As technology continues to grow, the availability of information and research has become more accessible. For some investors, it has raised the question ‘why managed money?’ Why should someone pay for investment management services when they have free information at their fingertips, or can use a low-cost online service?
An essential question to ask yourself is, is the advice you’re getting customized for you?
Every investor is different. We have different objectives, expenses, and income. So how do you know the information you’re gathering is correct for you? For example, according to a recent publication titled Three Key Components to Building Effective Portfolios, Fidelity’s Portfolio Construction Guidance Team recommends investing 40% of a portfolio in international equity. Before we take a look at this recommendation, we should ask, for whom is this advice designed? Is it for someone in their 30’s? Someone in their 70’s? Is the investor focusing on Growth or Preservation? The recommendation is not specified and just thrown out as a “one size fits all” approach.
Let us take a look at the recommendation
Fidelity released the report on 3/5/20. Let us compare an international ETF (IEFA) with an S&P 500 ETF (IVV) from 3/5/20 to 5/6/20. The international ETF has underperformed over this period by double!
Source: Morningstar
Even looking at it across a longer time frame, we are still seeing underperformance.
Source: Morningstar
Our Approach.
At Independent Solutions, we have lowered our international equity exposure over the past year. Our opinion was that the US Markets would be more durable than global. For the time frames listed above, and even the last year, that has been accurate. We think it is essential to have some international exposure, but we believe 40% is too much as a blanket percentage.
So, why have your money managed professionally?
A portfolio needs to adapt and change with the times. It needs to react with the current markets and news. Having your money managed professionally can help with making adjustments to your portfolio rather than relying on free advice, which may not always be the best for you. At Independent Solutions, we have a team with over 180 years of combined experience, who are watching the markets, following the news, and making changes to portfolios. This experience and training help us to create a fine-tuned portfolios to fit your specific needs and objectives.
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All opinions expressed Mike Zimmer are solely Zimmers’ opinions and do not reflect the opinions of Independent Solutions Wealth Management, LLC (“ISWM”). You should not treat any opinion expressed by Zimmer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion for educational purposes only and does not constitute investment, legal or tax advice, an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. Zimmer’s opinions are based upon information he considers reliable, but neither ISWM nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Zimmer, ISWM, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Zimmer’s statements and opinions are subject to change without notice. No part of Zimmer’s compensation from ISWM is related to the specific opinions he expresses. Past performance is not indicative of future results. Neither Zimmer nor ISWM guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. Before acting on information, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from an investment adviser.
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