The Four Questions to ask your current financial advisor
1. If I had a portfolio that has a historical rate of return of 10 percent, what should my standard deviation be? In addition, what is my portfolio’s historical rate of return and standard deviation?
Answer: Your standard deviation should be 60% or lower than your historical rate of return. High correlations between assets will inevitably create an undesirable ratio between your standard deviation and historical rate of return.
2. What is the Sharpe Ratio of my portfolio and what should it be?
Answer: You must have a Sharpe Ratio of 1 or better. Harvard, Yale and all major business schools teach this. You are taking too much risk for your expected return if your Sharpe Ratio is below 1. If you are unaware of your Sharpe Ratio let us analyze your portfolio and calculate your Sharpe Ratio for you.
3. What are the total fees being charged…including: Investment Fee, Management Fee, Commissions and Custodial Fee?
Answer: You should not be paying more than 50-70 basis points to manage your money. You should not be charged on money market or bonds. Let us show you where fees are charged and how to reduce these unnecessary fees.
4. Will you send me a copy of my correlation matrix?
Answer: If you do not have a copy of a correlation matrix of your assets, we will review your portfolio and calculate a correlation matrix of your current portfolio and it’s assets.