Have you heard these statements?
- We didn’t see this coming.
- You need to be well diversified.
- Invest for the long run.
- You have lost money, but selling now is unwise.
- The stock market goes up and down. That’s just the way it works.
I thought so.
These types of statements are intended to deflect investors’ attention from the “roller-coaster ride” that so many have been taught to endure.
Many financial professionals will tell investors that the way to invest is to put their money into the stock market. If that feels too risky, they may advise them to diversify by adding some bond funds to their portfolio in order to “smooth out the ride.” While their counsel may differ slightly, the net result of their investment strategies tends to mirror this advice.
I have seen many people’s brokerage account statements and, currently, the majority are covered in “red ink.” Many investors have taken significant and unexpected losses. Many are not young; they are older people who cannot and should not be taking big hits or investing using conventional buy and hold strategies.
I’ve witnessed people’s emotions in response to these losses. They are angry, frustrated, hurt, disgusted, fearful and some are even brought to despair. I frequently think, “What a crazy industry that so frequently delivers such poor outcomes to trusting people!” In my opinion, people are not and have not been adequately educated by their financial advisors about what the “investment ride” will entail – at least not in words they can understand or with logical explanations.
Some investors are having more success with their investment portfolios than others. However, the vast majority of the people with whom I have spoken have seen their investments plummet in value this past month. They’re asking the same question I asked myself before I became an Investment Advisor Representative: Why hasn’t someone developed a way to help me protect and grow my money, instead of simply taking me on a financial roller-coaster…again?
I also asked myself other questions. How could advisors more correctly set the expectations of investors, so that when the market collapses, people would still be assured they’ll survive financially? Why does the way the wealthy invest differ so greatly from how the average retail investors are told to invest?
These types of questions are those which financial professionals dislike hearing, and when they’re asked, it seems that either the questions or questioner are dismissed. I have experienced this first hand.
It is not your fault.
Perhaps you have been on the “Wall Street merry-go-round” with very few portfolio gains – or only losses to show for the ride. The financial industry teaches its professionals how to encourage investors to invest in their strategies with a degree of confidence. However, when losses occur, investors are ill-equipped to handle them. While this is not always true, far too often it is.
So, what’s the answer?
Ask yourself how much money you’ve made or lost and how much risk you’ve taken to get there. You may have realized at this point that you’re not getting the desired results for the amount of risk you’re taking and that it’s time to move on and find an advisor who will actually protect and grow your investments.
So, how do you make sure that your next advisor won’t deliver the same results as your last three? Here’s a key question to ask a potential advisor, which cuts through all of their claims: Ask to view their track record for 2015 and for YTD 2016 and consider how it compares to the S&P 500. Ask them the tough questions and consider how they respond. Are they making the same claims and statements you’ve heard several times before?
If you’re feeling like you’re ready to get off the roller-coaster, please let me know. I’d be happy to speak with you and provide a complimentary assessment of your current investments – or just answer any questions you may have.
P.S. – You can view the real-time performance of my most conservative strategy by clicking here.