This post is a sketch created by Carl Richards who has become a frequent keynote speaker at financial planning conferences and visual learning events around the world. Through his simple sketches, Carl makes complex financial concepts easy to understand.
His sketch below highlights the difficultly of investing based on recent past performance. He compares doing this to driving while looking in the rear view mirror. Many investors use recent past performance – what has happened over the last 3 years for instance – which leads to the problem highlighted below.
So when creating an investment portfolio, be sure to focus on the long term historic performance to avoid “investment accidents”. I wrote a post which highlights this problem called “Stopping Future Mistakes” . Click on the silver button below to read.
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