Chapter 2

U.S. Capital Market Investment Performance: A Historical Review

Hindsight is always 20/20.

—Billy Wilder (1906–2002), Colombo’s Hollywood

Life can only be understood backwards; but it must be lived forwards.

—Søren Kierkegaard (1813–1855)

An investment advisor and a new client often complete an extensive data questionnaire at the beginning of their work together. The advisor asks the client to describe the facts of his financial situation, state his investment objective, and specify his risk tolerance. Armed with this information, the investment advisor designs a suitable investment strategy. This data gathering process can have its problems, however. What assurance does the investment advisor have that the client has realistic ...

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