Do they deserve thousands of your dollars?
Americans love experts.
We feel comforted when we see a tall, uniformed pilot behind the control of a plane. We trust our doctors to help us navigate health complications, we’re confident that our lawyers will steer us through legal messes, and we eat up the words of the talking heads in the media.
We’re taught experts deserve to be compensated for their training and experience, and definitely don’t question what they have to say.
No that’d be bad.?
After all, we wouldn’t hire someone off the street to build a house or remove our wisdom teeth, would we?
All our lives, we’ve been taught to defer to experts: teachers, doctors, investment “professionals.” But ultimately, expertise is about results. Somebody can have the fanciest degrees from the fanciest school, but if they can’t outperform the guy who comes from the school of hard knocks, their expertise is meaningless.
In our culture of?listening to?experts, what have the results been? When it comes to finances in America, they’re pretty terrible.
Instead of mastering the basic fundamentals by saving and investing, most American households are in debt and struggling.
Somethings not right here.
When it comes to investing, it’s easy to get overwhelmed by all the options: small-, mid-, large-cap stocks; REITS; bonds; growth; international; emerging markets; target date; value; or blend funds — not to mention factoring in expense rations; interest rates, allocation goals, and diversification. Sheesh.
This is why so many people say, “Can’t I just hire somebody?”
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You can.
But when you look at the actual data, fund managers and anyone who attempts to predict the market — are often no better than the amateurs.
In fact, they’re often worse.
The vast majority of people can earn more than the so-called “experts” by investing on their own.
No financial advisor.
No fund manager.
Just automatic?investing in low-cost index funds (not picking stocks?— which I’ll cover another time).
So, for the average investor, the value of financial expertise is a myth when it comes to outperforming the market. There are several reasons for this which I’ll detail in tomorrow's email, but I urge you to think about how you treat the experts in your life. At a minimum the financial ones. Do they deserve tens of thousands of your dollars in fees? Hundreds of thousands? If so, what kind of performance do you demand from them??
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STEP 1: Audit the Financial “Experts” In Your Life
How much are you paying them in fees? Do they deserve tens of thousands of your dollars? Even just a one percent fee wipes out over 28 percent of your portfolio. Are they worth it? If so, what kind of performance do you demand from them?