Closet Technicians and Fed Statistics
Top 5 of the Week of August 29
Heading up this week’s Top 5, Joshua Brown, author of The Reformed Broker uncovers how everyone is a closet technician. Ben Carlson of A Wealth of Common Sense discusses how we interpret statistics and the ways they can fool us. And Mateo Dellovo, CEO of BFA Wealth Management, shares his approach to optimizing your portfolio on Investopedia.
Naomi Rovnick and Aime Williams examine the amount investors pay for investment advice on behalf of the Financial Times. And Janine Mace of SuperGuide helps us sleep more soundly at night without worrying about our investments…
“Everyone is a Closet Technician”
- During times of market volatility this becomes truer than ever, people begin to study the prices rather than the motivation and influences behind them
- While prices show an accurate account of what’s going on it’s not nearly as interesting to the media as speculating over the causes as that’s more opinion based
- From these speculations the media can create their headlines, some investors react irrationally, and technicians start to look for the real ‘truth’ in prices—which is not always there
Statistics That Fib and Fool Us
- “The secret language of statistics, so appealing in a fact-minded culture, is employed to sensationalize, inflate, confuse, and oversimplify,” Darrell Huff
- With information in vast supply nowadays you have to be extra smart and examine beyond the surface of evidential data
- Some people have been employing similar tactics to suggest that S&P 500 gains in the last eight years are “Fed-induced”
- While there is some truth in this, it’s not as simple to suggest only one variable has that much influence
Balance Your Portfolio
- Diversifying your portfolio is advised so as to avoid your investments being in a too concentrated position; heavily focused in one sector increasing your risk level
- Invest in a range of asset classes—stocks, bonds, and/or cash— to achieve this; according to your risk tolerance
- For low-risk options, be more conservative with your investment choices (bonds) or choose riskier equities if you can handle the volatility in favor of potentially higher returns
Still No Easy Way of Understanding and Comparing Financial Advice Fees
- Despite landmark reforms in the financial advice market since 2012, the average cost of fees has seen no significant change at just 2.56% from 2.86% four years later
- With the market as it is today, getting sound financial advice is a major worry for investors
- With no tools to accurately compare costs for advice and investment, it’s hard to foresee the compounding effect over time of percentages that aren’t relative to their returns
Have you been victim to hidden fees? Or ‘low’ percentages that build up over time? Share your comments in the section below
Sleep Soundly; Manage Your Risk Profile
- The level of risk you can handle will influence all your major investment decisions—be self-analytical to discover what yours really is
- A good financial advisor will help you review and evaluate your personal and financial circumstances to understand your risk tolerance
- There is no such thing as a standard risk profile as everyone is different; reassess yours every few years as things develop and change in your life that weighs in
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form – and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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