Home > About Second Opinion > Investment Principles > Principle 1

Principle #1: Establish Consistent & Realistic Return Expectations

An investment portfolio should reflect an investor's expectations about future returns in the capital markets as well as their own goals and objectives. Thus the expectations and objectives should not only be realistic but they should also be internally consistent

Expectations of returns and risk should not be based on recent history. A common mistake is to look at recent trends and assume that these trends (whether up or down) will continue. A more appropriate and realistic approach is to look at price earnings relationships that have existed for over a hundred years and assume that these relationships will continue.