Financial Planning Matters… a monthly insight with Jonathan Beardmore, an IFA at Pearson Solicitors and Financial Advisers.
Over the coming months I will be writing about investments and financial products and hoping to demystify some of the national headlines and stories you hear.
However, this column will not be about star fund managers and share tips – quite the opposite.
If you listen to the majority of financial advisers fund performance is their number one concern. Some even tell you they can pick the next star fund manager!
So I thought it best to start my new column by providing ideas of what to avoid in an investment:
- Outperforming investments – “No such thing as free lunch”
If your financial adviser says “you have beaten the market”, this is a warning! One of the surest ways to have a bad year is to have a good one first. Beating the market is a myth – you can only get a better return than the market by taking more risk than the market. An out-performing investment is a riskier investment.
- The defensive investment – “Being early is the same as been wrong”
The amount of sales people who say “our fund gets you extra in the good years and protects you in the bad years” are too numerous to count. This strategy relies on a healthy supply of crystal balls to “time the market”.
A fund manager in 2007 took me to lunch and told me he was going to invest in “consumer poverty” stocks. He feared a recession – he was 100 per cent correct but his timing was not. That fund is no longer trading.
- The fund of all funds
In around 2000 advisers realised they were underqualified to pick funds, so employed an unqualified manager to do it for them.
Their clients now have the situation of having fund managers guessing markets, while another manager guesses which managers are the best at guessing.
I firmly believe it’s not in your interest to be paying for multiple layers of professional management. At Pearson’s we aim to give a service that works for you, not the manager!
The aim of this column is to provide information on what Saddleworth Independent readers want. I will willingly answer any questions you have in print if you want to get in touch. Please email any request for topics and I will do my best to include them in forthcoming months.
If you simply want advice contact: jonathan.beardmore@pearsonlegal.co.uk
Find out more about Pearson on their website or follow them on Facebook and Twitter.
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