middle of the road commentary and newsletters? You might like MarketWatch (all sides of the spectrum), the BullOrBearReport on YouTube, the Bob Brinker Radio Show, Forbes Magazine and others.



11) Magazines

bad Fortune Magazine published it's "10 Stocks To Last The Decade" in 2000. Ten years later it failed miserably versus the S & P 500 index. That about says it all. Read up on what the Efficient Market Hypothesis is, stop trying to pick and trade individual stocks, and instead just invest in an index fund or two.



12) Advice from friends, family, etc

bad Even the experts as a whole can't beat the indexes so why would you buy into anyone else's investing advice? Again read up on what the Efficient Market Hypothesis is, and stop trying to pick and trade stocks. Instead invest in index funds.


Often investors let down their guard just because the investment recommendation comes from a friend, co-worker or family. Con-artists often prey upon groups such as religious or ethnic communities, the elderly, professional groups, clubs, etc. The fraudsters are often members of the group.



13) Legitimate TV and radio hosts

warning It's always good to learn about investing and how the markets work. But just because Jim Cramer has a TV show about investing in individual stocks doesn't mean that you will outperform the indexes by trading stocks. Again read up on the Efficient Market Hypothesis, stop trying to pick stocks, and instead invest in index funds. Even Jim Cramer, who devotes most of his TV show to picking stocks, says to invest in ETF's if you don't have time to study stocks. You can take it a step further by saying that even if you do have time to study stocks, you should just invest in ETF's. By the way this study revealed that Jim Cramer picked stocks outperformed the S & P 500 index 12.1% to 7.35% during a 2 year time period that was studied. At first glance that might lead you to 1) become a stock picker and 2) heed his stock picking advice. But as we all know, the only study that matters is a risk adjusted study. Their risk adjusted study showed that Cramer actually did slightly worse than the market in 2006, and slightly better in 2007. Anyone can beat the S & P 500 index when the broad market is advancing upward by simply taking on more risk (example: favoring small cap stocks, mid-cap stocks, and/or aggressive growth stocks).


Ric Edelman has a radio show that is educational but be cautioned that he also pushes his fee-based asset management business. If you've already read page one (and above) then you know to instead seek out advisers on a one-time or one-task basis. Presumably Edelman also provides one-time or one-task services to those who specifically ask.


14) Radio hosts who are really product salesman pushing

free seminars, webinars, books, courses, etc.

bad There is an increasing trend whereby insurance salesmen, real estate brokers, market timers and other non-fiduciaries are paying for airtime on local radio stations in order to get you out to their free seminar or to watch their "webinar", at which time they try to sell you an expensive insurance product (such as annuity, universal life, etc), a non-traded real estate investment, or they may be selling a book or asset management service that involves market timing strategy. These "radio programs" may sound good intentioned but they should be avoided like the plague! Never seek money advice from these non-fiduciaries! Ask yourself why are they paying for air time? To make money off of you!


Typically they employ the tired old technique of instilling fear of the stock market while completely ignoring diversification into bonds in order to sell you that insurance product or private real estate investment that will earn themselves a lavish commission. In the case of market timing strategy seminars they ignore the Efficient Market Hypothesis. , nobody can consistently time the market. You are more likely to get it wrong than right.


"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time." - John Markese, President, American Association of Individual Investors Journal


"There is an overwhelming body of evidence to support the view that believing in the ability of market timers is the equivalent of believing astrologers can predict the future." - Larry Swedroe, Author


"No, I don’t believe in market timing. I’ve been around this business darn near a half-century, and I know I can’t do it successfully. In fact, I don’t even know anyone who knows anyone who has ever successfully timed the market over the long term." - John Bogle, Founder of The Vanguard Group


Just how knowledgeable is any adviser at steering you away from trouble?

Even the very best intentioned investment advisors and firms often know nothing about the investments they pitch beyond what they’re told by promoters! Case and point: Many investment advisory firms and even the Securities and Exchange Commission (!) were unaware that Bernie Madoff's fund was a Ponzi scheme. The SEC was even alerted that Bernie Madoff had to be running a Ponzi scheme yet they STILL didn't believe it!!! So why would you take referral advice from ANYONE, let alone just a friend or family member?! Stories like this bolster the idea that advisers shave an asset management fee off of your portfolio in order to merely hold your hand.


Beware of anyone who promises unrealistic returns

First of all, as described on page one, beating the market averages or timing the market is not was an adviser should do. For those who choose to foolishly ignore this, read on...


