All of the frenetic activity each day in the financial markets results in but 3 long term investment outcomes:

A.      The portfolio outperforms the broad market

B.      The portfolio roughly approximates the broad market

C.      The portfolio underperforms the broad market

The overwhelming distinction between what markets provide over the long term (investment return) and what typical investors actually receive (investor return) has been widely documented. Research studies have shown that there is a 5-7% per year difference resulting in investors earning much less than the markets.  Perhaps there should be a fourth category - dramatic underperformance - which is where many investors find themselves.

With over 16,000 individual stocks/funds/ETF's, Wall Street has set up an elaborate "choice dilemma" leading investors towards "the best choice". The self-serving brokers (ah hem "advisors") operate in a system with well disguised costs and huge conflicts of interest, making this a virtual minefield for investors to navigate.

For most, seeking Option A (where the portfolio outperforms) has a very, very low probability of success. Yet, this is where investors (and their "advisors") crowd. A recent study published by Jefferson National found that 75.5% of the "advisors" surveyed indicated that they thought active stock selection and market timing would outperform in the long term. This might be described as delusional, but nonetheless is the operative strategy being employed by many.

Our time-tested approach based on market science seeks Option B - to accept the returns provided by broad based exposure to the markets. We add substantial value to client relationships by helping clients transition into a diversified, low-cost portfolio and then stay invested through different market cycles.  If we can capture the returns from the broad market in an efficient and low-cost manner, it puts us well ahead of almost everyone else. That is true in good markets as well as not so good markets.

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