What your financial adviser will never tell you
Posted
Sep 16 2008, 08:01 AM
by
Andrew Horowitz
Rating:
Brokers' phones are ringing with the questions from concerned clients looking for direction. Now, more than ever, everyone wants to know: "What do I do now?" The trouble is that most stockbrokers are not in the business of providing ongoing advice because their job is really all about asset gathering.
Think about it. How many times have you been called during a market top and told that it may be a good time to sell? More often than not, selling is frowned upon as there is always a reason to be optimistic. While we are at it, how many times were you called and told that hedging your portfolio with ETFs and options could be beneficial to help offset equity risk?
Unfortunately, during market downturns, many investors find themselves like deer in the headlights, hanging on to hope and the belief that, over time, all will work out. This is because during difficult times many financial advisers have a limited number of tools they can use.
One of the oldest and most cherished tools that you will often hear about when markets sour is what I like to call: The Financial Planner’s “Placations for a Financial Crisis”. Here is a look at the top phrases which will be used in an attempt to soothe investors:
- Buy on the DIP
- Diversification is key
- Remember, we are in it for the long haul
- Do not listen to the noise
- There is plenty of liquidity in the markets
- Great time to dollar cost average
- The situation is well contained
- They’re not losses until you sell
- It is time in the markets, not market timing...
- The 25 Year history of the S&P 500 shows….
- Now is the time to buy, not to sell
- 80% of the S&P 500 returns are from the top 5 days
- This is healthy for the markets
- Do not let emotions control your decisions
- The S&P 500 has never had a negative 20-year return
Don't be fooled by the smokescreen that is meant to keep you invested so that fees can continually be generated from your portfolio. Be smart, do what you know to be right from all of the information that is available and resist the urge to just sit still and hope for the best. Re-evaluate your allocation, reassess your risk and act appropriately.
Andrew Horowitz is a money manager and the founder of Horowitz & Company. He is also the author of the bestselling book, The Disciplined Investor . Check out his latest investment idea or listen in as he hosts, The Disciplined Investor Podcast.
