Reply to @andrei
:
Hi Andrei,
Thank you for your research on this matter. I did download your referenced paper, but only glanced at it. Duke financial professors do good work. But I hesitate to go any further examining GBMFX because of the size of their excessive entry point requirement and/or the multi-tiered fees demanded by secondary suppliers to that fund. So, I’m not in this ballgame whatsoever.
Best Wishes.

Reply to @David_Snowball:
Hi David,
Thank you for participating. That alone guarantees an expansive readership.
Wow, that’s quite an astute recommendation to examine the asset allocation of the GBMFX fund to gain insights into Jeremy Grantham’s market actions relative to his forecasts.
According to Morningstar, he is eating his own cooking with his heavy two-to-one commitment to foreign holdings over US equity positions. Perhaps his confidence level in his forecasts might be viewed as thin given that one-quarter of that fund’s portfolio is currently sequestered in a Cash account. It certainly is not a damn the torpedoes, full speed ahead endorsement.
And what about that exorbitant entry level price tag? Again referencing Morningstar, a 10 million dollar opening commitment is required; that is a bit pricy for a few MFO members. I guess he’s strategically operating that specific offering like a Hedge fund. In no way would I deny him that option or opportunity.
Apparently, other financial institutions are providing indirect access to GBMFX at significantly lower entry obligations. Wells Fargo lists one such product, its WARAX fund which only reinvests in the Grantham billionaires product . But that Wells Fargo offering carries a heavy weight front-end load fee.
In a composite sense, the total fees working through Wells Fargo seem massive, thus reducing any likelihood that the small investor can benefit from Grantham’s wisdom, at least in that fund.
Where are the mutual fund angels?
But why worry? It’s not the end of the investment world. As cartoonist Charles Schulz correctly observed: “It’s never the end of the world. It’s already tomorrow in Australia.”
Best Wishes.

Hmm, perhaps taking the advice I should delete MoneyLife Podcast from my iPhone.
On the other hand, I understand what he is trying to say. He is mostly referring to apps with transactional capabilities but if you are not disciplined your monitoring app will urge you to rush to your computer when market is tanking and you do not have a plan or discipline. Financial Institutions have vested interest in your frequent trading to make money/commissions on trades so they will push these new capabilities and I agree with him that if you think you have an edge over professionals in rapid trading, you will be hugely disappointed. It is a new rope to hang yourself up in that sense.
But that is not new. With each new technology we have gone through that. Before you could logon to your account in computers, you had to call your broker or send written buy/sell instructions to your mutual fund company. It was a slower process and in the middle you could come to your senses having thought of the situation a bit longer. Heck, you would only find out about the NAV of select mutual funds on the next day's WSJ paper. I am sure at each point of technological advancement we got such warnings.

Reply to @MikeM:
Wellington is still open, unless you're trying to get in via a broker, advisor, or institution.
From the prospectus supplement (2/28/13): "Vanguard Wellington Fund will be closed to all prospective financial advisory, institutional, and intermediary clients (other than clients who invest through a Vanguard brokerage account)."
If one checks Vanguard's page for this fund, one will see the min investment is $3K (i.e. not closed). In contrast, the Primecap page says: Minimum investment: closed.

What's ringing in my ears...."Indexing is about tracking the market, not outperforming". LOL. Well I sorta agree. HOW I earn the returns is more important to me. I want consistency.
However while I don't disagree with the argument, I'm not a big fan of Jaffe. On the one hand we have financial Pron. On the other, I think Jaffe makes arguments from both sides. The simple fact of the matter is EVERYBODY compares their fund against some benchmark even though they may say it does not matter.
So yes, enhanced indexing may or may not outperform. The thing is we need to wait for an article 10, 15, 20, 25 years from now. At any given point in time enhanced indexing might have yielded lower or higher results than the S&P 500 and the appropriate party would be claiming victory, only for the trophy to keep changing hands.
Meanwhile, depending on investors see those articles, they will form opinions on which is better and then hold on to it till the rest of their investing lives. One more reason I think looking at chart simply to see how a fund does in good times and bad without relative to ANY index might be a good thing. Look at a fund for what it is in absolute terms. That's what keeps me in PVFIX. Anyone else who bought PVFIX at beginning of 2013 will likely sell (or might even have now) if he compares it against the Russell 2000.

