“God Damn The Pusher Man” – Steppenwolf
We all have our vices. Some smoke, some over eat and some people are addicted to finding the “hot” investments for their 401(k) plan. Financial salespeople feed our addiction by offering to find the hot fund for us.
Before you hire an adviser to pick hot funds for your 401(k) menu, or design model portfolios for you, ask the hard questions below. It might not kill your addiction but it will make the dealer fade away:
- Good Funds Are Not Good Enough: With the benefit of hindsight, anyone can pick hot mutual funds and imply that they have recommended them all along. Don’t just look at the funds’ performance, look at the advisers track record for picking those funds. They should be able to show you the exact date that each fund was recommended and/or removed from the 401(k) menu. The advisers resulting performance picking those funds should then be disclosed in writing using the Global Investment Performance Standard.
- Model Portfolio’s: Even the best group of funds put together with the wrong weightings will spell trouble. You can have the best bond fund and best stock fund in the world, but if you put them together in a model portfolio, and then load up in the wrong one, you still miss out. Whenever you hire someone to put together a model portfolio for you, please ask for their track record putting together portfolios. Again, all track records should use the Global Investment Performance Standard.
Do you hear that? It’s the sound of silence because all of those sales people have gone looking for easier prey. The addiction will never go away. We all want more. But at least the dealer is history.