Hey Jim, how are you doing? I just wanted to touch on a few things you mentioned here from the perspective of someone in the private wealth management world.
You bring up a good point with the having some exposure to gold and other precious metals in your portfolio. We are definitely in a bull market along with other commodities. There’s a lot of money to be made going forward. But I wouldn’t commit more than 10% of my portfolio to it.
As for money managers always thinking the market will only go up, I think this is untrue. I’ve had many conversations with portfolio managers and have heard just about the same thing from all of them. Most fund managers seek to outperform their respective benchmarks while minimizing risk. They all realize that everything is cyclical and certain asset classes outperform others during different economic cycles. I’ve never had a manager tell me that the market is always going up. Over the long term it has but as the old disclaimer goes, past performance is no indication of future results. Alternatively, I’ve had many debates with real estate agents with their claims of real estate only going up.
Portfolio Managers are usually Chartered Financial Analysts (CFA) and MBAs with thorough knowledge of all the financial markets. As for their tenure and having been in bull & bear markets, I would advise anyone looking to invest in a fund to look for a manager with a long consistent track record in all market cycles. To your point, most big wirehouses will have “rookie” portfolio managers run or be apart of their proprietary funds, which I would recommend avoiding.
I think you are missing the point for investing in mutual funds. Indeed, they are not insured by the federal gov. but that’s where risk vs. reward comes to play. Most fed. insured investments have a return that is at or below inflation. To offset those returns, one invests in an asset that can provide more return for the risk assumed. Modern Portfolio Theory implies that by spreading your money across a variety of low correlating asset classes, it will provide consistent returns while minimizing overall portfolio standard deviation. Gold is not insured either and is very volatile, however when mixed with other low correlating investments, the volatility is reduced.
I think “baby boomers” should seek the advice of a successful, intelligent wealth advisor with a CFP or CFA designation that can educate them on diversifying their portfolio to gain exposure to low correlating asset classes such as gold, managed comodities, etc. This will help them hedge against the “dooms day” that I’ve been seeing everyone talk about lately.
Not that this is a big deal but it’s SIPC that protects investors not SPCIC. ;)Sorry, couldn’t let that one go by.