http://www.marketwatch.com/Story/story/print?guid=08C5010A-067D-11E3-928D-002128040CF6
Video, at bottom left side of page.
The financial industry wants you to chase performance and thrives on churn!

What Are Top Managers Buying? Europe
http://www.forbes.com/sites/investor/2013/08/16/what-are-top-managers-buying-europe/

If you’ve been consumed the past few months by the implications of potential Federal Reserve tapering on the U.S. markets, you may have missed a compelling investing opportunity worth some financial research: Europe is getting some serious love as an area ripe for value investors.
While European unemployment remains painfully high, economists, market strategists and money managers are eyeing key data out of Europe and coming to the conclusion that the proverbial corner has been turned.
Moody’s Analytics senior economist Glenn Levine pointed to the improving balance sheets of Europe’s corporations, improving euro purchasing managers’ index readings and the beginning of rising output from key economies as positive continental green shoots. “In the past week, a spate of industrial production figures confirmed a steady acceleration in European factories … businesses typically lead the business cycle, and Europe appears to be in the initial stage of a recovery” Levine wrote in an August 9th note.

I have not changed my stable value or (PTTDX) allocation by much. Naturally the percentage of total portfolio goes down as the equities increase in value. About 40% bonds and stable value.
I am guessing that stable value funds will not pay as much as they have in the past due to the financial crisis. Some stable value funds broke the $1.00 per share barrier and most will not risk that again. There may even be new rules as to what a stable value fund can hold. Others can answer that.
What I want to know is why the adage "Buy low and sell High" does not apply to bonds as well as stocks? If the share price of a bond fund is going down and you are reinvesting dividends, even though they are low, are you not buying more shares for a cheaper price? Eventually bonds will go up just like stocks. Is this thinking wrong?
For now I am keeping my bond/cash allocation around 35-40%. Over time that 60/40 and even 50/50 stock to bond ratio, in my opinion, is the long term sweet spot.
Art

Dear MJG: FYI: ◾Most of Jeremy Grantham’s comments derive from his quarterly letter to clients and from media interviews.
◾His forecasts are generally long-term, but he occasionally comments about near-term expectations for the overall U.S. stock market. Evaluating long-term forecasts is problematic due to difficulty of constructing a large sample of reasonably independent forecasts.
◾He develops forecasts based mostly on fundamental valuation and macroeconomic/financial analyses, as modified by the effects of the Presidential term cycle.
◾Jeremy Grantham has been mostly negative about the prospects for U.S. equities (apparently since 1994), but not for international equities.
◾Jeremy Grantham’s forecast sample size is very small, so confidence in the measurement of his accuracy is very low.
His strong pessimism drives GMO managed funds toward the most stable (large capitalization) value stocks, and these funds have performed fairly well (reflecting perhaps a value premium rather than market timing).
Source: CXO Advisory

TIBIX old managers are now at PQDIX I think. TIBIX was another fund M* used to drool over until the financial crisis. Yet another fund that gave the illusion it was less risky than it was. Not sure about current management of TIBIX. PQDIX I'm certainly not interested in.
I worry about some funds that have had such outsize returns beyond the financial crisis, but whose names indicate they are more sedate than go-go growth funds. Sounds too good to be true.

