Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Uh oh, Rob. ESI Money is targeting you. He believes financial experts should publish their net worth and financial education showing their own success in following the advice they give.
He says what you say, Anonymous. Then below that he says that advisors should also tell HOW they made their money. He points out that some might make a lot of money as the result of some short-term project and then lose it; he says that it is the long term that matters. That’s what I believe.
If an advisor endorses Buy-and-Hold strategies and claims that he had made money with them, does he tell how much of what he made came post-1996, when the promotion of Buy-and-Hold strategies caused prices to rise to dangerous and unsustainable levels? Should the people who are listening to the fellow’s investing advice be counting the cotton-candy nothingness part of his portfolio as real wealth or should they be adjusting his numbers to show how much wealth he has accumulated when his wealth is measured REALISTICALLY?
You know what I think, Anonymous. Anyone who doesn’t make an adjustment for valuations is either uninformed as to the last 36 years of peer-reviewed research or is flat-out working a con on people, hoping that they will accept the nominal, unadjusted numbers as real. The reason why I am a big believer in using the peer-reviewed research as guidance is that the peer-reviewed research cuts through the cons, it exposes the con men (whether they are suffering from cognitive dissonance or not — most are, but still…) for what they are.
I favor investing strategies that work longer than a single bull/bear cycle. Why? Because we all invest for longer than a single bull/bear cycle. The typical bull/bear cycle lasts 35 years. Most of us invest for roughly 60 years. Valuation-Informed Indexing TROUNCES Buy-and-Hold over 60-year time-periods. It’s not even remotely a close call. The risk is far, far less and the returns are far, far greater.
People should indeed look at whether advisors are able to create wealth for themselves. But they need to be careful not to be fooled by the smelly bull market garbage. They need to look at real numbers. They need to turn to peer-reviewed research for guidance. They need to cut through the cons that have come to dominate the investing advice field in the Buy-and-Hold Era. The wealth that matters is the wealth that lasts for the long term. For lasting wealth, you want to go with the first true research-based strategy and run, not walk, from those pushing the pure Get Rich Quick approach.
My sincere take.