[quote=http://onlinelibrary.wiley.com/doi/10.1 ... 8/abstract]In our view, financial advice is a service, similar to medicine. We believe, contrary to what is presumed in the standard finance model, that many investors have very little idea of how to invest, just as patients have a very limited idea of how to be treated. And just as doctors guide patients toward treatment, and are trusted by patients even when providing routine advice identical to that of other doctors, in our model money doctors help investors make risky investments and are trusted to do so even when their advice is costly, generic, and occasionally self-serving. And just as many patients trust their doctor, and do not want to go to a random doctor even if equally qualified, investors trust their financial advisors and managers.
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Net of fees, investors consistently underperform the market, but experience less anxiety and earn higher expected returns than they would by investing on their own.
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We should not forget, however, the central point of trust-mediated money management—that it enables investors to take risks, and earn returns, that they might otherwise not obtain. There are surely significant distortions in portfolio allocation that are inevitable when investors exhibit psychological biases. Despite these distortions, financial advice and money management represent an important service.[/quote]
Money Doctors
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MachineGhost
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Money Doctors
Last edited by MachineGhost on Sat Mar 14, 2015 7:30 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
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Libertarian666
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Re: Money Doctors
So the takeaway is that passive investing, including refusing to panic when your portfolio is going down, is better than relying on an advisor.
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MachineGhost
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Re: Money Doctors
I can attest to the powers of "trust-mediated money management". It is certainly freeing, even if it costs you. The PP is far too much of a DIY project to have widespread appeal.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!