“Few
advisers want to say it, and no client wants to hear it, but your best bet
isn't obsessing over funds and strategies but simply raising your savings rate.
The
investment industry - and clients - are intensely focused on how to maximize
returns, with much ink, brain power and tears spent on trying to divine which
fund to choose and what strategy to adopt.
While
this is entirely appropriate, and sometimes even fruitful, it is also, in many
ways, a self-defeating diversion.
The
truth is that the primary generator of wealth is earnings, and the only
earnings that really count are those you don't spend but invest.
Deferring
consumption is a much tougher sell than the alchemy of fund selection, and so
the industry, with clients and advisers both complicit, spends far more time
thinking of one than the other.
Putnam
Institute has done a well-constructed study which looks at the impact of fund
selection, asset allocation, rebalancing and simply saving more, and finds that
over the long term delaying gratification is the name of the game.” Bottom
line: it’s how much you save, stupid! By James Saft for Reuters. 9/13/12 Read
details at: http://www.reuters.com/article/2012/09/13/us-column-investing-saft-idUSBRE88C10S20120913
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