http://www.sec.gov/Archives/edgar/data/1444822/000119312513336644/d581730d497.htm
497 1 d581730d497.htm AQR MULTI-STRATEGY ALTERNATIVE FUND
AQR FUNDS
Supplement dated August 15, 2013 (“Supplement”)
to the Class I and N Prospectus, dated May 1, 2013 (“Prospectus”),
of the AQR Multi-Strategy Alternative Fund (the “Fund”)
This Supplement updates certain information contained in the Prospectus. You may obtain copies of the Fund’s Prospectus and Statement of Additional Information free of charge, upon request, by calling (866) 290-2688, or by writing to AQR Funds, P.O. Box 2248, Denver, CO 80201-2248. The following disclosure is hereby added to the section titled “Closed Fund Policies” on page 168 of the Prospectus. Please review this important information carefully.
AQR Multi-Strategy Alternative Fund
Effective at the close of business September 30, 2013 (the “Closing Date”), the AQR Multi-Strategy Alternative Fund (the “Fund”) will be closed to new investors, subject to certain exceptions. Existing shareholders of the Fund will be permitted to make additional investments in the Fund and reinvest dividends and capital gains after the Closing Date in any account that held shares of the Fund as of the Closing Date.
Notwithstanding the closing of the Fund, you may open a new account in the Fund (including through an exchange from another AQR Fund) and thereafter reinvest dividends and capital gains in the Fund if you meet the Fund’s eligibility requirements and are:
• A current shareholder of the Fund as of the Closing Date—either (a) in your own name or jointly with another or as trustee for another, or (b) as beneficial owner of shares held in another name opening a (i) new individual account or IRA account in your own name, (ii) trust account, (iii) joint account with another party or (iv) account on behalf of an immediate family member;
• A qualified defined contribution retirement plan that offers the Fund as an investment option as of the Closing Date purchasing shares on behalf of new and existing participants;
• An investor opening a new account at a financial institution and/or financial intermediary firm that (i) has clients currently invested in the Fund and (ii) has been pre-approved by the Adviser to purchase the Fund on behalf of certain of its clients. Investors should contact the firm through which they invest to determine whether new accounts are permitted; or
• A participant in a tax-exempt retirement plan of the Adviser and its affiliates and rollover accounts from those plans, as well as employees of the Adviser and its affiliates, trustees and officers of the Trust and members of their immediate families.
Except as otherwise noted, once an account is closed, additional investments or exchanges from other AQR Funds will not be accepted unless you are one of the investors listed above. Investors may be required to demonstrate eligibility to purchase shares of the Fund before an investment is accepted.
The Fund reserves the right to (i) make additional exceptions that, in its judgment, do not adversely affect the Adviser’s ability to manage the Fund, (ii) reject any investment, including those pursuant to exceptions detailed above, that it believes will adversely affect the Adviser’s ability to manage the Fund, and (iii) close and re-open the Fund to new or existing shareholders at any time.
PLEASE RETAIN

