A week ago, I announced a new feature here at Free Money Finance, the Star Money Article. Today I'm giving out my first star.
This one goes to Kimmunications for a post that shows how much a bad investment advisor (or a bad investment for that matter) can impact a portfolio over a long period of time. The post profiles what one investor earned on his investments (7.21%) versus what he could have earned if he just performed at market average (10.9%) and how much it cost him over nine years. Here's the point of the piece:
"That is a 30% difference in just nine years - $435,000 additional real dollars in your account. Imagine how much more pronounced this effect would be over longer periods of time - say the forty years it takes someone to save for retirement? To quote Warren Buffett on how to be a successful investor, 'Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.' "
Stop by and check out the article. It's a star.
What she neglects in her post are the client's risk tolerance and objectives. What if the client is not comfortable with all the risk of the S&P 500? What if his/her objecitves are much different than what can be delivered by an index? What else is in the total portfolio in addition to Applegate? These are important questions.
Posted by: thc | July 30, 2005 at 11:08 AM