Honest Crap is Better than Fools Gold

Investment advisors and stock brokers see a lot of crap.

Good advisors know crap when they see it. Bad advisors don’t recognize crap for what it is.  The really bad advisors take the crap and sell it to their own clients for fat commissions.

Advisors and brokers are constantly bombarded with products and services in the hopes they will turn around and sell these products to their own clients.

Today I got one such e-mail. It was a company called Paradigm Capital Management trying to sell their small cap fund, the Paradigm Opportunity Fund. I knew immediately I had no need for this fund. I already have much better small cap funds to use for my clients – and in investing, there is no reward for second place. Advisors should always provide their clients with the #1 choice.

At the bottom of the advertisement they had posted the fund’s performance:

paradigm small cap perforamance

This fund underperformed its benchmark almost all the time. And they want me to use this for my own clients? Are you kidding me?

The really troubling part of the industry is that a lot of these companies play games with their numbers to make them look better than they really are. Not in this case. They were totally honest that their fund has bad performance. It was crap, but at least it is honest crap.

One last small point.  Notice that there was a mistake in the performance they had posted. See the +/- benchmark performance YTD as of 12/31/2013 ? They should have () around their performance number of 3.12% indicating their fund lost to the benchmark. You can clearly see the performance is below the benchmark, but for some reason in their grid they omitted the () around the number, making it look like it beat the benchmark YTD. I’ll give them the benefit of the doubt and assume this is a typo.