Hi Guys,
Does anyone bother to keep score of the forecasting follies game?
Okay, the respected GMO fund firm just released a worldwide forecast of expected future real returns for various investment classes. That’s comfort food for those planning to commit to the projected high return areas anyway. I hope the report did not influence those who were not so inclined to join the stampeding herd. That’s how bubbles are initiated.
I like the GMO organization, and I especially respect Jeremy Grantham. They’re fine folks and he is a true knowledgeable gentleman. But has anyone scored the accuracy and reliability of their far ranging forecasts? How good are they in the forecasting business?
Forecasters of all kinds, in all sizes, in all disciplines for all times have prospered forever. Historically, that prosperity is derived from their fees, not from their prescient prognostication abilities.
Probably the most extensive study of forecasting accuracy was conducted by professor Phil Tetlock over a 20 year period consulting roughly 300 experts (most often in the political arena). Over 70,000 forecasts were evaluated and scored. On average, these wizards scored just over 50 % correct. A “no change” judgment would have done about as well. A simple linear extrapolation algorithm would have bested the wiz-kids in many instances. From this work, Tetlock coined the Fox and Hedgehog grouping of experts. He trusted the Foxes of the world.
Way back in a1932 paper, Alfred Crowles 3rd asked the mutual fund management question “Can Forecasters Forecast? His research data answered a definite “No”. That early research finding has been echoed time and time again by an endless stream of academic and industry research work. The WSJ and Barron’s assess their stock picking genius frequently. Sometimes they exceed dart throwing monkeys: sometimes they don’t. In all cases, the margin of victory is thin.
Reacting to market guru forecasts is hazardous to your end wealth.
There is no doubt that the GMO family of funds is a quality operation. They own a respectable overall performance record. By my stars, they tend to underperform slightly in a bull market environment, but demonstrate their mettle with superior rewards when the marketplace is in serious turmoil. That’s an attractive and worthy attribute.
But how good are they at forecasting future real returns around the globe? That’s a daunting challenge that they must accept when they publish predictions. It’s fair that GMO should be prepared to be rated equally on all its forecasts; both its good ones and its bad ones. But that doesn’t ever seem to happen.
Typically, forecasters get to tout their victories and are permitted to conveniently forget their failures. I have a higher standard. Before I trust a forecaster, I need access to his entire forecasting historical record. Of course I am never granted that access, so I basically distrust all forecasts and do not react to them.
But just one moment please. Jeremy Grantham does have a verifiable prediction record. It was generated over the years by the CXO Advisory Group. It is contained in their Gurus section. Here is the Link:
http://www.cxoadvisory.com/gurus/
In reviewing the listing, Jeremy Grantham made 37 evaluated forecasts and received a 47,5 % accuracy grade. Not too bad; not too good. A lot like tossing a coin. Comparatively, he scored in the middle of the total guru distribution population. I’m singularly not impressed.
A seven year forecast is a long stretch given that forecasting just 6 months ahead is tough. Forecast accuracy degrades as the time dimension increases. I hope you guys did not invest in emerging markets based solely on the GMO forecast. That’s a risky adventure, maybe even a gamble.
I stay away from forecasts, indeed, very far way. They usually are sheer nonsense, equivalent to financial pornography.
Best Wishes.

You have not asked but I am giving the following
Glo Allocation: No favorite but held GLBLX in the past as a poor man's substitute for much touted First Eagle, etc. :-)
US based balanced funds: FPACX, PRWCX, OAKBX, VWELX
Sector:
HLTH: PRHSX
Financial: HSFNX
Natural Resources: None
Bonds: Do not hold any of them but usual favorites of everyone; LSBRX, Doubleline, Metropoliton, TCW, etc.

LG: One of the PrimeCap funds
LB: VDIGX (from the funds that are available to me)
LV: VEIPX (ditto)
Midcap: Never researched for exclusive midcap funds but hold AKREX and VASVX (a new addition)
Smallcap: Never successfully found a good smallcap fund so far but hold ARIVX and Hennssey smallcap fund financial fund
International Lcap: ARTKX
International M/S cap: Had some success with PRIDX but did not find a permanent solution so far; Not needed anymore with GPGOX in port but would like to have a good intl/glo small cap value. Any suggestions?
EM: Hold these AEMGX, SFGIX, MAPIX, WAFMX but none of them are favorite/high conviction funds
Glo Lcap: PQIDX, ARTGX
Glo M/S cap: GPGOX
L/S: Never invested so far but hold PAUDX in alternatives section