If an investment sounds too good to be true it's usually either a fraud or someone is withholding the whole truth and messaging numbers and facts. People who are trying to sell something love to paint a rosy picture and exaggerate. Would you believe someone who tells you that they've found a baseball player who is gonna bat .500 next season? Bernie Madoff similarly boasted of having investment returns that were statistically impossible to generate. Accordingly beware of anyone who makes bold claims such as consistent annual return projections of more than 10% per year. No responsible person can promise returns of as little as 10% a year, year in and year out. The market fluctuates and all things financial are tied together. There is no such thing as an investment that will earn a fixed 10% annual return without risk of essentially failing to do so and even losing principal investment. A US Treasury note is as close to a "sure thing" as you can find, yet a 10-year note only pays less than 5% a year. Any investments that average returns above and beyond 5% start to carry more and more risk.


Also no comparison is a true apples to apples comparison unless it is risk adjusted. Nobody should take credit for beating the S & P 500 index when they simply took on greater risk (which for example anyone can do with leveraged ETF's). Those risks can just as easily backfire in down markets.


CONFLICT OF INTEREST: Full service brokerage firms

You shouldn't trust a broker any more than a car salesman. Brokers are trying to make as much money as possible for the company, whether it be by selling investment products that pay the highest commissions or by just plain making as many transactions as legally possible (without doing anything that might be considered "churning", although the legal standard is low). All of this is a conflict of interest. If you just sit on your investments without selling, buying and shifting them around then they don't earn commissions. So they call you and tug on your arm whenever there's possible cause to make a transaction. They certainly aren't going to be motivated to preach the buy and hold strategy or tell you to invest in ETF's (which you should do both).


Churning is the practice of executing trades for an investor by a salesman or broker in order to generate commissions from the account. Churning is a breach of securities law in many jurisdictions.


Earning commissions off of transactions is not the only way that brokerage firms make money. When they do recommend investments sometimes they recommend investments that they "make a market in", meaning that the brokerage firm itself actually currently holds and/or is buying or selling the stock and hoping that it goes one way or the other. As an example they may own a large position of a stock that has run up in price, and now they are trying to "unload" their shares quickly in anticipation of a downturn in the stock's price. They need buyers of the overpriced stock that the firm holds. In particular beware of pitches to buy scarcely traded "penny stocks", as their prices can be easily manipulated. Brokers may earn an extra commission if they get customers to buy a certain investment.


Full service brokerages may try to sell you special services such as an expensive report mapping out an overview of where your money is allocated. You don't need this crap!


It's no surprise that the Securities and Exchange Commission has accused Goldman Sachs of selling risky mortgage investments without telling buyers that the securities were crafted in part by a hedge fund manager who was betting on them to fail. A former employee Greg Smith also blew the whistle on Goldman Sachs saying essentially that they are in business for themselves, using any means possible.


Don't believe any adviser's own performance claims -- ONLY "Global Investment Performance Standards" (GIPS) statistics can be trusted

First of all, as described on page one, beating the market averages or timing the market is not was an adviser should do. For those who choose to foolishly ignore this, read on...


The only reliable investment performance claims are those that are GIPS compliant. Any other claims that investment advisers make on their own are meaningless because it is too easy to manipulate data. So if your investment adviser tells you that he earned an average of 10% annual returns for all of his clients, those claims are worthless and cannot be verified or relied upon. Past positive performance doesn't equate to future positive results if the world of mutual funds so why should you expect anything different with individual advisers? Also stock picking by individual advisers is antiquated. There is NO reason to believe that an individual financial planner is going to outperform an index. Nobody has any advantage over anybody else (or over any unman aged index fund) because with computers and the Internet, information is available instantly and market trades happen in seconds. Nobody should be able to “beat the market” when picking stocks or “time the market” for that matter in trying to predict market movements as a whole. Years ago Wall Street managers had an edge. Things have changed, and statistical evidence supports this notion. If a manager beats the market (after fees) it's probably because he simply had his clients take on more risk and just got lucky.


"Why does indexing outmaneuver the best minds on Wall Street? Paradoxically, it is because the best and brightest in the financial community have made the stock market very efficient. When information arises about individual stocks or the market as a whole, it gets reflected in stock prices without delay, making one stock as reasonably priced as another. Active managers who frequently shift from security to security actually detract from performance compared to an index fund by incurring transaction costs."-- Burton G. Malkiel, Author of "A Random Walk Down Wall Street"


NEXT ARTICLE: Avoid Annuities


Disclaimer and Waiver - Nothing on this consumer advocate website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy, hold or sell, or as an endorsement, of any company, security, fund, product or other offering. This website, its owners, affiliates, agents and / or contributors are not financial or investment advisors or broker / dealers and assume no liability whatsoever by your reliance on the information contained herein. The information should not be relied upon for purposes of transacting securities, assets, financial products or other investments. Your use of the information contained herein is at your own risk. The content is provided 'as is' and without warranties, either expressed or implied. This site does not promise or guarantee any income or particular result from your use of the information contained herein. It is your responsibility to evaluate any information, opinion, advice or other content contained. Always hire and consult with a professional regarding the evaluation of any specific information, opinion, or other content.