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Originally Posted by Slava
I don’t agree. The studies that show this underperformance are almost all based on mutual funds, and to me that’s questionable. We know the fees are higher there and as a result the hurdle rate is higher, but this gets continually trotted out as gospel.
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Two things: first, the data is consistent across the board, not just higher fee funds. Second, what are you proposing instead?
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The other and perhaps far more important point is that the point of asset management isn’t just outperformance. It’s about a risk adjusted after-tax return that satisfies the objectives of the investor. If you only need say 3% a year to make everything work, why in the world would you care about beating the market? I know you’re well aware that using a goals based system is becoming increasingly prevalent and I think there’s good reason for that. Building portfolios and managing assets in that context is definitely worthwhile in my view.
I obviously agree that the other aspects of planning and implementation are critical and perhaps more impactful. But I do think it all works together and appropriate asset management is a significant piece.
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Completely agree, which was my point regarding bundling of services. The value that professional help will provide isn't as one-dimensional as outperform the market. Portfolio management should be directed towards the goals of the investor, and the overall wealth management strategy. We are in full agreement here.