I Dare You to Try This
Published by Terry McIntyre on Oct 23, 2014
This is a great test for how you are managing your investments at any time
Over the next while, talk to you friends and colleagues about where they feel they should be invested in the markets at this point in time. How much is in stocks, bonds and cash. What type of stocks and what type of bonds. While they all won’t agree with each other 100%, it won’t take long to find a strong overlying trend.
Is the public always wrong?
Those in the industry know that the general public make too many decisions on investing similar to those around them. It seems to be human nature to want to jump on a trend long after the trend has started, and more likely to get in during waning days of this trend. The longer the trend runs, the more certain they are of their decision.
As a very solid rule, the public make the wrong investment decisions. This is especially true as more and more are in agreement. There are a lot of theories in the industry about the reasons for this phenomena, and I have a few of my own, but suffice it to say that it holds true. If I find that the public is in agreement with what I am doing with my clients, I take a very deep breath and start to look deeply at my portfolio construction.
In one of companies I worked at in the past I got to know a senior person at our discount broker. I would intentionally take the time to ask what the current trends were with the general public. The trends were always wrong and a recipe for disaster. I’m not saying everyone at discount brokers are poor investors but strong investors are the exception.
Should you be running your own portfolio?
If you run your own portfolio, take the time to do a major review of your portfolio. If it follows the same trends as the majority, it is time to review your theories and investment philosophy. Remind yourself that as more and more start to agree with you, your performance will not only be sub-par it will probably be in trouble down the road. It is time to look at history, actually study the markets for what has happened in the past in similar conditions and adjust accordingly.
Is your advisor earning their keep?
If you are working with an advisor and your portfolio matches what the masses are doing, it is time to ask questions. Your advisor is probably more interested in keeping you comfortable and agreeing with the masses. She/he is taking the easy path to try to keep you happy and uses this theory to bring in more money. You will be able to look back at your history with this advisor and find chronic underperformance, too much volatility and you will lose your faith in your advisor.
Time to go Shopping
As I wrote in a blog earlier this year Is it time to go shopping? for a new advisor. Find one who is doing the proper work for their fees.
If you want to see what a truly independent advisor can do for you, call me at 905-846-9060, ext.3838, email me at Terry.McIntyre@manulifesecurities.ca or visit my website at www.terrymcintyre.ca.