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Should you trust your financial advisor? Pseudo-mathematics and financial charlatanism |
April 10, 2014
Your financial advisor calls you up to suggest a new investment scheme. Drawing on 20 years of data, he has set his computer to work on this question: If you had invested according to this scheme in the past, which portfolio would have been the best? His computer assembled thousands of such simulated portfolios and calculated for each one an industry-standard measure of return on risk. Out of this gargantuan calculation, your advisor has chosen the optimal portfolio. After briefly reminding you of the oft-repeated slogan that "past performance is not an indicator of future results," the advisor enthusiastically recommends the portfolio, noting that it is based on sound mathematical methods. Should you invest?
Link: http://feeds.sciencedaily.com/~r/sciencedaily/computers_math/computer_science/~3/lhXigx1sG68/140410103005.htm
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