We receive marketing emails the time from investment companies selling their wares.
Here’s one that came in today.
“Creating long-term value through prudent investing”
Its a good sensible headline and makes sense, but read on…
“Mitigating downside risks does not necessarily mean missing out on returns. The MFS Meridian® Funds – Prudent Capital Fund shows how a focus on avoiding losses has generated strong risk-adjusted performance and delivered long-term value for investors. See how avoiding losses has helped the Fund deliver a smoother investment journey than global equities during a very volatile year. With economic and market uncertainty likely to linger, could now be the time to consider a more prudent approach to investing?”
It makes sense, right? If you avoid losses, then you increase your returns. It’s like selling at the top, watching the market fall, then buying at the bottom. You avoid losses and catch all the upturn.
But here’s the problem with this and most marketing by fund providers, they don’t explain the process of how they do it. Now you could argue, if they told you about their ‘secret sauce’, then others would copy it and they lose their advantage. Really! It is very easy for consumers to be taken in by the marketing. Providers spend £££s on what to say and how to say it. We are all at a disadvantage. Nevertheless, having the presence of mind to think a little more deeply about what these companies are saying, can help you ask better questions and hopefully avoid poor decisions!
The Wealth Coach, an independent financial advisory firm based in the UK. Nic Round, Chartered Wealth Manager.
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