Time to Rethink Broker Advice
Investors ‘invest in the market’ to get the highest possible return. More often than not, investors use a broker to select mutual funds to help achieve the investors goals. The broker will select money managers, who will decide what stocks and bonds to buy, and when to sell. But there is one major problem investors face when going about working with a broker.
In a recent article with Dan Solin, a former securities arbitrator, brokers generally recommend actively-managed funds, those that the broker thinks will outperform the market benchmark. There is compelling evidence that 97 percent of actively-managed funds could not be expected to beat a risk-adjusted benchmark. There is no credible, peer-reviewed data indicating your broker or anyone else can identify who the members of this elite club of outperforming fund managers will be in the future. Most investors are not aware of this data. If 97% fail to beat a benchmark, that means only 3% will beat the benchmark. The chances of you investing with this 3% is probably close to 0%. Don’t play the broker game.
Every investor is entitled to a market rate of return and the key is to work with a Coach that knows where returns come from.
Here’s the article, enjoy- http://money.usnews.com/money/blogs/On-Retirement/2012/07/12/rethink-the-advice-from-your-broker