Mark Hulbert, whose MarketWatch blog and newsletter track the performance of professional advisors, asks and answers the question for traders:
How hard is it to beat the market?
"My three decades of tracking investment advisers has shown that, over long periods of time, about one out of five advisers are able to do better than simply buying and holding an index fund. While that meansit isn't impossible to outperform the market over the long term, the odds are stacked against us."
Mark also highlights a report from Morningstar: illustrating that investors are steadily moving from actively managed mutual funds to index funds:
"…a decade ago, more than 89% of mutual fund assets were invested in funds whose managers were actively engaged in beating their benchmark. By the end of 2009, the actively-managed share had dropped to 78%.
To appreciate how big a shift this is, consider that the 22% that is passively managed now totals $1.7 trillion."
Hat Tip to Tadas at Abnormal Returns
Michael James on Money has an excellent idea for anyone who feels the need to consult an investment advisor. Excerpts from his comments:
"If I felt the need to get advice, I would only be looking to pay for time he spends talking
to me [not] for several extra hours to produce a written plan.
I could bring in all my financial details and talk to an expert for a couple of hours to get his
opinion of what should be changed. Then I would go away and handle the changes myself. Every so often I would come back for another hour to discuss further updates.
For this model to work, the advisor would have to charge a high hourly rate. Perhaps $200 to $400 per hour would make sense depending on the advisor’s skill level."
This plan gets you the maximum value for your dollar. The only difficulty may be that the advisor must take some time to become familiar with your portfolio and your needs. He/she may not be willing to forgo fees for that time. I agree that there's no need for a written plan.
This sage advice is offered by Charles Kirk, of The Kirk Report:
I really encourage you to find and explore new and creative ways to
make trading and investing fun especially with others who share similar interests. While this is a zero sum game in many ways and making money is a serious business, if you can learn to enjoy the game more than the bottom line, I think you will give yourself a greater chance of long-term success. Surround yourself with people who enjoy and revel in the challenge and you'll raise your own game to new heights.
Coming soon: eBook from Mark D Wolfinger
Lessons of a Lifetime: (subtitle not finalized)