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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75801  
Subject: Re: Consolidation Date: 4/8/2010 1:57 PM
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... nominal sum using the Stock Advisor service, up 7%, or 7x what my current broker has done. Go fool!..

While it is too short of a time to be meaningful, an S&P 500 index fund is up by about 7% over the last two months. Many index are up 50% or more over the last year. You need to compare your performance to a comparable index fund to see how you are really doing. If you are investing in mostly small stocks, then the S&P500 is not a fair index to use for comparison.

If anyone could reliably pick over performing stocks then they could easily make an eight figure salary working on Wall Street. When a professional money manager is able to beat comparable index funds by even a percent or two over the long term then they are doing well enough to be on the covers of magazines. It is unrealistic to expect a stock broker to be able to outperform the market over the long term.

Professional advice can be very useful for thing like retirement planning, asset allocation, risk management, or minimizing taxes but expecting superior stock picking is not reasonable.

...How best to consolidate?...

Select about 6 diversified low cost index funds, and move 95% of your money onto these funds unless there would be a large tax problem. Keep the other 5% in an account where you can try your stock picking skills. Add any new money in the same 95/5% proportions. in the future if your stock picking fund is less than 5% of your total portfolio then you know you have not been beating the market.

Greg
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