“All this return measurement really has nothing to do with a client’s wealth. All that’s doing is really misleading clients to think that it does,” (David) Loeper, chief executive officer of Wealthcare Capital Management in Richmond, Va., said. He said that looking a performance report of an investment as a guide of a client’s wealth is “like going to the doctor when you’re already dead.” – Financial Planning magazine
I am glad to see this paper resurface. When I read it a few years ago, I kept thinking, “Why isn’t the financial services industry coming to similar conclusions”? Having spent my youth studying economics, it seems straight forward and logical.
Economics is about tradeoffs. I can have something today but I may I have to change something in the future. I can delay something today and get something I value more in the future.
People may wish to sacrifice today. Equally possible, a person may choose to save less today and work longer. They may choose a special item (an exotic sports car), to send their children to college, to care for a sick loved one, or any number of things.
Financial Planning is an industry trade magazine. Follow the link for the article. Follow the second link for the original paper.