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Rating the Robo-Advisors

@JAMES BECK @Michael Moore @Burton Richardson Unless you have an accurate crystal ball, messing with your asset allocation is a fool's errand: (1) You're no more likely to get it "right" than you were the first time, and (2) you've now subjected yourself to additional costs.

Things are only "obvious" in hindsight. When old was $140/bbl, many "experts" were predicting the certainty of $200/bbl. Same with gold when it hit high numbers. Remember "Dow 36,000"? The inevitability of a bond crash due to rising rates has been forecast for at least 5 - 6 years. In the meantime, some savvy investors have done well ignoring that prediction.

In a post below, TG notes that most investors underperform their underlying investments. He's correct. Most investors get in and out of their funds, i.e. particular asset classes, at the wrong time. They buy after things have already gone up and sell when things have already gone down, i.e. they buy and sell when "it's obvious."

If you want to beat the market you have to buy/sell when it's not obvious. Otherwise, be happy with market returns. A wise man once told me that you make your fortune by whatever work you do and you preserve your fortune (your spending power) thru your investments.

Hers's the problem: Many people don't want to work and save enough for retirement. Stated another way, in retirement, they want to be able to spend more than their invested savings can SAFELY provide - so they try to beat the market. If they're lucky, they beat the market and spend the cash on crap that probably doesn't make them any happier. But if they're unlucky, they end up eating Alpo for dinner.

That's where many people - advisors & investors - get things wrong. They estimate what their cash needs (wants) are in retirement and come up with an asset allocation that will give them that return. If your well being (and not having to subsist on Alpo) depends on beating the market, you're a freaking idiot. Instead, you should give yourself a margin of safety and plan to spend LESS than "market returns" (because often that's what the market returns). That means some combo of (1) working harder/longer, (2) saving more, i.e. spending less now, and (3) spending less in retirement.