Hi Guys,
Earlier today I posted a reply to MFO member Vintage Freak’s observation that “We suck!” as investors. I’m sure that exclamation was made in frustration. I disagreed, and said so.
My response was a reflexive reaction. On reflecting on the matter, I liked the submittal. I concluded that my rapid reaction might be of more general interest to the MFO population as a whole. A wider audience distribution might be appropriate.
So I decided to repost. However, I believe in a value-added policy. So allow me to append an eighteenth mistake that Merriman identified. It escaped me initially. Also permit me to add my version of a slightly modified ancient joke.
First the joke. We all recognize that market wizard’s foolish forecasts are no more accurate than those made by informed amateurs. So: Fool me once, shame on you. Fool me twice, shame on me. Fool me thousands of times, shame on financial experts.
I hope that was not too painful.
Secondly, Merriman also includes a Mistake 18 very late in his paper. For completeness, here it is: Mistake#18: Spending so much time focused on investments that “real life” gets crowded out”.
By all means do not fall victim to that pitfall. A portfolio of mutual funds and ETFs go a long way to steering clear of that egregious error; a portfolio of individual stock and bond holdings exacerbates this time sink.
My original post, unedited, follows immediately:
I seriously doubt that as investors “we suck”. I’m sure some of us do; I’m equally sure that most of us do not suck. I do not suck; you do not suck.
We often make misguided investment decisions, but being 100 % correct when forecasting future market movements is an impossible standard. The unknowns and unknowables overwhelm the knowns.
Don’t judge yourself so harshly. Experts make faulty decisions just as often as we do.
Taken in isolation, brainpower is not sufficient by itself. From the dustbin of history, Sir Isaac Newton lost a fortune in the South Sea bubble; Albert Einstein lost when he overcommitted to failed municipal bonds early in the 20th century. John Maynard Keynes recorded a rocky up-down financial career with his beauty contest approach to investing.
Recently Nobel laureates and economists Robert Merton and Myron Schols were founding members of the Long Term Capital Management debacle. Physicist John Allen Paulos unwisely had a love affair with WorldCom stock while sacrificing 90 % of his investment to bad practices. He did write a book, “A Mathematician Plays the Stock Market”, so he likely recovered from some of his misfortunes.
My takeaway is that scientists are not immune to the same investment foibles that endanger and compromise our investment decision making.
Brainpower is a positive asset, but it must be supplemented with large inputs of knowing the rules and the odds of the investment playing field. A little commonsense also is beneficial. The other side of the investment coin is familiarity with the many pitfalls and traps that snarl neophyte investors
Paul Merriman has an excellent article that identifies 17 common traps. Avoiding these wealth eroding traps should remove anyone from the Sucks list.
Mistake #1: No written plan
Mistake #2: Procrastination
Mistake #3: Taking too much risk
Mistake #4: Taking too little risk
Mistake #5: Paying too much money to others
Mistake #6: Trusting institutions
Mistake #7: Believing publications
Mistake #8: Failing to take little steps that can sometimes make a big difference
Mistake #9: Buying illiquid financial products
Mistake #10: Requiring perfection in order to be satisfied
Mistake #11: Accepting investment advice and referrals from amateurs
Mistake #12: Letting emotions – especially greed and fear – drive investment decisions
Mistake #13: Putting too much faith in recent performance
Mistake #14: Failing to resolve disagreements between spouses
Mistake #15: Focusing on the wrong things
Mistake #16: Not understanding how investing works
Mistake #17: Needing proof before making a decision
Sage advice. Making just a couple of these errors can be ruinous to portfolio health. Merriman concludes the article with recommendations to avoid these pitfalls. Applying his experience-based observations might just save everyone more than a few bucks. Here is the Link to the complete paper:
http://www.merriman.com/PDFs/AvoidTheWorstMistakes.pdf
Please give it a try. It’s worth your time commitment.
Vintage Freak, the marketplace is a tough demanding master. But it can be controlled with discipline and patience. Just review the Lazy-Man performance record that is often referenced in MFO postings.
The long term performance of all these simple options hover around the 7 % annual rate of return. These are accessible, real, and are realistic expectations for market rewards. They demonstrate that investing can be made simple.
But simple does not necessarily equate to easy. It takes work. Sometimes it is not easy to overcome behavioral biases, greed, and the devil renegade in each of us.
Some luck is always needed.
Best Regards.

