Investing history is a reliable source of information relative to asset categories as a whole. By looking at historical returns, we can assess the overall risk and volatility of an asset category. It is also possible to understand how different asset categories behave in relationship to one another (correlation) using history.
This type of information is useful in designing diversified portfolios that will achieve market rates of return over a long-term period of time.
Here’s the problem:
Historical information cannot offer us any indication of how any one asset class or individual investment is going to perform in the future. Past performance is not a guarantee of future performance. Therefore, it is imprudent to base future investing decisions on the track record of one asset class or individual investment. The Financial Coaching Group discourages financial professionals and investors from using short-term returns to make long-term investment decisions.
We believe in Markets, not Managers. Market performance is primarily determined by asset allocation, NOT stock picking or market timing. We believe that prudent and global diversification reduces risk. We believe that this philosophy can reduce risk, costs, taxes and expenses.
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