Be Fearful of Financial Planners and Investment Advisors Who Promise Consistently High Returns

I came across a great proverb¬†in a recent CNBC article titled, “Investments and the ghost of Bernie Madoff” that seems to line up perfectly when I ask the question why an “expert” really needs my money,

Farr [an investment advisor], in an email exchange, recounted the tale of a college professor who had his students record 500 tosses of a coin and calculate the actual percentage of heads and tails. He told them they didn’t really have to toss the coin if they didn’t want to and could randomly write down heads or tails. Then, the professor offered to review their lists and tell them who actually tossed the coin and who didn’t. He says that the real tossers would have several strings of eight heads or tails in a row, and the fakers never do that

Its going to be beyond rare to find an investment advisor or money manager that is going to beat the market year in and year out.¬† This is not to say you shouldn’t trust your investment advisor but there should be healthy skepticism if you are showing returns of a flat 6, 8 or 10% since we all know the market is a bumpy, bumpy ride with highs and lows.

 

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