If we have learned anything from the last few decades is there is always some hot new investment vehicle that is growing faster than 
other investments. But we have also learned that bubbles always seem to burst. Dot-com companies, real estate, commodities, and the stock market itself.
When investments behave in a fashion that seems too good to be true they probably are. The ultimate admonition is that YOU NEVER WANT TO BE THE LAST MAN STANDING.
Basically most investments are priced based on an expected rate of return and the risk associated with the investment. In general the higher the rate of return on the investment the greater is the risk.
When asked how the Federal Reserve had missed the real estate bubble then Ex-Chairman Alan Greenspan replied that real estate prices had never decreased so rapidly and so much in terms of value and the models did not incorporate such a possibility. You may or may not believe the Fed’s model could not have considered such a possibility – but it is certainly clear that such a possibility was not simulated in the Fed’s various economic models. While investment real estate was paying returns far in excess of other investments investors continued to invest – not considering that it was speculation instead of market fundamentals that was causing these investments to rise so rapidly.
Of course there are exceptions. When my wife wanted to buy Google when it first came out our broker advised against it. While an opportunity was lost the advice was sound. Our investment philosophy was to shy away from speculative ventures.
No investment advisor can be right 100% of the time. But one that promises growth far in excess of general market trends should be looked at with skepticism. Many investment advisors will acknowledge their philosophy will not cause performance as good as the market in general during growth periods. By the same token their clients anticipate their portfolios will not decrease as much as the market during down periods.
Growth and loss of money are usually not symmetrical to most investors. They fear losing money much more than the satisfaction gained from making money. One way to look at this is to think that a gain of 10% may cause satisfaction of 5 (on a scale of 1 to 10 – 10 being the highest) while a loss of 10% may cause dissatisfaction of minus 8. Many investors would fit into a similar profile.
When using an investment advisor make certain he or she has an accurate picture of your tolerance for risk.
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