Will investors ever stop underperforming their own investments? The theme in both of these articles by Jason Zweig is what happens when investors (or their advisers) chase trends and lose sight of what they really ought to be doing.
“So find a financial adviser who favors a handful of highly diversified funds rather than a jumble of narrowly focused, volatile funds. Make sure he tends to hold on for at least three years at a time. The simpler, smaller and smoother your collection of funds, the more likely you are to do as well as they do—instead of worse.”
How about a market based indexed approach where you may keep the funds for the rest of your life? The mixture of the funds is how you adjust risk exposure slowly as you age.
“That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.”
The problem I’ve found is that what people “want” is often not good for them – think children wanting candy – when they really should have broccoli. With a prudent plan, and a proper structure of the resources to support that plan, you are often further ahead than chasing trends or fads. Sometimes is feels awkward as the tortoise when the hare gets all the attention.
The moral of the story is that you should focus on what you are trying to do with your money and not on trends and noise that, more often than not, distract and pull you off track from what you should do. And what is “what you should do?” In my humble opinion, many of the themes in my other blog posts cover the answer to this question. My message is consistent throughout.
And here’s my blog post that discusses this theme and on how this fits in with paying your adviser to help you stay on track: http://blog.betterfinancialeducation.com/behavior-corner/you-get-what-you-pay-for/