Rational Investment Management

Most risks and returns, generally ninety percent, are accounted for by asset allocation into broad financial asset classes. At best, only ten percent of returns come from other factors such as financial product stories, leverage, illiquidity, active security selection and management. This is proven by SPIVA studies which demonstrate the superior performance of independent/passive asset-class index funds compared to active security selections.

Over most periods of time, and for most financial asset markets, passive indexes perform better than 80% of active managers at a fraction of the cost and enhanced risks of financial product funds. Wealth manager analysis, allocation, adoption and fee revenue from such products is detrimental to investor risk and return. This is financial product distribution, not investment process. Investor portfolios need both offense into calculated opportunity and defense from financial products, stories and popular investment themes.