Breaking clients of their S&P 500 addiction
January 14, 2020 by Craig S. Israelsen
You’ve done your homework, run the data, performed your due diligence and built a diversified, multi-asset portfolio for your client. But your job isn’t done.
All advisors know that clients may act surprised and disappointed when their portfolios get a little crazy. Naturally, it’s nearly always the downward volatility that bugs them the most. But experienced investors will also be wary of persistent periods of overperformance, knowing that what goes up must come down.
The tricky part is educating your client on how to recognize what constitutes underperformance and overperformance. To this end, it is vital that the advisor explain to the client — and help them understand — that the performance benchmark for their portfolio is NOT the S&P 500, despite the fact that the index is widely reported and often cited as the representative return of the stock market.
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