Imagine that your doctor promised that you could pay him/her only when you were healed from your medical condition.
It sounds ludicrous because no medical professional will rationally promise that their treatment is guaranteed to heal you. In fact, your estate will be liable to settle the medical bills for your care, after your death.
Doctors rely on medical science based on experiments and data to decide what the best course of action will be. Whether a specific treatment will work on the specific patient with their specific condition is not guaranteed.
The work of financial planners isn’t that different from doctors when it comes to investment planning. We rely on financial science and data to decide what the best course of action will be. Whether the situation plays out for a specific client over a specific period, is not guaranteed.
Yet, during difficult times, we are disappointed at portfolio outcomes even if they were based on the best data and science. Even if we understood the potential outcomes of risky portfolios, or grasped that the world underwent traumatic changes and events over the past few years, we are still disappointed at our portfolio returns.
Just like the best medicine doesn’t always work, the best-designed portfolios don’t always deliver the intended outcomes, even over long periods.
There is however a difference between medicine and markets. If a treatment is not delivering the expected results, then a doctor would do well to try a different treatment regime. Good portfolios though are best left untouched. Given time, a well-constructed portfolio delivers whilst a patient on an unsuccessful regime may die!
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