Riding The Waves
The investment industry advice has been consistent for decades: Keep your clients fully invested at all times!
Millions of dollars a year are spent on marketing campaigns, slick glossy brochures, all purposed to that singular goal.
So the question is, why put so much effort into that one idea?
The answer is simple: They make more money from you if you always stay in the market.
There are several reasons for this.
First, are the fees. We're not talking about the fee your advisor charges. That's a different story for another post. We're talking about the internal management fees charged by the fund's Advisor, Custodian, Distributor, etc. Typically, fees for equity funds are the highest. Higher by far than Money Market or cash holdings.
Let's use an example. Suppose you have $100,000 invested. According to NerdWallet, the average fee for an Equity Mutual Fund is 0.63%. Some go as high as 1.5% but we'll use NerdWallet's figure as an average.
So for our $100,000 account, you will pay AT LEAST $620 a year in fees. If you are killing it in good years, that can be easy to overlook. After all, if your account is up $20,000 what's $630, especially since you never actually see a deduction because it's all internal.
But what if the market is declining?
What if your account LOST $50,000 as it may have during the 2007/2008 decline? You still pay that hefty fee on top of the losses as your broker and yes, your online service too, all advise you to 'stay invested'.
But what if, instead, you had a tool that helped you decide to move out of equities when the decline began?
InvestWaves Wave 1 would have kept you out of the market for a total of 23 months during the 2007/2008 decline. Check out how that could have boosted your returns here.
Where would your money have been instead? In a Money Market account that charges, again according to NerdWallet, an average fee of 0.18% or over 70% less in fees than the equity account!
Now that's quite an incentive to keep you fully invested, don't you think? Money Market funds can be a safe haven as their stated objective is to keep the value per share at $1.00.
But it goes beyond financial incentives.
There's also cultural hesitance.
We talked to an investment advisor that does things differently for their clients. Many years ago, they shared with a colleague their thoughts on 'Buy and Hold' investing. They told the colleague about getting clients out of falling markets by moving to money market accounts.
The colleague seemed impressed and this advisor thought they had a convert. Until the colleague pushed the papers back and said, "This looks like a lot of work... you know we don't have to work this hard to make good money in this business." With that, the colleague brushed the advisor off.
There's a reason your advisor may be spending a lot of time on the golf course. Why should they change?
They have the bulk of a multi-trillion dollar industry behind them telling YOU that there's really no alternative. As long as they collect their fee and keep you on board, they won't likely change any time soon.
Another reason-- and this may be the biggest reason of all for why your local advisor pushes you to stay fully invested-- is they just don't know how to do anything else.
When you enter the world of investment advisory, you are trained of course in how to conduct business, how to manage your client's accounts, etc.
That training is very uniform. Don't believe us? Just visit any number of 'Independent (that's a laugh!) advisors' websites and tell us what exactly is different about them.
They are pretty much all the same.
A former advisor tells us that there are just a few content providers producing websites and 'approved content'. That means that everyone pretty much puts out the same information, from the same sources. And it all says staying fully invested is the only good way to make money in stocks or mutual funds.
That's a load of crap.
Anyway, the bottom line is the vast majority of advisors don't understand Wave Investing and have no incentive to do so.
Why work hard and go against the stream when you don't have to?
They go out of their way to tell you it's impossible to 'time the markets'.
We're here to tell you they're wrong. Let us prove it to you.