Most people hire wealth managers via the typical, fee-based advisor system. But this system is designed to make them money, through your commissions and management fees. It’s not designed to maximize benefits for you, individual investors. You hire a big firm, and they charge you a yearly fee to control your investments.
They also charge you transaction fees for when they buy and sell your stocks and tweak your portfolio, plus performance fees. They virtually all use the same strategy: buy and hold. Pick stocks, and stick with them, long term. Their goal is to beat the market indices, like the S&P 500. They mostly use what is called fundamental analysis. They look at a bunch of numbers, like earnings reports, and guess where each particular stock is headed. There is no clear exit strategy, nor is there scientific evidence that buy and hold works. Big firms justify their logic by saying, “The market always goes up in the long run.” But as anyone who has witnessed the market’s multiple crashes knows, the market inevitably sees big drops, and it doesn’t always recover. This was exactly the case in both 1929 and 2008, and the results were disastrous. The 1929 crash led to a bear market that continued until 1932.
When you don’t have a complete strategy that prepares for bad times, your emotional state will dictate your decisions. In bad times, you’ll liquidate your portfolio at the worst possible time, and be forced to live with your losses forever.
Laurens bensdorp at Trading Mastery School teaches a different concept:
- A quantified approach with specific buy and sell rules so it tells you exactly how these rules have performed
- Trade both long and short at the same time so you are protected in a down market as well
When the markets go down (and they always will), your portfolio, if you’re invested in a buy-and-hold strategy, goes down with it.
When the market crashes, advisors will say: “Yeah, you’re down 45 percent, but the index is down 56 percent! We’re actually doing well, relatively. The market will go up long term, and you’ll make your money back.” They don’t know when the market will go back up, though, or by how much, and you’re forced to deal with the stress of losing your hard-earned savings in the meantime. You may never see that money again. They’ll tell you, “You just have to deal with this.” They make you believe that it’s “part of the game,” that this is normal and happens to every investor.
And the thing is, when you add up all of the hidden fees, more than 90 percent of the big funds don’t even beat the index. They need a huge staff to conduct their complicated analysis, and they pass that cost off to you, through management and transaction costs, and sometimes performance fees. If you bought the index. Taking charge of your own investments is key. And at Trading mastery School we help you do that.
Trading Mastery School - Laurens Bensdorp 