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TheStreet Open House

2013: Another Solid Year For Equities? Only If Investors Break Some Bad Habits...

LOS ANGELES, Jan. 2, 2013 /PRNewswire/ -- As the year begins, most investors are positioned to make precisely the same mistakes they made in 2012.  "Investors are routinely informed that 'past performance is not indicative of likely future results,'" notes CPA and asset manager Selwyn Gerber. "Yet they invest as if they were navigating their car by focusing on the rear-view mirror." As a founding partner of Century City-based RVW Investing providing strategic wealth management to both private individuals and retirement plans, Gerber has spent more than a decade watching the annual churning of "best" and "worst" managed funds. "The data is crystal clear: very few asset managers stay consistently at or even near the top of the rankings." 

As baseline evidence, Gerber cites the highly-respected quantitative analyses by Standard & Poor's comparing exchange traded indices to active funds (SPIVA). These reports document that, over a mere two years, of those managed funds in the top quartile of performance in 2010, only ten percent remain. In other words, ninety percent of managed investment funds did not remotely deliver to expectations.

"Over the long run, stock picking and market timing don't work," says Michael Stone, senior analyst and also a founding partner at RVW. "Yet, over time, markets overall deliver superb returns." Stone advocates a wealth management plan that does not try to second guess short term bleeps.

"All the data, charts and web pages only reveal what successful investors have known for years," adds Gerber. "In the long run, properly-selected exchange-traded index funds (ETF's) consistently outperform active managers. This one basic understanding can make the coming investment year better than the last."

Gerber urges investors to remember the advice of Warren Buffett, the famed Sage of Omaha, to be greedy when others are fearful and fearful when others are greedy. "With fear so pervasive about the domestic economy," observes Gerber, "and with the fate of the Euro and the massive geopolitical problems looming, now may actually be an optimal moment to invest."

"Forget the tortoises and the hares – they are both doomed to fail." Stone says. "In the real world, it's the bulls that win."

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