I was lucky enough to close out an amazing ski season at Silverton Mountain, in Silverton Colorado this weekend. Not many are familiar with Silverton Mountain, so an introduction will be necessary to piece together how this fits into the question many investors ask often, “Should I Hire an Investment Advisor or DIY?”
I think the best way to sum up Silverton Mountain is in its requirement to ski there; sign waiver that states, “YOU CAN DIE HERE TODAY,” and the need to carry a shovel, avalanche beacon and avalanche probe.
Get the picture?
It’s not a mountain for sissies. And, neither is today’s stock market. The variable and often unpredictable expert terrain makes Silverton Mountain a great analogy for investors, expert and well, not so expert.
Silverton Mountain very strategically has 2 types of seasons, Guided and Unguided. Here is one of the Guided blurbs from their website:
- Pay attention to your guide all day, exactly.
- The guide will only take you where he feels comfortable as their priority is your safety.
- The better you listen, the more the guide can open it up for you, (longer pitches, steeper lines etc). Let your guide know if you want to huck your meat, or ride steeps as much as possible. If you don’t tell them they won’t know.
- The guide may not be able to accommodate your request based on snow conditions and avalanche hazard, but they will try their best.
It all sounds pretty applicable to hiring an advisor to help you navigate tough market terrain (minus the “huck your meat” which would translate to “betting the farm” in investor speak). My translation to investors:
- Follow what your advisor says, exactly.
- Your advisor will only invest your portfolio where he/she is comfortable – as their priority is your portfolio’s/retirement plan’s safety.
- Listen and talk to your advisor – if you don’t tell them (what you want, what you fear), they wont know.
- Your advisor may not be able to accommodate your request (ahem, 12%+ returns with low risk of losses) based on current market conditions, but they will try their best.
I, personally, don’t ski Silverton Unguided. I don’t consider myself an expert skier, and that’s why Guided is the right fit for me.
What’s your investing expert level? Considering that most investors aren’t “experts,” they shouldn’t navigate markets on their own in DIY mode. I admit it, I gave Unguided a shot – ONCE – it was the first time I had ever skied the mountain. That’s the day I severed my ACL in my left knee. A novice, expensive and time consuming mistake. Investing is no different.
And while blowing my knee is an extreme example, yes, there are many other less extreme parallels to be made with going Unguided at Silverton Mountain and the DIY investor; choosing the wrong run on the mountain (some will be bare and some will offer exceptional snow…AKA returns!) – and you only get a shot at about 4 – 6 runs per day, so a wrong move/run could be costly to your day. A Silverton Guide shepherding you to the run with the fewest tracks and freshest and safest snow is invaluable and may ensure maximum runs that day…AKA highest Return on Investment (ROI).
Are you with me?
So, if you’re insanely passionate about following world markets, and have been investing for 10+ years (shout out to Malcolm Gladwell’s 10 year / 10,000 hour expert principle), you may be just fine in DIY Investing mode, but make sure you adhere to these tenets:
- Keep your trading fees and your investment fees low.
- Subscribe to a tactical methodology and don’t get trapped in Buy & Hold mode. 2008, like Silverton Mountain, wasn’t for sissies either! Want to keep on top of the top performing asset classes so you know where to position a majority of your investments? Subscribe to Alphavest’s blog/newsletter and get routine updates on these tactical shifts.
- Set some trading ground-rules. Don’t fall victim to “bad behavior” otherwise known as buying high and selling low. Dalbar’s Quantitative Analysis of Investor Behavior (QAIB) “…when looking at long-term returns, the average asset allocation investor has underperformed both equity and fixed income indices. For the 5, 10 and 20-year timeframes, the average asset allocation investor failed to keep up with inflation. Investor bad behavior accounts for staggering investment underperformance.”
For the majority of investors in the crowd, Guided is most likely your best bet. Hire an advisor that’s on your side, honors low fees and will steer you clear of rocky terrain.