Simply answered: it doesn’t. And that’s when investors become frustrated and start looking for ways to fix their portfolios.
So why do consumers keep purchasing products and predictions - otherwise known as investment research, mutual funds rankings, top picks, and stock recommendations?
“Many times they don’t think about the process in clear terms. I think that consumers of investment products and services need to start making different choices and asking themselves: do I want to incur extra expenses and risks and let an advisor attempt to beat the market return with my portfolio? Or do I want to index my portfolio to earn the market return and protect myself against underperformance?”
Many investors unwittingly allow investment experts to make predictions with their portfolio in an attempt to outperform the market return and fail.
Chris offers some tips for investors to avoid underperforming portfolios:
Consider purchasing index funds instead of dozens of mutual funds or individual stocks.
Insist on a single, consolidated rate of return for all accounts over a quarterly, yearly and since inception basis (after fees have been deducted).
While we can blame the investment industry for poor performance, ultimately we are the consumers of investment products and services and we need to choose approaches that are in our best interest.
“Your portfolio return has three possible outcomes. It can beat the market return, equal the market return, or underperform the market return. It’s time to stop playing the odds and make better consumer choices for your money,” says Turnbull.
For more information on active versus passive investing and indexing visit: http://www.theindexhouse.com/
Chris Turnbull’s book Your Portfolio is Broken: Who’s to Blame and How to Fix It is available here:http://www.theindexhouse.com/
To book an interview contact: Rachel Sentes, Publicist