What is Achievement?
“Modern day investment management resembles, sadly, another old profession … I’m thinking of ancient alchemy with its near constant promises to turn lead into gold, just as investment managers repeatedly offer to transform low returns into high returns. This raises the question as to why investors/people keep falling for the stories offered up by investment managers/alchemists.”
James Montier, “No Silver Bullets in Investing (just old snake oil in new bottles), December 2013”
Max, 14 and Mitchell, 14
Late last month my twin boys graduated from the 8th grade. In advance of that day, I was a bit puzzled that there would be a formal 8th grade graduation ceremony. I remember my 8th grade graduation ceremony being akin to the cliché “don’t let the door hit you on the backside on the way out.” Upon hearing my recollection, my Mom quickly reminded me that I did, indeed, have an 8th grade graduation ceremony. She also recalled the four or five graduates who were cited for academic achievement. I can assure you that I was not one of those cited.
WARNING: I have occasionally been referred to as a curmudgeonly skeptic. Warren and I would suggest you want your financial advisor to be a skeptic.
My wife, Mom and I settled into our seats for the graduation ceremony that was scheduled for ninety minutes. The faculty and staff had done a great job setting up the program for this class of over 300 students. There were students cited for honors in standardized testing, particular subjects, spirit, and, of course, grades. These honors went on for quite a long time. I finally came to realize that seemingly every student in the class had been cited for some sort of academic achievement. The self-esteem movement this country has embraced with fanatical fervor has a small bit of merit, but should almost the whole class be cited for academic achievement? Grade inflation is a documented fact as I often remind my kids.
So, why do I write about academic achievement and grade inflation? Because I believe something very similar is happening in the investment world.
You can’t walk by a newsstand (for those that still do that!) and not see a magazine headlining something about “top investments.” How many top investments can there really be? According to what I see online and during my Saturday morning reading of Barron’s the press and marketers would have you believe there is a plethora of these top investments. Let me cite an example:
Lists of Top Investments
You see these lists all the time. So much of the time they are based on short time frames. Many times I have seen rankings based on 3 months of investment results.
Is that data worth anything to anyone? Warren and I would say no.
Reading Barron’s last month I saw hedge fund managers highlighted who manage not even one quarter of the assets that the team at Stribling~Whalen Financial Group manages and they barely have a five year track record. Can you say grade inflation? Does this sound like the 8th grade graduation I attended for my twin boys? Have we come to a place where everyone is cited whether or not they actually achieve anything?
I sure hope not, especially when it relates to the life savings of investors.
Investment managers should have at least a 15 year track record and, hopefully many more years beyond that, for Warren and I to consider them. In addition, they should have expenses that are significantly below the average for their peer group.
Achievement, by our definition, is not relative and will always be measured by the long-term.
As always, thank you for the introduction of your friends and family that so many of you have made. We are honored to serve you! As a service to our clients, we are happy to act as a sounding board for your friends and family. If any of them should need a second opinion on their financial situation, introduce them to www.striblingwhalen.com or call us at 678-989-0048.
Regards,
Warren D. Stribling, IV, CFP®, Principal
warren.stribling@striblingwhalen.com
Brian E. Whalen, CFP®, CIMA®, Principal
brian.whalen@striblingwhalen.com
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brian Whalen or Warren Stribling and not necessarily those of Raymond James.
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