80% of Financial Planners Don’t Beat the S&P 500 Index

So, Why Not Just invest in the S&P 500 Index?

I’m tired of always hearing the smartest way to invest in stocks is to buy an index fund.  A commonly held view is that between 80-90% of financial planners do not beat the S&P 500 Index.  That may be true.  Most financial planners do nothing more than sell clients mutual funds.  Plus, their commissions and hidden fees further dilute returns.  The odds are that, if you just follow the advice found in a credible basic investing book, you will probably do no worse than your financial planner – and perhaps even better.  One caveat, however:  Although financial planners may not make you more, the better ones can do a better job of minimizing your losses in bear markets.  That’s because they can spot trends before the average investor and can be better at implementing strategies to protect you in down markets.  Looking at performance during bear markets, is perhaps a better indicator of a financial planner’s qualifications.
I’ll also concede that financial planners probably make since for the vast majority of retail investors who simply don’t or won’t take the time to educate themselves about investing.  They’re probably better served to outsource their financial planning.  However, there is a growing niche of investors who are taking control of their investment strategies.  These are folks who use the tools that are readily available these days.  These are folks who are willing to invest the time to educate themselves on investing and also capable of disciplining themselves when it comes to investment decisions.  These are folks who follow resources like Stocks On Wall Street.
How can you beat the S&P 500?  I’m a believer that astute investments in the global market are a better way to beat the S&P 500. What makes it hard for old school money managers at large investment firms to beat the S&P 500 is that in-depth analysis of promising global stocks is often lacking, even at the major Wall Street firms.  The majority of global stocks that interest me do not show up on the lists of researched stocks at many large investment houses.  Most huge investment firms do not provide much coverage of small and micro cap stocks.  It’s only after some of these stocks appreciate 50-100% that big firms finally start to initiate coverage. And, even then, the analysis is sometimes still lacking depth or meaningful analysis.
It can be time consuming, but it’s certainly not too difficult to do your own research.  Those who follow Stocks On Wall Street know that I’m a believer in the long-term growth of Asian and other select emerging market economies.  In addition to the usual economic indicators, I’ve also honed my perspective to include an analysis of how the political and legislative environments will potentially affect the growth prospects of companies and countries.
Granted, taking charge of your own investments, especially in global and emerging markets, is not for the fainthearted.  Don’t fool yourself about the risks.  But, remember, the risk is not just on the down side.  I, for one, remain a believer in the long-term economic global growth story relative to the U.S. economy and our almost insurmountable debt.  That doesn’t mean I would shun U.S. investments.  It simply means I will continue to skew my investment perspective toward global and emerging markets, which I believe will deliver greater returns over the long haul.

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