In his latest Outside the Flag article Jim Parker, Dimensional Fund Advisors, looks at the depressing demise of the Ross Asset Management investment business in New Zealand. The firm has gone into receivership after reporting returns of 25% a year since 2012.
Jim provides 5 key lessons for investors:
1) Be skeptical with any scheme promising consistently positive returne;
2) Any investment based on a few stocks or a fe sectore is extremely risky;
3) Never undertake an investment without first receiving independent advice and better still;
4) Don't build an investment based on a manager's supposed ability to predict the future;
5) Rather, build it on a clear investment philosophy, a transparent investment process, an approach based on evidence rather than forecasts or intuition and a consistent application with proper safeguards for investors.
These are important lessons from what has been a terrible result for the hundreds of investors involved.
You can find Jim's full article following.
November 26, 2012
The Too Good to Be True Test