Yesterday's Gone

Fleetwood Mac were right on that one.    They were very wrong about thunder only happening when it's raining, but they are right about the gone-ness of yesterday.    
 
In the world of financial services, there is a real problem with the past.   On the one hand, the investment advice given is often supported by what has happened in the past.   And then it is said quite solemnly that "past performance is not to be taken as a guide to future performance".  

The public hate that kind of disclaimer.   They really do.  


The brutal truth is that no-one knows what is going to happen in the future.     It drives us mad, but that is literally how it is.   We really need to get a grip on that concept.   You can control the level of fees that you pay, but you can't know for sure which funds are going to be the best.


One thing to watch for are the charts used as a sales aid that track $1 invested in, say, 1900 like this one and how much they'd be worth now if they were invested in shares,  property, cash or bonds.   The figures always look really impressive for shares. 

This is what such charts can't show:

1.  They can't make any assumptions for tax (it's too hard), so they assume that all growth is tax-free.   
2.  They can't make any assumptions for fees (it's too hard), so it is assumed that all growth has had no fees come off them.

3.  They overlook the fact that it is impossible for a retail investor to have invested in one managed fund product for that entire time.   

Other than that, they're fine (!).

My take on this is that for most of us KiwiSaver is something we are going to rely on and, for me personally,  I don't fancy being talked into an expensive, highly volatile fund - especially when employers and the Government have added a generous return to my fund already.     When I have extra money knocking around that I can afford to lose, I'll let you know.