07/28/2009 08:37 pm ET Updated May 25, 2011

An Investment Riddle Rubix Cube Masters Can't Solve

A globally diversified portfolio of index funds invested solely in stocks was down a whopping 40% in 2008. The same portfolio is up 19% in 2009, year to date.

Here is the data for a portfolio invested 60% in stocks and 40% in bonds:

2008: down 23%
2009 (YTD): up 10%

Raise your hand if your market beating broker or advisor told you to "flee to safety" at the end of 2007 and to get back into the market at the beginning of 2009 so that you would not miss the rally.

I am not seeing any hands.

My point exactly.

Brokers and advisors (and financial pundits) have no ability to time the markets or pick stocks. But that doesn't stop them from continuing to pretend they do. And it doesn't stop investors from relying on their flawed predictions.

Which brings me to the riddle:

Why do investors use market beating brokers and advisors?

I deal with this subject in this week's video.

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