Q: Hi Peter & 5i: Just a comment. It is difficult to know what to do with the numbers when the market hands you outstanding returns. It isn’t all your own doing and yet if you didn’t make some of your own good decisions you would not have done nearly so well. You want some credit and frankly you deserve some credit and nothing sells the service like the odd eye-popping number. So on your “Join” page your first checkmark point in the sales pitch is: “Who else will offer a Model Portfolio (up 34.1% in 2013), with no obligations or management fees?” You didn’t promise the return; you just mentioned it, parenthetically at that; and after all, it’s a fact isn’t it? Sure. And for me: not a problem. I come to it knowing that 2013 was a great year in the markets but I also know you outperformed any likely benchmark. I know that number is much higher than your portfolio is likely to deliver over the long term, even over the medium term. I even know, because you have owned up to it, that the downward spiral of 2008 produced an absolutely brutal result in the portfolio you were running at that point. And all of that seems perfectly reasonable to me now because I also have several years of experience in owning stocks and watching the markets. But I can imagine someone with much less of an experience base reading that number on the “Join” page and thinking: hey, here is a way for me to earn a 34% return; here is a guy whose stock picks go up. I can imagine that number contributing to the creation of an unrealistic expectation.
The fact is that when you buy a stock, unless you are buying at a longer term bottom (you’re probably not!), so long as you are thinking you’ll hold that stock for a reasonable period of time, it is very likely that at some point while you own those shares they will be worth less than what you paid for them. Think about that for a second. In fact, if they never are any lower, it’s just pure unpredictable luck.
Of course, the flip side is also true: unless you buy at a longer term top and provided you have sufficient patience, it is very likely that at some point your shares will be worth more than what you paid for them.
I feel for the uninitiated though, because the thing is, I’ve never heard anyone say the former fact. I’ve certainly never seen it acknowledged in a sales pitch. That said, I have the absolute greatest respect for Peter and 5i and the services you are able to offer to investors and I would recommend 5i as a great value and a great resource to anyone who ought to be interested.
You can publish this if you think any of those points are worth others' contemplation. Thanks!
The fact is that when you buy a stock, unless you are buying at a longer term bottom (you’re probably not!), so long as you are thinking you’ll hold that stock for a reasonable period of time, it is very likely that at some point while you own those shares they will be worth less than what you paid for them. Think about that for a second. In fact, if they never are any lower, it’s just pure unpredictable luck.
Of course, the flip side is also true: unless you buy at a longer term top and provided you have sufficient patience, it is very likely that at some point your shares will be worth more than what you paid for them.
I feel for the uninitiated though, because the thing is, I’ve never heard anyone say the former fact. I’ve certainly never seen it acknowledged in a sales pitch. That said, I have the absolute greatest respect for Peter and 5i and the services you are able to offer to investors and I would recommend 5i as a great value and a great resource to anyone who ought to be interested.
You can publish this if you think any of those points are worth others' contemplation. Thanks!
