005 – When will the fed raise the interest rate?
So many people are worried about interest rates rising and how that will affect their investments and ultimately retirement success. They are not sure what to do with this information and what actions need to be taken. Scott sheds light on what he is telling people if they ask him what to do. He also shares more information on what an average return looks like since most people do not understand what they are reading when viewing mutual fund investment performance. He explains what it means to chase past returns and how effective this strategy is. Finally, Scott gives a simple acronym that you can use help ensure staying on the right path when it comes to getting everything you want out of your life.
Chasing Past Performance:
Some investors use mutual fund track records as a guide to selecting funds, reasoning that a manager’s past outperformance is likely to continue in the future.
Does this assumption pay off? The research offers strong evidence to the contrary.
This chart (click on link below) illustrates the lack of persistence in outperformance among US equity mutual funds. The funds are evaluated based on their 10-year track records (2000-2009), and those that beat their respective benchmarks are re-evaluated in the subsequent five-year period (2010-2014).
Among the 2,711 equity funds that began the initial 10-year period, only 25% outperformed—and among these 682 winning funds, only 28% continued to beat their benchmarks in the subsequent five-year period.
Some US equity fund managers may be better than others, but they are hard to identify in advance using track records alone. Returns contain a lot of noise, and impressive track records often result from good luck. The assumption that past outperformance will continue often proves faulty and leaves many investors disappointed
About the author, Scott Wellens
Scott Wellens, CFP® is an investment advisor and founder of Fortress Planning Group. After earning his Bachelor of Science degree from the University of Wisconsin-Oshkosh, Scott quickly ascended to become a Vice President of North American Sales at a major regional provider of telecommunications infrastructure. While financially successful in this role, Scott searched for ways to pursue his passion related to financial literacy and providing financial freedom for both his own family and others. During his search, Scott became curious about the significant gap he found in the financial services sector: he was unable to find a comprehensive financial planner that maintained a family stewardship lens without being attached to financial products. Scott decided to fill that gap by creating his own planning firm that maintains a strong passion for comprehensive, unbiased wealth planning that is genuinely client-centered.
Scott resides in Menomonee Falls, WI with his family. He is the father of three active and independent daughters who keep him on his toes. Scott is an active community member, serving on the Hamilton Education Foundation Board, serves as a Dave Ramsey Financial Peace facilitator and leads the All Pro Dad’s group at their local elementary school. Scott enjoys spending his free time visiting state parks with his family, reading, and watching the Milwaukee Bucks and the Green Bay Packers win ball games.