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FA Center: When to say ‘you’re fired!’ to your investment adviser

CHAPEL HILL, N.C. (MarketWatch) — When should you fire an underperforming investment adviser?

This question comes up far more often than we would like to acknowledge, for the simple reason that it’s incredibly difficult for investment advisers to beat the market by picking individual securities, ETFs or mutual funds — even among those with stellar track records for past performance. It’s a good bet that each of us, at one time or another in our investment careers, will have to face this crucial question.

Yet it’s surprisingly difficult to answer it in a rigorous and objective way. That’s because there is a considerable amount of statistical noise in any track record, and it’s very hard to know whether the mediocre performance of a previously market-beating investment adviser is more than just a random fluke.

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