Kim Snider
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July 25, 2005

The Fred Fiasco ...

Let me illustrate the predicament for most investors trying to grow their portfolio.

We had a client who approached us last year. Fred had inherited a sizeable portfolio when his dad had passed away.

All of his life, his father, a successful businessman, had relied on Merrill Lynch to do his investing for him. Since he was a novice investor at best, Fred felt like the best course of action was to leave the portfolio at Merrill Lynch.

Fred's portfolio had remained with Merrill Lynch's private banking group for ten years. It had been managed by a "superstar money manager" by the name of Nicholas Applegate.

In the table below, you can see the actual returns from the stock portion of Fred's portfolio year to year, taken directly from Merrill Lynch's AIMS Report on the account and compare those to the returns of the S&P 500.


Right away, you can see that Fred's account was no different than the average investor - he badly under-performed the market over the ten year period of time.

What did this really cost Fred? A lot more than you think!

Let's assume that Fred started with $1 million in his portfolio and his account grew consistently by the average instead of through an average consisting of ups and downs. How much more money would Fred have had? Let's compare an average of 7.2% to a consistent 7.2%.


That is a 30% difference in just nine years - $435,000 additional real dollars in your account. Imagine how much more pronounced this effect would be over longer periods of time - say the forty years it takes someone to save for retirement? To quote Warren Buffett on how to be a successful investor, "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."

So where does one find this kind of consistency in a devilishly inconsistent market? Here is the bad news - it doesn't exist - not at that level of profit. But here is the good news - it is feasible to get a lot closer to the ideal than most people think. I try to keep this blog from being a blatant sales tool, but here is a hint. If this sort of low risk approach appeals to you, but with a yield of 13% instead of 7%, have a look at our track record.

Thoughts? Comments? Feel free to post them below.

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.


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» The Cost of a Bad Investment Advisor from Free Money Finance
This article originally appeared at Free Money Finance on July 29. A week ago, I announced a new feature here at Free Money Finance, the Star Money Article. Today I'm giving out my first star. This one goes to Kimmunications... [Read More]


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Kim Snider is an author, speaker and host of Financial Success Coaching, Saturdays at noon, on KRLD Newsradio 1080, Dallas - Fort Worth. This blog is primarily devoted to empowering individual investors with information to help them be good stewards of their money. Above all, it is about achieving true financial success. Kim's book, How To Be the Family CFO: Four Simple Steps to Put Your Financial House in Order is in bookstores now. Order yours from Amazon or other fine booksellers today.

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