Every year, I go to several investor conferences with 2,000 to 3,000 of my closest friends. Each conference has companies who underwrite part of the cost by taking the opportunity to hawk their products at exhibitor booths. I am always attracted to the trading booths with their elaborate displays – multiple computer screens displaying the latest technical analysis of stocks and markets, the latest prices, and charts with all the most sophisticated analytical tools. There are the stochastic charts, the candlestick trend lines, the moving averages, and on and on.
Surrounding the screens are the testimonials of who have made money using the tools and programs the vendors are showcasing. I should add that licensed financial advisors are not permitted to use any testimonials. Testimonials are a small part of an advisors’ book of clients. They may or may not be representative of the total performance of the advisor (and probably not – what advisor would use a testimonial of a client who lost money or who filed a complaint against the advisor?).
Obviously these vendors are not licensed as financial advisors. They are not going to show the testimonials of their clients who lost money. I am pretty sure there are plenty of those who have lost money, but I have no way to know whether or not that is true.
What is true is that some people, maybe all, have made money. That raises the question, “how much money?”
Dalbar and Associates is a research firm that, among other things, studies how mutual fund investors do compared to the S&P500 or other benchmarks if they are in bonds, balanced, or asset allocation funds. The study looked at a 30 year period, ending on 12/31/2014, and found that the average mutual fund investor did make money. Had they started at the beginning of those 30 years with $100,000 their portfolio would have grown to $286,002. The average mutual fund investor made $186,002. Seems good. They nearly tripled the worth of their portfolio.
However, if that $100,000 had been invested in the S&P 500, it would have grown to $2,122,469! The average mutual fund investor with $100,000 at the beginning of that 30 year time period would think they made money, but only a fraction of what that money could have made if invested otherwise.
So, when I go to the conferences and see those testimonials of investors using the trading platforms and making money, I do not see how much they would have made over the longer-term had they just done as well as the S&P500.
I do post how well my clients are doing compared to the S&P 500.