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Page 26 features guidance on the unpredictability of investments


Research by Morningstar(1), reveals that the average difference on an annual basis between the returns of a fund and those that the average investor receives is -2.5% per annum to the detriment of investors, on account of their poor entry and exit timing.


Given that most advisors charge 1% as an ongoing fee, which should also include comprehensive financial planning and regular goal tracking, it is easy to see the value of employing a steady hand to guide an investor through choppy waters.


In conclusion


So next time you look at a portfolio valuation, spare a little time to consider the broader, longer-term role we are playing. What you are looking at is market noise, which risks tempting you into bad, emotional choices. We are here to provide perspective, stop you from owning investments that should be avoided, help you to keep faith in the programme and make you rebalance, just when you don’t want to! That’s what we are paid to do.


Figure 1: US investors – net new cash flows vs. equity market returns (1998 to 2013). Source: Investment Company Institute. Copyright. All rights reserved 2013.


(1) Mind the Gap 2014 by Russell Kinnel, Morningstar


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