- Very few mutual fund managers can outperform the market over the long run. Often times, higher expenses and high turnover costs result in reduced performance of funds managed by the “experts”
- Global diversification is important. “Home country bias” often results in portfolios that are too heavily-weighted in the US. Adding international and emerging markets equities and fixed income will enhance diversification and will have the potential to lower risk and lead to better results.
- Fees matter. There is a direct correlation between fund fees and performance. Historically, the low-expense funds have performed better than their more expensive peers.
- The “experts” are often wrong. When reading an article or viewing television, you should always:
- Consider the speaker’s agenda. Are they selling a book? Promoting their firm?
- Listen for data to substantiate their predictions. Anecdotal evidence does not count. For a good read on why many predictions fail and some do not, check out The Signal and the Noise, by Nate Silver.
- If you see an ad for an investment on television, think twice! Often times, television commercials are aimed at uninformed investors and use fear and greed to call investors to action.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.