With so many sources of financial advice, how do you pick one?

First, eliminate the stock pickers. Those are the people making predictions about which stocks are going to be winners and losers. Cross off the market timers, too. They’re the ones who get into and out of the market, trying to buy the dip and sell at the peak. The problem with these strategies is that it’s unlikely any individual will be able to pick the right stock and the right time—especially more than once. Over 50 years of research confirms that people can neither pick stocks nor time markets consistently year after year. The smartest person on the planet isn’t as smart as the market. Markets are smarter than advisers.

Why is that so? Markets do a sensible job for sensible reasons. Buyers and sellers have to come together to make a trade. Prices have to be low enough to attract new investors and high enough to entice someone to sell. Both sides have to feel good, or they don’t make the trade.

That’s why you should trust the financial adviser who trusts the market.

These are people who help investors try to capture the returns of the market rather than attempting to outsmart it. Decades of research supports this strategy.

Think of the market as a giant information processing machine. Prices change as millions of buyers and sellers react to new information coming into the market. Prices settle at “fair” values that seems reasonable to both the buyer and the seller. This should be reassuring to people and give them the confidence to trust the market rather than to fight it.

What’s the catch in all this? It’s daunting to figure out what exactly to do, how to develop an investment plan. But you can’t avoid it. Few things are more important than developing a well-thought-out plan when investing your life savings.

In my experience, it’s easy to agree with these principles, but it’s hard to stick with them when times get tough. You need to be a long-term investor.

If you accept these fundamental principles of markets and how they work, you owe it to yourself to find an adviser who does too. So trust the adviser who trusts the market.

Duncan R Glassey
Managing Director – WealthFlow
duncan.glassey@wealthflow.com

 

This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Errors and omissions excepted.

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WealthFlow Group Ltd. Registered in Scotland No SC635011. Registered Office: 10 Charlotte Square, Edinburgh EH2 4DR.

Head Office & Consulting Rooms: 10 Charlotte Square, Edinburgh EH2 4DR.

Mail correspondence to our Central Scotland Admin Hub: WealthFlow Group Limited, PO Box 14947, Grangemouth FK3 3AU.

Authorised and regulated by the Financial Conduct Authority

For your protection, unresolved complaints can be referred to the Financial Ombudsman Service.

To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.

WealthFlow Group Ltd. Registered in Scotland No SC635011. Registered Office: 10 Charlotte Square, Edinburgh EH2 4DR.