Dear Financial Advisor: Why Is My Portfolio Doing So Badly?
From: www.thestreet.com
That’s a question many investment advisors are hearing these days when they dare to answer the phone.
Understandably, the investor sees the stock market reaching new highs, then they look at their portfolios and see either no gains, or a gain considerably lower than the one posted by the stock market. Indeed, the S&P 500 ^GSPC is up 10% so far this year, through August 31, 2018, and your portfolio isn’t.
One answer, of course, is that your advisor never suggested that you be 100% in the stock market. They likely advised you to diversify into different asset classes to smooth your returns, and your nerves, over the years. So, comparing your overall performance to the stock market isn’t fair.
In that case, what should your returns this year be?
Your personal investments are likely diversified into stocks, including the U.S. stock market, international stocks, and some emerging market stocks. You have some exposure to bonds, which have done poorly and produce tiny returns, and perhaps some commodities. Of all these assets, the U.S. stock market stands out as the star performer, and just about all of the other investments have suffered.
The only investor who would be up in double digits this year, is one who took a big gamble and said: “I’ll put all my money into stocks. And I’m going to further bet on only the U.S. stock market, no international, no emerging markets.” If you took that bet, you’d be up 10% this year. But of course, you didn’t.
