Part 5: Great Relationships are not Focused on Past Investment Performance

  • June 20, 2018

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    Superior past performance is easy to show: simply exclude the poor performance from the myriad of time spans and accounts for which returns are available.

    Investors who chase past performance by retaining advisors who tout exceptionally high returns are almost always disappointed. Exceptional performance almost always involves high levels of risk and/or luck – neither of which should drive your financial health.

    Clients that pressure investment professionals to generate consistently exceptional performance are like race horse jockeys that whip their horses too hard and too often – they do not end up receiving a good outcome. A finance professional that truly cares for his or her clients is the only type of professional with whom you should deal – and they do not need to be “whipped”.

    If an investment manager truly has exceptional, consistent abilities to out-perform the market, the manager will spend time managing their own money, or perhaps managing a hedge fund for ultra-high net worth investors to collect massive profits. They will also keep their best strategies secret!

    Further, excellent short-term past performance usually occurs when a portfolio is poorly diversified. Diversification is the single-most valuable investment strategy. Search for an investment professional delivering returns based on very well diversified holdings, reasonably low fees, and no conflicts of interest.

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