Reply to As an advisor, into the shark tank...

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[quote=OTAlexFA][quote=Anonymous][quote=OTAlexFA][quote=Anonymous][quote=OTAlexFA][quote=Anonymous]Why don't I just put my money in index funds rather than you? Will your fee + the returns outperform index funds + fees?[/quote]

This one feels like a trap.   :)

In a bull market?  Maybe not.  Index funds are outstanding when everyone is making money.  However, are you going to tactically manage those passive funds?  If not, you can guess what happens when the market "corrects" (a term I don't like).  You'll get virtually 100% of the market growth now and then virtually 100% of the downcapture, as well.  There's no hedge.  As most of us know from math, if you lose 20%, it takes 25% of gains to get back to even.

Index funds are very popular, particularly on DCUM, I've seen.  I like them.  I use them.  The question is, does it fit your strategy?  What's your time horizon?  What's your goal?  Index funds are great; they just aren't a cure-all.[/quote]

And I liked your answers up til this one.

I think an advisor can make sense as a coach-- avoiding mistakes like changing your asset allocation in the middle of a bear market.  But you've gone from saying your purpose isn't to outperform the markets to saying your purpose is to get 100% of the gains and less than 100% of the losses of the market.  Those sentences don't make sense together.[/quote]

I think I see what you're saying and I will try to be clearer.  Again, I like index funds and will use them as a portion of a portfolio.  That sleeve will get all the gains and all the downcapture of a market.  However, the entirety of the portfolio will likely neither outperform nor capture all of the draw downs.  Like I said earlier, if you would like to go all index funds, I won't argue with you, unless there is a distinct reason to (age, needs, etc.).

Make a little more sense, maybe?  Or was that more confusing? [/quote]

No that is more confusing.  I can't tell if you are distinguishing between stock index funds and some other equity investments in the portfolio, or between stock index funds and fixed income investments.  Certainly I have no desire to be 100% invested in the stock market and get 100% of the gain and losses of the stock market, but how I allocate my investments among different asset classes has little to do with whether I used index funds for my investments.[/quote]

Yup, I'm confused too.  My original intent was to explain the index fund in comparison to the rest of the hypothetical portfolio assuming a diversified allocation across asset classes.[/quote]

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