Hi Vintage Freak,
I seriously doubt that as investors “we suck”. I’m sure some of us do; I’m equally sure that most of us do not suck. I do not suck; you do not suck.
We often make misguided investment decisions, but being 100 % correct when forecasting future market movements is an impossible standard. The unknowns and unknowables overwhelm the knowns.
Don’t judge yourself so harshly. Experts make faulty decisions just as often as we do.
Taken in isolation, brainpower is not sufficient by itself. From the dustbin of history, Sir Isaac Newton lost a fortune in the South Sea bubble; Albert Einstein lost when he overcommitted to failed municipal bonds early in the 20th century. John Maynard Keynes recorded a rocky up-down financial career with his beauty contest approach to investing.
Recently Nobel laureates and economists Robert Merton and Myron Schols were founding members of the Long Term Capital Management debacle. Physicist John Allen Paulos unwisely had a love affair with WorldCom stock while sacrificing 90 % of his investment to bad practices. He did write a book, “A Mathematician Plays the Stock Market”, so he likely recovered from some of his misfortunes.
My takeaway is that scientists are not immune to the same investment foibles that endanger and compromise our investment decision making.
Brainpower is a positive asset, but it must be supplemented with large inputs of knowing the rules and the odds of the investment playing field. A little commonsense also is beneficial. The other side of the investment coin is familiarity with the many pitfalls and traps that snarl neophyte investors
Paul Merriman has an excellent article that identifies 17 common traps. Avoiding these wealth eroding traps should remove anyone from the Sucks list.
Mistake #1: No written plan
Mistake #2: Procrastination
Mistake #3: Taking too much risk
Mistake #4: Taking too little risk
Mistake #5: Paying too much money to others
Mistake #6: Trusting institutions
Mistake #7: Believing publications
Mistake #8: Failing to take little steps that can sometimes make a big difference
Mistake #9: Buying illiquid financial products
Mistake #10: Requiring perfection in order to be satisfied
Mistake #11: Accepting investment advice and referrals from amateurs
Mistake #12: Letting emotions – especially greed and fear – drive investment decisions
Mistake #13: Putting too much faith in recent performance
Mistake #14: Failing to resolve disagreements between spouses
Mistake #15: Focusing on the wrong things
Mistake #16: Not understanding how investing works
Mistake #17: Needing proof before making a decision
Sage advice. Making just a couple of these errors can be ruinous to portfolio health. Merriman concludes the article with recommendations to avoid these pitfalls. Applying his experience-based observations might just save everyone more than a few bucks. Here is the Link to the complete paper:
http://www.merriman.com/PDFs/AvoidTheWorstMistakes.pdf
Please give it a try. It’s worth your time commitment.
Vintage Freak, the marketplace is a tough demanding master. But it can be controlled with discipline and patience. Just review the Lazy-Man performance record that is often referenced in MFO postings.
The long term performance of all these simple options hover around the 7 % annual rate of return. These are accessible, real, and are realistic expectations for market rewards. They demonstrate that investing can be made simple.
But simple does not necessarily equate to easy. It takes work. Sometimes it is not easy to overcome behavioral biases, greed, and the devil renegade in each of us.
Some luck is always needed.
Best Regards.

Reply to @SteveS: That's a pretty good story Steve. I'm 59 and planning to retire at least from full time work at 62, so I have been having the same thoughts and concerns about investing for the future as you. I enjoy the mutual fund game but I don't fool myself in thinking I'm making more then a financial fiduciary could do for me. No offense to Bee, but the simple spreadsheet comparison shown below isn't very useful in predicting ones outcome. Frankly, making 7% return in a conservative fashion during retirement is wishful thinking. At the very least, it shouldn't be counted on in your calculations. There are way to many variables, both economically, emotionally and unknown, that interfere with consistent returns.
Anyway, thanks for the post.

