{"id":49292,"date":"2021-09-13T13:23:00","date_gmt":"2021-09-13T17:23:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=49292"},"modified":"2021-09-23T12:17:24","modified_gmt":"2021-09-23T16:17:24","slug":"managing-your-portfolio","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/managing-your-portfolio\/","title":{"rendered":"Managing Your Portfolio: Do You Need an Advisor?"},"content":{"rendered":"\n

Thinking of hiring a financial advisor to help manage your investment portfolio<\/a>? Does one really need professional expertise to manage their investments?<\/p>\n\n\n\n

If you\u2019re not a personal finance expert, managing your portfolio might seem intimidating, and you may even be tempted to hire a professional<\/a> financial advisor. However, unless your financial situation is especially complicated, you don\u2019t need a financial advisor\u2014you can get the same (or even better) results by managing your own investments, even without any special expertise. <\/p>\n\n\n\n

In this article, we\u2019ll see how financial \u201cexperts\u201d are typically no better than amateurs when it comes to predicting the market or choosing where to invest\u2014and how falling for their false expertise can cost you thousands in fees. <\/p>\n\n\n\n\n\n\n\n

Financial Experts Rarely Beat the Market<\/strong><\/h2>\n\n\n\n

When you think of a financial expert (or, more specifically, an investing expert), who do you think of? Most people picture one of two things: media pundits who make their living loudly predicting stock market trends on television, or mutual fund managers (people who choose how to invest the money in a mutual fund, which is a group of different stocks that make up a single fund people can invest in). In either case, their job is to \u201cbeat the market,\u201d which means getting better-than-average returns by correctly predicting which specific stocks will rise or fall in value<\/p>\n\n\n\n

We tend to put these people on a pedestal because we assume that their investing experience will equate to better financial returns. However, that\u2019s rarely the case: Mutual fund managers only \u201cbeat the market\u201d about 25% of the time. <\/strong>Even if they do <\/em>manage to beat the market one year, that result typically involves more chance than skill\u2014and they\u2019re rarely able to replicate their success the next year, let alone for several years in a row. That\u2019s because the stock market is an extremely complicated system<\/a> by nature, so it\u2019s nearly impossible to predict how it will change in the short-term. <\/p>\n\n\n\n

To see how chaotic the market can be, consider this example: Back in 2008, if you had the option to buy stock in Google or in Domino\u2019s Pizza, which would you choose? Most people would choose Google, and they\u2019d see some great returns\u2014between 2008 and 2018, Google\u2019s stock tripled in value. However, in that same period, Domino\u2019s Pizza\u2019s stock grew to 18 times<\/em> its 2008 value. That\u2019s why fund managers can so rarely beat the market\u2014it\u2019s almost completely unpredictable.<\/p>\n\n\n\n

Hiding Poor Performance<\/strong><\/h3>\n\n\n\n

You might wonder why so many people put so much faith in pundits and fund managers when they have such a poor track record for predicting the market. There are a few reasons for this. <\/p>\n\n\n\n