Sounds crazy right? Being ‘frugal with the truth’ is a term which implies someone is not lying to you, but they may not be giving you the whole picture. In some respects, it’s up to you to fill in the blanks.
That’s fine providing you can fill in the blanks. In the world of investing, that’s never simple or easy.
So how do you lie by telling the truth?
Here’s an example from Melissa Hogenboom writing for the BBC Future “.. your mum asks if you’ve finished your homework and you respond: “I’ve written an essay on Tennessee Williams for my English class.” This may be true, but it doesn’t actually answer the question about whether your homework was done. That essay could have been written long ago and you have misled your poor mother with a truthful statement. You might not have even started your homework yet. Misleading by “telling the truth” is so pervasive in daily life that a new term has recently been employed by psychologists to describe it: paltering. That it is so widespread in society now gives us more insight into the grey area between truth and lies, and perhaps even why we lie at all.”
Here’s a question. The investment adviser or institution or wealth management firm says to you “Our charges are only 1%”, that may be true, but as an investor, you need to understand all the charges, not just one area of total costs. Paltering. “Performance on this fund is 30%, that’s fantastic” It may well be fantastic and truthful, but of no consequence, if the rest of your portfolio is making only single-digit returns. Paltering.”You can see from the graph the outperformance”. Yes, you can, but how many points of outperformance can you see? If it’s only one, then outperformance is clearly not a skill, but a lucky event. Paltering.
The job of a wealth manager is to sell funds. They will never lie, at least I hope not, but they can be selective (or frugal) with the truth. It’s your job to break down paltering.