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!