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Chasing Returns?

Human nature being what it is, most investors will use past performance as the deciding factor for their investment choices.  So what’s the problem with that? The problem with chasing returns is that it doesn’t account for volatility. Take a look at the chart below from J.P. Morgan which shows asset class returns since 2000.  The chart shows that small cap stocks averaged 6.6%.  That sounds great, but the volatility of that asset class is 21.2%, which means that in any given year small cap stocks may rise or fall as much as 21.2%.  Now look at the asset allocation portfolio, which is a fully diversified portfolio.  The average returns for that portfolio since 2000 is 5.7%, however volatility is only higher than owning bonds or cash.  Diversification is not exciting, but nobody likes to lose money and, more often than not, a diversified portfolio has been a reliable strategy.



About LPL Financial
LPL Financial (Nasdaq: LPLA) was founded on the principle that the firm should work for the advisor, and not the other way around. Today, LPL is a leader in the markets we serve,* supporting nearly 20,000 financial advisors, and approximately 800 institution based investment programs and 500 independent RIA firms nationwide. We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to personalized guidance from a financial advisor. At LPL, independence means that advisors have the freedom they deserve to choose the business model, services, and technology resources that allow them to run their perfect practice. And they have the freedom to manage their client relationships, because they know their clients best. Simply put, we take care of our advisors, so they can take care of their clients

*Top RIA custodian (Cerulli Associates, 2020 U.S. RIA Marketplace Report); No. 1 Independent Broker-Dealer in the U.S (Based on total revenues, Financial Planning magazine 1996-2021); No. 1 provider of third-party brokerage services to banks and credit unions (2020-2021 Kehrer Bielan Research & Consulting Annual TPM Report); Fortune 400 Company as of June 2021. LPL and its affiliated companies provide financial services only from the United States.

Jones & Company and LPL Financial are separate companies.

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