I went to support a friend on her first 5k run. I stayed with her for 10 days training for it: we ran, cooked, and fueled by ‘green power’ food. One day she asked me ‘how I manage my investment’, I told her that I have a financial advisor. She then asked ‘how much I pay him’, I don’t know. She asked ‘what’s my YTD return’, another silence, finally I said I will check…
What I found out was upsetting and shocking: my portfolio performance was a lot worse than the market, worsen by the management and other fees. Why did I need a financial advisor? How useful were those fancy allocation, diversification strategies? I’d be better off to just invest in the market indexes. I trusted my financial advisor and we had good, long-term relationship (I moved with him while he changed brokerage companies). I reviewed the statements periodically and we had regular meetings. How could I not question the seemingly obvious, performance and fee?
I realized that I was focusing on the tree (make sure the # were carried over-time correctly) instead of the forest (overall return). Also, I was blinded (or you could say ‘over-trusting’) by the benchmarks and people (instead against S&P 500, NASDAQ, and Dow Jones, the comparison was with categories selected by the brokerage. We would either outperform the benchmarks or my financial advisor would explain the strategy behind a temporary lower return then I’d ensure myself that the goal is longer-term, near-term up ‘n down wasn’t a concern.).
It’s painful if to think what could be for the past 17+ years yet it’s a blessing to be awaken now than never or later. I’ve grown from this experience, financially and personally, to better manage my life forward.