Modern Portfolio Theory Disclaimer

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There ought to be a law for those who choose to hide behind the skirts of Modern Portfolio Theory as a basis for offering investment advice.

The law should require a disclaimer on all documents stating that Modern Portfolio Theory was used for developing the investment plan and for selecting the recommended investments:

Modern Portfolio Theory Disclaimer

Modern Portfolio Theory relies entirely on investment history for investment analysis and investment conclusions.

The representations of Modern Portfolio Theory are contrary to securities law that requires that the investor be warned that past investment performance is not a guarantee or indicator of future investment results; as anyone who has spent more than a nanosecond in the financial markets knows to be true.

As Modern Portfolio theory is nothing more than another means to record and report investment history, it must not be used to plan for or to predict the investment future.

Taking action on the proposed investment plan will merely put the investor into yesterdays low Beta, high Alpha, low Standard Deviation, Efficient Frontier investments; however, as all calculations for these investment terms were derived from historical investment data and not current or projected investment data, there is no basis whatsoever to suggest that these investments will be today's or tomorrow's low Beta, high Alpha, low Standard Deviation, Efficient Frontier investments.

The most that can be said about the proposed investment plan is that if the investor had owned the recommended investments in the past during the historical investment analysis periods he or she would have done well; however, there is no basis whatsoever to conclude that investment history will repeat itself and that if the same investments are purchased today that they will do well in the future.

As for a responsible and thoughtful analysis of the investment future, the advisor has given it little thought and has given no consideration to the investment future with regard to the current recommended course of investment action.

Future recommendations will be made by retrieving the most recent investment history, by chasing Efficient Frontiers, and by creating pie charts to demonstrate to you why you should change current investments to be in more recent investments that did well in the most recent investing past.