We are living through a period of time that there is unfathomable amounts of data at our fingertips and most people in the western world have instant access to this data through a computer or a smart phone. This data can be incredible helpful in certain areas of our lives but it also can hinder.

The information that we perceive to be beneficial when it comes to making investment decisions, like selling out of an investment just to buy it back later, can hinder our long term return potential. This results in an investor’s returns lagging the actual total return that their investments can earn. Our choices of when to try to out-smart and time the market takes away from the return that the investments can provide with a simple buy-and-hold strategy. Let’s not forget that selling is only one half of this type of trade, you also have to be correct on when to get back in.

I have included a list (see below) that shows the 2021 returns of thirty-eight hedge funds in the USA. These are some of the best and brightest minds on Wall Street, whom have countless staff at their disposal and have access to any information that they perceive to be necessary to make investment decisions. As a comparison, the S&P500 stock index rewarded passive investors with a 2021 total return of 28.71%.

As you can see from the list, three out of the entire list actually performed better than the index… THREE! Bear in mind that these hedge fund managers are paid on the two and twenty fee arrangement usually where they charge 2% per year on the total assets that you bring them AND they also take 20% of the profits made by the fund above a certain predefined benchmark. Their investment strategies are far from passive index investing but just because you have some fancy algorithm or a team of analysts doesn’t mean that you are smarter than the market. As well, this only covers one calendar year (2021) and no one knows what 2022 holds but this should show you that even the smartest people on Wall Street don’t have an idea either.

Looking at your 2021 year-end statement returns, I’m sure that a lot of you can give yourselves a pat on the back for beating a good number of the market professionals listed above. As well, I hope that it continues to reiterate my thoughts on prudent diversified investment management being a dime-a-dozen service and financial planning being the key to your future success.

Here are the steps to attain financial success:

1. Create a Vision
2. Transform Your Vision into a Quantitative Plan
3. Invest Accordingly to Achieve Your Vision
4. Revisit the Plan to Track Progress & Update as Required

If you need help with creating a personalized vision or any other of the steps listed then feel free to reach out to me at info@financerx.ca.