Good morning, good afternoon, good evening. Depending on the part of the world you’re in. This is a little early morning “Seeking Wisdom, Wealth, and Wellness,” and a reminder about financial planning and investment advice.
Even though it’s called planning and investment advice, it’s much more important to teach people how to be good investors versus spending all of their time trying to find good investments. I could find good investments, but if you don’t have a good investor, the client themselves will underperform the investments by magnitudes of 2 to 10% a year.
Just to show that there’s evidence, that I’m not making this up, you can look at the data from DALBAR, which does quantitative research on investor behavior. You could look at information from Morningstar on the dollar and time-weighted returns of investments versus the investors. You can look into the history at Fidelity Magellan, where the investors underperformed by 6% a year, or the more dramatic CGM Focus Fund in the years 2000 to 2009, which averaged 18% a year—the fund, the investment—and the investor averaged -11% a year.
So let’s make good investors in the decade ahead, on our collective path to Wisdom, Wealth, and Wellness.
Have a great day.