The Big Jump

The average holding period for a mutual fund is something like three years. This is an average, so some people have more patience and some have less. But that’s at the product level. What about the average holding period for a particular investing strategy? Let’s just say that it’s probably similar.

The reality of the investment management business is that investors will not often stick with something that appears to be “not working” for an appreciable length of time, even if all of the data and evidence in the world can prove to them – on paper – that it will work in the long-term.

Life is not lived on paper. Life is not lived in the long-term. So around three years is probably a pretty good guess as to the period time during which an investor will be patient enough to maintain a particular investment philosophy. And then a new one comes along that is, perhaps, more appealing in a given market environment – this isn’t working anymore, look at what happened this month!

As advisors, our number one responsibility to investors is to do everything within our power to set them up for success. Part of this means delivering financial plans that are durable enough to withstand life events that cannot be perfectly planned for, like sickness, scholarships, career opportunities, divorce, the sale of a business or the death of a patriarch or matriarch. But another equally important part is to allow for the fact that clients are human in the way we invest their money. This means that

Keep reading this article on The Reformed Brocker.

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