Fooled By an Amateur

I've seen this pitch from some amateurs in the investment consultant business. If you're interested in breaking into our industry, give this exercise a try. You can also ask a high school student with an aptitude for technology to do this. I can't believe it works, but the reports a kid can create are compelling. Here is how you can do it yourself:

Go to morningstar.com. Sort the funds by the highest returns over the past five years. Choose at least five of them and equally weight them. You'll have a portfolio whose returns are so good they completely destroy anything you, I, or any sane investor would create.

A seasoned amateur is a little better. This amateur sorts the funds by sectors, then returns. This way, he can explain away the objection that might go something like, "Why don't we have any oil and gas?" Instead, he'll use "honest hyperbole" and say notice how this portfolio holds a conservative oil and gas fund? Sidebar: the oil and gas sector lost a lot of money in 2015; likely the less you held, the better you did. So this amateur's pitch is "what happened in the past is likely to happen again."

An even more experienced amateur says these are the sector bets we made in the past. Now we use sector rotation to avoid things like the oil and gas crash (seriously, people say these things). Your current portfolio could be completely different than the one I'm showing you now, and we will change it again. Never mind the implicit duplicity of my showing you a back-dated performance report.

You get the point. Past returns are completely irrelevant when my high-schooler can create a portfolio that beats any investment consultant on the planet, every year, simply with the perfect hindsight of the internet.

The bottom line is that professional investment advice is much different than an internet-generated portfolio. It is based on your needs and values. It stems from real-world experience helping people like you plan for college educations, retirements, and lifelong goals. It gives you confidence. And it is built on trust.

Last Chance For Sanity Before the Election
What Captain Sully Taught Me About Investing

Go Tax Free

A&I Financial Services - Karl Frank Book - Go Tax Free

 

 

 

 

 

An assortment of tools and strategies that give readers of all backgrounds a clear, specific action plan for obtaining the maximum allowable control over when and how they pay taxes.
Learn more

Green Initiative Side Bar 2

The Green Initiative

Addressing Global Concerns on an individualized basis