A very simple math equation normally works for me.
All active traders as a group = the market. All active traders - 1% management fee < the market.
Then one friend said that he's just setup an account with an adviser and he's excited because the adviser's claim to fame is that they only lost 10% during the 08 crash.
I work in the industry and I find this is really concerning. I can't imagine a reputable advisor making that claim, even if it was true. For starters, every client shouldn't have the same portfolio. Sure, someone in a very conservative portfolio, like 80% bonds, might only be down 10%. However, a more aggressive client with a longer time frame should have a more aggressive portfolio, which was probably down much more. Rhetorical questions: were ALL of his clients down 10%, does he manage every account the exact same way regardless of client situation, are these statements about being down 10% in '08 statements that FINRA &/or the SEC would approve him using in an advertisement or speech, and will he guarantee that investors will never be down more than 10%? I'm guessing the answers would be no, no, no, and no!
Even a 20s/80b portfolio of index funds was only down about 10% in '08. Source:
https://personal.vanguard.com/us/funds/snapshot?FundId=0723&FundIntExt=INT#tab=1aMore concerning, two of an advisor's main roles are determining risk tolerance and behavioral coaching. If an advisor sets the expectation they are a magician who can avoid downturns what is that client going to do in a real downturn? The client has zero education or expectations that they need to stay invested in a crash.
Now, if your friend invested in a single fund, like VASIX, and it was only down 10% your friend's statement makes sense. However, that doesn't sound like the situation.
(rant over)