What should be considered in examining an advisor’s track record?
Start by considering the length of the record. Sprinters aren’t necessarily successful distance runners. Sensational performance in a short time span may reflect little more than extraordinarily good luck. Or, of more concern, it may reflect someone who takes greater risks than you may be comfortable with over the long haul. Or it could reflect specialization in markets that, in a given period, were especially active. Track records can be much more meaningful when you examine a longer record. This provides more information about how an advisor has performed over the landscape of continuously changing market scenarios. An advisor’s performance in less than spectacular years may be an important indicator of risk management skills.
