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Friday, April 04, 2014

Investment advice isn't only about maximizing returns

Generating above average returns isn't the only way investment advisers help clients.

As Vanguard has recently pointed out, investors on their own tend to make bad mistakes that destroy returns over time.

Investment advisers can help their clients make better decisions in key areas that dramatically impact long run returns:

  • keeping clients on an even keel emotionally by guiding them to be fearful when others are greedy and greedy when others are fearful
  • guiding clients toward tax-efficient investing without making tax planning an all-consuming goal
  • keeping client investment costs low
  • guiding clients to rebalance their portfolios: selling what has gone up and buying what has gone down
According to Vanguard, such measures can improve an investor's returns by as much as 3% a year.

I agree with Vanguard's findings and believe it highlights what many investors may be missing: investment advisers help clients reach their goals not just through investment selection, but by providing prudent and effective advice that can significantly impact returns over time.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

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