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Financial advisors are not trying to beat the market; they are only incentivized to track right along with it. Excluding hedge funds, which can tolerate unlimited risk, the only goal of almost all financial advisors is to keep up with the major indexes. But guess what: they still fail! 75% of all mutual funds fail to beat major indexes like the S&P 500. They won’t tell you this when they are pitching you their services, but you only need to think about their incentives to see why it’s true. This is why financial advisors attempt to track along with the market:
- If the market returns 6% and they return 1%, they are fired.
- If the market returns 6% and they return 6%, you can’t complain.
- Taking aggressive or speculative stock positions is not what most people want.
- Financial advisors’ main goal is to “protect capital.”
You don’t have to be a rocket scientist to understand why financial advisors’ business is to basically try to go along with the herd.
They are not paid to think outside the box. In fact, they are paid to be so conservative that you will rarely even keep up with the major markets, especially when you include the mutual fund fees. After all, the speech they gave you when you first contacted them was centered on “protection of capital.”
Here is the truth: “Protection of capital” doesn’t refer to ticking along with the stock market, hoping for a 6-8% return while having your net worth eaten away by hidden mutual fund fees.
My capital is protected when it is invested in a fully rehabbed house, managed by a quality real property management company, and tenanted real estate property in one of the U.S’s greatest cash flow markets, purchased for 80% of the retail price.
How do you feel your capital is best protected?
If you want to explore protecting your capital through real estate investing, let’s get you cash flowing immediately!