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Step Two | Beware of Market Gurus

Part two of an six-part series looking at the six key factors that will help you become a better investor and avoid 'market gurus'

Every day the newspapers and TV are full of so called market gurus telling you what to do with your money.  The problem is that these ‘experts’ have a dismal record of predicting anything.  So what’s the alternative?  A long-term  structured approach to investing can help you achieve your goals and manage risks, without the need for a market guru!

Switch on the financial news on television, or pick up the money section of any newspaper, and you will see there are plenty of supposed experts, giving their opinion as to what investors should do.

But the track record of these market gurus is dismal. Year after year their forecasts are inaccurate, and very rarely are they held to account of their failure to predict the future.

But you might be thinking, what about those star fund managers who manage to outperform the market?

Surely all i need to do is find one of those to manage my money for me?

Unfortunately, its not that simple.

Research has consistently shown that only about 1% of fund managers beat the market consistently over the long term, and they’re almost impossible to spot in advance.

It takes 22 years of data to be 90% certain that a managers out-performance is genuinely down to skill, rather than luck.

And even those few managers who do outperform, generally recoup for themselves any value they add, in fees.

As for hedge funds, the evidence is that they perform no better, and that they’re far more expensive.

Every year hundreds of hedge funds and mutual funds are either closed or merged with another fund because they perform so badly.

The second step to successful investing, therefore, is to beware of market gurus.

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