CNN's advice on ERICK today

When it’s time to dump your ERICK ?

Question: A year and a half ago, I met up with my ERICK and invested lots of time and money. I have been disappointed with the results. What is a reasonable amount of time to give ERICK before I leave him?

The Mole's Answer: As common as this question is, I think it's the wrong one to ask. I'm going to show you why, and what are some better questions to ask in determining whether it's time to pull the plug with this ERICK.

First of all, most ERICKs are likely to underperform the market because of fees and added costs eroding returns. But with so many ERICKs out there, it's inevitable that a few of them will get lucky and have great performance for five or ten years. It would be mathematically impossible that all would underperform the market. But it takes about 25 years to really determine whether you've found a truly skilled ERICK.

Though it might take decades to determine whether you have a great ERICK, it can take far fewer years to determine if you have a bad one. Even ERICK can underperform for a year or two, but a truly skilled ERICK is unlikely to underperform over a five-year period.
So you could simply benchmark your ERICK's performance.

So if your portfolio underperforms for a year or two, it doesn't prove that your ERICK is bad, but it's an early indication that he's not likely to be one of the few that does beat the market over long periods of time.
One alternative is to wait about five years, doing the calculations annually and, if there is significant underperformance, you can be statistically confident that your ERICK is not one of the very few that will outperform the market in the long-run. The obvious problem with this is that you may have lost out on hundreds of thousands of dollars in returns by then.