{"id":229,"date":"2015-03-30T06:14:50","date_gmt":"2015-03-30T13:14:50","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=229"},"modified":"2015-04-02T08:11:28","modified_gmt":"2015-04-02T15:11:28","slug":"what-gets-between-you-and-trouble-when-trouble-is-you","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/what-gets-between-you-and-trouble-when-trouble-is-you\/","title":{"rendered":"What gets between you and Trouble when Trouble is you?"},"content":{"rendered":"

Carl Richards has a great column in the New York times called Sketch Guy<\/a>\u00a0where he boils complex financial issues down to simple concepts sketched on the back of a cocktail napkin. \u00a0\u00a0We recently saw Carl Richards speak and he talked about how people\u00a0benefit from working with a financial planner. \u00a0Here is our\u00a0attempt at a Carl Richards’ sketch to illustrate his point.<\/p>\n

\"Between<\/a><\/p>\n

Goal setting is important – if your financial plan is not tied to life goals about which you are passionate, you simply won’t have the motivation and discipline to see it\u00a0through to fruition. \u00a0“Getting between you and Trouble” is important\u00a0because Trouble can manifest itself in many different ways, especially when it comes to implementing the investment part of your financial plan. \u00a0Trouble might cross your path in the following guises:<\/p>\n

Accepting high and hidden fees<\/strong> – Canada has some of the highest mutual fund expenses in the world and the impact on returns is poorly\u00a0disclosed.<\/p>\n

Engaging with those who may not have your best interest in mind <\/strong>– Many\u00a0Canadians are\u00a0advised to invest in securities and funds by advisors who are compensated based on selling product, not on providing advice.<\/p>\n

Putting all your eggs in one basket<\/strong> – Investors’ holdings may be concentrated in too few investments across too few sectors and regions.<\/p>\n

Not properly taking account of risk<\/strong> – There are countless stories of investors suffering loss\u00a0by holding investments that are totally inappropriate for their risk profile.<\/p>\n

But what happens if the Trouble\u00a0is you? \u00a0The evidence suggests that Trouble lurks when individual investors try to “time”\u00a0their investments. \u00a0It’s possible to observe the magnitude of the impact by comparing the performance of investment fund returns with the performance of what is termed “dollar-weighted returns”. \u00a0“Dollar-weighted returns” represents what the average investor actually earns as a result of not only which funds they invest in but when<\/em> they invest. \u00a0Investors clearly let themselves down. \u00a0The following chart from Vanguard using data from Morningstar illustrates that the impact\u00a0is common across all different types of funds.<\/p>\n

\"Actual<\/a><\/p>\n

The returns experienced by the average investor, represented by the darker blue rows, are lower than\u00a0actual fund performance in every fund classification and risk class.<\/p>\n

Do you\u00a0try to pick the best\u00a0fund manager based on past performance? Do you\u00a0try to time the stock market’s ups and downs and instead find yourself\u00a0chasing performance? \u00a0The above evidence suggests your performance may suffer as a result of your own behaviour. \u00a0So you may want to think about getting something in between you and Trouble, especially if that\u00a0Trouble is\u00a0you!<\/p>\n","protected":false},"excerpt":{"rendered":"

Carl Richards has a great column in the New York times called Sketch Guy\u00a0where he boils complex financial issues down to simple concepts sketched on the back of a cocktail napkin. \u00a0\u00a0We recently saw Carl Richards speak and he talked about how people\u00a0benefit from working with a financial planner. \u00a0Here is our\u00a0attempt at a Carl […]<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,10,19,7],"tags":[],"class_list":["post-229","post","type-post","status-publish","format-standard","hentry","category-all-posts","category-evidence-based-approach","category-financial-planning","category-graham-bodel-posts"],"_links":{"self":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/229","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/comments?post=229"}],"version-history":[{"count":7,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/229\/revisions"}],"predecessor-version":[{"id":242,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/229\/revisions\/242"}],"wp:attachment":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/media?parent=229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/categories?post=229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/tags?post=229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}