Orange Grips
Good Apples & Oranges Help Avoid Lemons
There are certain inevitable truths to our business. Much like in life, we should frequently be reminded of how certain aspects of the world work in order to save ourselves the aggravation and heartache that comes with miscalculated action. In a recent review with one of our clients, I was shown a spreadsheet that the client had put together to keep track of his investments. He stated that his philosophy was simple…compare the balance on each account from the beginning of the year to the end. From this, he was able to deduce which investments had performed poorly versus those that had risen to the top.
On the surface this seems like a perfectly adequate way of assessing the success of your portfolio. However, he is excluding a very important factor in evaluating his money’s performance…they aren’t all the same kind of investments. You can’t fairly compare an apple to an orange in much the same way you can’t compare a equity money manager to that of a bond.
This Callan Chart details a number of asset classes and their performance over the last 20 years. You’ll quickly notice several things:
- Very rarely does any one particular style-box stay in the same place
- In most cases, the top performers in one year move to the bottom of the chart in subsequent years
- In most cases, bottom performance tends to be followed by a rise in relative performance in the years to come
- There seems to be little rhyme or reason as to how these categories flow year to year
As we near the end of 2009, there is a good chance that many of you are pulling out your statements and trying to get a grip on what has been a pretty stellar year for investors. Please heed my warning…don’t jump to ill-advised conclusions about the relative performance of your money. Talk to your financial professional before you make any changes to your portfolio. It could lead to that lemon.
About the Author
As a co-founder of Chappell, Mayfield & Associates, Charles assists countless individuals and businesses in achieving financial independence with appropriate insurance and financial products.
Charles launched his financial planning career as an agent at Prudential Financial in 1997, where he was a three-time Million Dollar Round Table member and a nominee to the first Prudential Field Advisory Council.
Charles holds the CFP® designation, as well as the CLU and CLTC designations. He has a B.S. in Management from Georgia Tech.
Just as Charles is committed to his clients’ financial well-being, he also takes an avid interest in benefiting his community. He is Past President and current member of the Board of Directors of Jerusalem House, on the Board of Councilors at The Carter Center, and a member of the Peachtree Road United Methodist Church. At Prudential Financial, he served as chair of the Prudential Connection Atlanta Outreach Program.
Charles has lived in Atlanta since 1992 and has a son Dylan. More of his blogs can be found at http://atlantaplanningguys.com/?author=2
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