Also, understanding “Alpha” is more important. Alpha is the return a manager gets above and beyond hat of a benchmark. That tells you if tor Advisor’s decisions are making you money. If you pick mutual funds, look at the portfolio managers Alpha. If it’s positive, they earn their fee. If not, bye bye.
Where to invest $
- Thread starter gold69
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Sector rotation is at the core of one of my client strategies. Using index ETFs, you can rotate between sectors and over/under weight based on market perspective. That’s how an Advisor can add value. Doing nothing and owning one index like the S&P 500 means you own the good and bad parts of the market.
And if you want to see the value of an Advisor, look up the Vanguard study on Advisor value. Vanguard, who tells you to do it on your own, conducted a study and found that investors that use a Financial Advisor outperform this that don’t by 3-4% per year on average. So don’t believe me, believe the guys that have told you to do it on your own for decades. Even they realize how valuable an Advisor is. Of course, the Advisor you choose makes a difference.
No one is suggesting having all your money in the market at all times. One person may have 80% of his assets in the market and the next guys 20%. My comments of stay invested of course pertain to just the funds he has own stocks and bonds etc. If you are assessing Warren Buffets performance as a stock picker you would not include that pile of cash since the cash has its own utility such as a buffer to his other businesses and as a source to bail out others such as OXY for a huge divided
Also my favorite saying is " you cant eat risk adjusted returns" . The highest Sharpe ratio of any asset class is T BILLS even tho it pays very little. The reason is that the risk is so low thus making every unit of return ( as small as it may be) king size relative to almost non existent risk.
Also my favorite saying is " you cant eat risk adjusted returns" . The highest Sharpe ratio of any asset class is T BILLS even tho it pays very little. The reason is that the risk is so low thus making every unit of return ( as small as it may be) king size relative to almost non existent risk.
Don’t disagree. But if I can make all your wildest dreams come true, and in order to do that, based on your financial plan, all we need is a 7% return, then why shoot for 10% and take on the additional risk? Because no one can tell when the bad year will happen, so if it’s the year you retire you’re screwed.
Listen, every client is different, with different desires and emotional and needs. My overall point it, if you’re paying anFinancial Advisor and they don’t do anything, and don’t understand you (based on what trader1 is saying) then fire him/her. But I don’t believe you just sit and do nothing, and there’s Nobel prize winning research (Modern Portfolio Theory) that would support that.
Listen, every client is different, with different desires and emotional and needs. My overall point it, if you’re paying anFinancial Advisor and they don’t do anything, and don’t understand you (based on what trader1 is saying) then fire him/her. But I don’t believe you just sit and do nothing, and there’s Nobel prize winning research (Modern Portfolio Theory) that would support that.
Alpha needs to be adjusted for Beta risk. If the benchmark does 10% and I do 12% my alpha is not necessarily 2%.
If my beta ( how responsive my portfolio is relative to benchmark ) is .80 then I would be expected to return 80% of benchmark which is 8%. So if I actually do 12% my alpha is 4%.
Technically the return metric for alpha is excess return ( the return over t-bills). But since t-bills are pretty much zero return and excess return are vitally the same.
If my beta ( how responsive my portfolio is relative to benchmark ) is .80 then I would be expected to return 80% of benchmark which is 8%. So if I actually do 12% my alpha is 4%.
Technically the return metric for alpha is excess return ( the return over t-bills). But since t-bills are pretty much zero return and excess return are vitally the same.