Financial advisors are licensed to provide the investor sound advice. In the licensing process they are taught modern portfolio theory which emphasizes diversification and risk adjusted returns. The investor is looking for a strategy that will provide sufficient funds for retirement.

The strategy should be a buy and hold strategy that outperforms the S&P. Otherwise the investor should just buy the S&P. In this case the investor wouldn’t need the financial advisor for investment selections. The problem is the industry doesn’t have many products that can beat the S&P. Why is that?

Diversification usually adds bonds which are currently 7 percentage points per year less than the S&P. You can’t have 40% of your portfolio in bonds and have decent performance.

There is no distinction between short term risk and long term risk. They are not equal. A wiggle today has no affect on your future performance if it is a buy and hold strategy. Over time risk disappears because the price has risen a lot.

Picking stocks that outperform the S&P is very difficult because the breath is so narrow. 4% of stocks account for all the S&P performance.

The solution is you need cap weighted ETFs because they are heavily weighted to the best performing stocks. The Stars model does this and outperforms the S&P by a factor of 17 over the past 26 years.