Reply to @SteveS:
Welome to MFO...Just so you and others fully understand what a 1-2% service charge means to your bottom line I included the growth of a single investment of $10,000 made when someone is 25. After 40 years...retirement age of 65... a 1-2% service charge would provide enough money for you and your financial planner to equally share in your retirement while you took all the risk and you provided all the hard work...with little or no risk on the financial planners behalf.
You sound smart enough to be able to generate a 7% return over 40 years without any help from an advisor, but if you would prefer less...6% or 5%...I'm sure there are plenty of financial planners who will "help" get you that too.
Over 40 years, that 1% difference equates to you "handing over" a chance to hold 50% more in profits ($70K vs $102K) (5% vs 6% return)...take a look at the difference between a 5% average return vs a 7% average return...tuly astounding profits for the fianacial planner when you consider you take all the risk.

Reply to @VintageFreak:
Hmmm...MOM is an etf, but POP is not...Ishares needs to work on this injustice. You probably have seen the presentation, "The Darkside of the Looking Glass". A little dated (2006), but still relevant and worth your time if you haven't seen it.
The financial system has a number of areas ripe for reform...Naked Short Selling is just one.
Hard link:
The Darkside of the Looking Glass

Hi Guys,
As the MarketWatch article claims, Mom and Pop are poor market timers; they typically zigg when they should be zagging. A ton of research establishes that as fact including the data sets from Dalbar that are referenced in the article.
But they are not alone. Simple money conservation-like law balances demand that, on a global scale, everyone who trades often suffers wealth erosion because of trading friction. All market timing traders are eventually losers. As John Bogle consistently emphasizes, the only winners are the croupiers, the Casino owners.
What is true statistically for Mom and Pop is equally true for day-traders, for mutual funds, and for institutional investors alike. Scores of detailed boring academic studies support the assertion that these talented money managers suffer the same shortfalls that Mom and Pop suffer. Smart money is a myth cultivated by those wishing to sell an overly-hyped, defective product. It is close to a universal finding.
But it is not absolutely universal. There are a scattered few among us who defy the odds and accumulate excessive rewards over time. Just ask Warren Buffett. The sometimes painful search for the Holy Grail continues. Sir Winston Churchill famously remarked: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”.
I’m a representative of the Mom and Pop cohort and I’m an optimist. While most of our group has lacked the discipline and patience to succeed, many others have thrived in the financial marketplace. I personally know folks who have crafted a plan, have diligently executed that plan, and have become multi-millionaires along the way.
It is not easy, but it can be done, especially when costs are controlled with a mix of passive Index funds and some prescient active management selections. Some of the Mom and Pop population do just fine, even remarkably well. A little luck also helps.
Alexander Graham Bell had it mostly right with his observation that is now the motto of Bell Labs: “ Leave the beaten track occasionally and dive into the woods. Every time you do so you will be certain to find something you have never seen before”. That’s as insightful for investing as it is for scientific research.
The cautionary warning is that many wilderness pathways, both in science and investing, lead nowhere, are costly mistakes and can lead to ruin. The trick is to recognize and abandon any misguided errors quickly.
Which leads me to a troublesome observation. I worry over SteveS’ decision to employ a costly financial advisor who has been granted the option to trade whenever the advisory team deems it profitable. I understand that some folks really do need such portfolio management first-aid, but not many, and certainly even fewer who participate in MFO exchanges.
Simply put, the incremental costs of such a service are going to severely truncate any anticipated extra performance. I doubt that many advisory teams have the capability to generate excess returns in the 2 % annual range consistently. They need that 2 % minimum just to pay for their management fees and the extra costs associated with frequent trading. The fees are likely to swallow 20 to 30 % of the expected forward-looking rewards.
The odds of a portfolio manager persistently achieving a 2 % annual positive excess return are miniscule. History reinforces my assertion. Also I worry over giving trading control to a third party regardless of his credentials.
History shows that a 2 % excess return over time is a marvelous, seldom seen happening. SteveS, I wish you well and hope you reach that target. I fear that it is a bridge too too far. Monitor closely. Your post suggests that you will indeed do that task with vigor. Good luck.
Best Regards.