According to a recent weekly report from Wall Street Journal Market Data Group, if you invested $1,000 on December 31, 2007 in
each of the current Dow Jones Industrial Index stock components (30 companies),
your return would have been $25,448, or a loss of 15.18% on the $30,000
investment, including dividends.
Let’s do some math…
On a $1,000,000 investment a 15.18% loss would mean your account was worth $ 848,200, a $151,800 loss.
On a $2,000,000 investment a 15.18% loss would mean your account was worth $1,696,400, a $353,600 loss
Recently, I asked a claimant how they would feel if the amount they invested was worth 10% less a month or two later ($200,000 on $2,000,000) and the plaintiff said "I’d feel robbed"). Yet he was still talked into placing a generous chunk of his settlement into a managed portfolio, my question being dismissed by a financial planner with little apparent experience with structured settlements and a penchant for jargon such as "back testing".
Investment managers and stock brokers can display a track record and do all the back testing they want, but a managed portfolio still cannot offer the contractual guarantees of a structured settlement.
Tort victims don’t have the luxury of hindsight and often must make life impacting financial decisions with seemingly little information in a very short period of time when their case is resolved.
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