This document discusses the barriers that individual investors face in achieving strong investment returns, including lack of access to meaningful information, high costs, poor risk control, and emotional decision making. It promotes the services of Sandpiper Capital, an investment advisor, which aims to remove these barriers by providing research-driven investing, minimizing costs, controlling risks through diversification and rebalancing, and removing emotions from the investing process. Sandpiper clients are said to experience limited downside due to risk management and have outperformed the average investor over time.
2. FINANCIAL MARKETS HAVE HISTORICALLY PROVIDED THE
OPPORTUNITY TO ACCUMULATE SIGNIFICANT WEALTH.
$100/MONTH SAVINGS CAN GROW TO $200,000 OR
MORE.
3. Individual investors however, often
miss the markets’ opportunities.
Morningstar – for the ten years ending 12-31-13, mutual fund investors earned 2.5% less per year
than the total return of the funds in which they were invested because of bad timing of purchases
and sales.
(http://news.morningstar.com/articlenet/article.aspx?id=637022)
Dalbar – For the thirty year period ending 12-31-14, returns for the average stock investor were 7%
per year less than for the S&P 500.
(http://www.keatsconnelly.ca/kca_files/media/Dalbar%20Survey%20Bad%20Investor%20Behavior%
202014.pdf)
4. Barber & Odean – In their conclusion to their 2013 survey of over thirty years of research on individual investor
returns, explain the dismal performance history:
“They trade frequently and have perverse stock selection ability, incurring unnecessary investment costs and return
losses. They tend to sell their winners and hold their losers, generating unnecessary tax liabilities. Many hold poorly
diversified portfolios, resulting in unnecessarily high levels of diversifiable risk, and many are unduly influenced by
media and past experience.”
(http://faculty.haas.berkeley.edu/odean/papers%20current%20versions/behavior%20of%20individual%20investors.pd
f)
Leaving a lot of money on the table…
6. WHAT ARE THE OBSTACLES TO SUCCESS?
NO ACCESS TO MEANINGFUL INFORMATION
HIGH COSTS
POOR RISK CONTROL
EMOTIONAL DECISION MAKING
7. No access to meaningful information
Cramer’s Mad Money Picks- “No evidence of any stock-picking skills -- his picks are neither good nor bad. In other
words, it's just entertainment.”
http://www.cbsnews.com/news/jim-cramer-still-wont-make-you-rich/
Money Magazine, Changing Times- “Buy recommendations significantly worse than the market’s average returns.”
http://cluteinstitute.com/ojs/index.php/JABR/article/download/5835/5913
Stock Brokers- “Involvement of financial advisors is found to lower portfolio returns net of direct cost, to worsen risk-
return profiles, as measured by the Sharpe ratio; and to increase account turnover and investment in mutual funds,
consistent with incentives built into the commission structure of both types of financial advisors.”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1360440
Newsletters- “for the period as a whole (1984-2010) the top decile performers lagged the S&P by 2.6%” Market
Sense and Nonsense: How the Markets Really Work (and How They Don't) By Jack D. Schwager
8. High costs:
Wrap accounts. Typically charge 2% to 3% per year for accounts of $100,000 to $1,000,000.
Poor Risk Control:
Higher risks mean lower compound returns.
Year 1 Year 2 average compounded
High Risk +50% -40% +5% -5%
Low Risk +15% -5% +5% +4.5%
Emotional Decision Making:
Holding losing positions averts the pain of acknowledging a loss. Selling profitable ones relieves the worry that the market will
take back your profit. Both behaviors are irrational responses that cost after tax returns.
10. The Experienced Professionals at
Sandpiper Capital can help:
Access to meaningful information:
We invest over 25% of our profits in research and analytical tools.
We use quantitative modeling software, bond credit and return analytics, real-time and historic economic and financial data
covering 150 countries and 6500 different data series to test our assumptions and add discipline to our process.
Your portfolio manager is a Chartered Financial Analyst.
“Shukla and Singh (1994) examined a portfolio manager’s advanced professional education, as symbolized by the CFA
designation, to determine whether it resulted in superior performance. They found that portfolios with at least one CFA
manager outperformed those who had none.
Franco and Zhou (2007) examined whether equity analysts with CFA designation outperformed those who had none. Their
tests also indicated that managers with a CFA performed at a higher level than those without one.”
www.albany.edu/honorscollege/files/Janos_Thesis.docx
11. We minimize client costs.
Bond accounts are custodied at UBS Financial Services at no cost to the client.
Stock and balanced accounts are held by TD Ameritrade, which discounts commissions by as much as 98% as compared
to traditional brokers.
Fees for investment management range from .3% to a maximum of 1% per year.
We control risks.
Cash and bonds complement stocks as we continually re-balance accounts according to our perception of risks in the
financial markets.
Most Sandpiper clients have not experienced a down year. If annual losses happen, they have been limited to low single
digits.
We take the emotion out of investing.
Giving an experienced CFA full trading discretion of your account removes the temptation to react emotionally to market
swings. You can call your portfolio manager when you are worried and he will be happy to counsel you on the steps that
have been taken to protect your account.
13. Know the barriers to successful investing.
Avoid the common traps:
Bad Information
High Costs
Poor Risk Control
Emotional Decision Making
Trust a qualified professional to shepherd your investments.
Contact us
SANDPIPER CAPITAL
(757) 962-4596 to learn more.
PROFESSIONAL CARE FOR YOUR SAFE MONEY