hr: Money

Everyone has bad days. Even the best of the best cannot guarantee continual high performance. So before you ditch your broker, you need to look for a few more signs other just the last two years performance.

Photo Credit: kevin_oneill

First of all, know that if your portfolio is underperforming an equivalent index fund for say, 5 years, then there’s something wrong. Take asset allocation into this. If your investments are shared betwen stocks, bonds, and overseas shares, then take the equivalent indexes, weigh them by your percentages of allocation, and you should get an idea of how much you should have gotten by now.

Second, look at the way your broker is buying and selling. Is he buying assets that have performed well recently? These tactics are called Performance Chasing, and is a poor tactic for investing wisely. If you see this happening, it’s a sure sign that you’re man isn’t doing a good job.

Next, you look at the total fees that you’re paying. This includes buying and selling fees, hidden costs, and not just the fees that your fund manager is charging you. The overall costs should not come to more than 1% of the total money invested. If it’s above that, your chances of outperforming are rather grim.

These simple tips should let you know if you have to keep your broker, or kick him out.