Warren Buffett once said, “The first rule of investing is not to lose [money]. And the second rule of investing is do not forget the first rule. And that’s all the rules. “Of course, your financial advisor will not always be able to follow this rule – markets do go down, and no one wins the market every time, even Buffett himself – but when he loses you money, how do you know when to pull the plug? (You can use this tool to suit a designer who meets your needs.)
One good rule of thumb when looking at losses in your portfolio: “Comparing the relative returns of your investment portfolio to a similar target portfolio, over the same period of time, can help you see if your losses are out of line. If you have a portfolio with 60% stock and 40% In a bond, compare it to a similar portfolio, “says Tiffany Lam-Balfour, NerdWallet’s investment spokeswoman. You might also consider getting a second opinion from another advisor.” Some brokerage firms may include a portfolio as part of their statement, or a financial advisor may include it In reviewing a client’s investment portfolio, “says Lam-Balfour. In addition, you can use a benchmark like the S&P 500, but you will probably need to do a weighted average of one or more indices, because a diversified portfolio will not be invested 100% in the S&P 500. “If your portfolio happens to be 60% stocks and 40% bonds, you can calculate a 60% weight for the S&P 500 and 40% for the Barclays Cumulative Bond Index or something like that to get a more accurate representation of the real portfolio. Yours, “says Lam-Balfour.
If you are getting low performance from the market, Lam-Balfour recommends asking your consultant why and see if the explanation makes sense. “You may also want to seek a second opinion to see if your current investments are right for your purposes and if you should go in a different direction,” says Lam-Balfour.
It is also important that you consider whether your advisor has invested according to your goals and expectations. “What’s important is that clients have clear understanding and expectations so that they are not caught unprepared. If a consultant invests a client inappropriately in a portfolio with too much risk that does not match his profile, then I would suggest he think about replacing consultants,” says Ariel Jacobs- Bitoni, a certified financial planner at Refresh Investments.
Also remember that losing money is not always a deal breaker. Luis Stromayer, a certified financial planner at Octavia Wealth Advisors, notes that consultants do not control market fluctuations, so it is difficult to judge their performance solely on the basis of losses alone. “If the market goes down by 30% and your advisor loses you by 10%, I might be glad the advisor didn’t lose me another 20%,” says Stromayer. And he adds, make sure your advisor is a lawyer and loyal to you. “They should not judge your lifestyle, but they should understand it. If it’s important to you, it should be important to them and they should find ways to help support your goals,” Stromayer says.