The Black Box Portfolio
There are a ton of new and fancy and pathetic investment products coming to market right now. These products prey on investor biases, charge outrageous fees, and invest solely in parts of the market that performed well in the past (nothing better than chasing returns!). And that’s saying nothing about all the new gambling ETFs.
This stuff isn’t good for investors, and how it makes it past the regulator is beyond me.
With that considered, here’s my idea for an investment product that would never make it past the regulator even though it would be great for investors. It wouldn’t prey on their biases, it wouldn’t have outlandish fees, and it wouldn’t chase performance. I call it the Black Box Portfolio.
Note: This isn’t a real product, and this isn’t a recommendation. It’s an example. Disclosures here.
The Black Box Portfolio would be reserved strictly for long-term savings (i.e., money you won’t need for at least a decade or the non-war chest component of your retirement savings). It would be fully invested in the global stock market (like XEQT or CAGE or DFA607), charge a .25% management expense ratio, and never change its investment process.
It’s most important feature, though, would be that investors would have to pay to see how its performing. Want to know how your long-term savings are doing? You must pay $1,000.
It’d be beautiful. Investors wouldn’t be euphoric during good markets or in desperation during bad ones. And I doubt investors would pay $1,000 to see how their investments are performing. That $1,000 would be better spent on just about anything else.
The advisor could share the approximate income the Black Box Portfolio might provide in retirement. But nothing else.
It’s perfect, isn’t it? Get emotion out of investing. Or punish investors for wanting their emotions put into investing.
There’s not a chance the Black Box Portfolio would ever be approved. Even though it’s how defined benefit pension plans operate. Even though it would most probably result in better investing outcomes for most investors. And even though the regulator will approve just about anything else.