Don’t Touch My Money, Just Hold My Hand

Victor Levinson Comments

A recent article by Wall Street Journal columnist Jason Zweig, entitled ‘Don’t Touch My Money, Just Hold My Hand’ (WSJ, June 9, 2017), touched on topics that reinforce the investment approach Park Piedmont has been conveying to clients since its founding in 2003.

First: many people look to investment advisers to boost their investment returns. If that’s your perspective, “you may be paying your adviser for the wrong thing,” according to Zweig. Just as investors tend to be their own worst enemy by “flinging money at whichever assets have gone up the most and then bailing out at the bottom, locking in losses” – typically during periods “when they are in the grip of greed or fear” – many advisers, driven by the perceived need or desire to outperform, act the same way. In their efforts to chase performance, advisers can lag significantly behind those who maintained a discipline in maintaining their long-term plan.

Second: investors often feel the urge to do something, when nothing may actually be a better investment decision. Zweig writes that investors tend to add and subtract money at inopportune times, leading to “what is often called the ‘behavior gap’ between the performance of an investment and its investors.” For instance, mutual fund investors earn average annual returns that are approximately 1 to 1.5 percentage points lower than the returns of the funds themselves. Zweig adds that investors in hedge funds “may lag those vehicles by up to 7 percentage points annually.” That’s what a financial adviser “should prevent,” writes Zweig.

Finally: Mr. Zweig closes his piece with the following quote, which further reinforces another of Park Piedmont’s consistent message to our clients. “You should hire an adviser not for his or her investing prowess, but to help organize your finances, prioritize your goals, minimize your taxes, and navigate the shoals of retirement and estate planning. Done right, those services can make you far richer – and happier – than the pipe dream of investment outperformance is likely to.”

There will always be events that affect the market in the short-term, in both positive and negative ways. But an adviser can give clients confidence and help them maintain their discipline, so that short-term events don’t undermine longer term goals.

Please contact us if you’d like more information about how Park Piedmont Advisors, a registered investment advisor with a fiduciary duty to put our clients’ interests first, provides asset allocation advice focused on clients’ goals and implemented with low-cost indexed investments.