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"Think Your DIY Retirement Plan Can Beat an Adviser?" article

3K views 15 replies 7 participants last post by  mooneyflyfast 
#1 ·
#2 ·
I am going with W.Buffett's plans for his wife's inheritance when
he finally bites the dust.....

"My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's. (NASDAQMUTFUND:VFINX)) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers."
 
#3 ·
Kind of like asking if you can produce better food than a restaurant over the course of your life.
There are some epic chefs out there and there are a LOT of bad and failing restaurants. I know I have eaten at many and seen more than that fail. I've also trounced the performance that VP's at Smith Barney and Morgan Stanley did for me for 18 years...Unfortunately!
I think there are at least as many bad "advisers" out there as there are bad restaurants.
 
#8 ·
I'm not an adviser... but in the biz

But can still answer your question
Some of them:
-evaluate their success by assets under management (clients portfolio $$$ up or down didn't matter) - more clients = more commish $$$
this generally equates to amount of money they made at the end of the year
-I have seen some look for big commission sales pops - IPO's, variable annuity's or chase performance of the whats hot and make $$ on the trade.
this is a dying piece of the business but still happens

They exceed expectations not just when the market is going up - but when there is a big correction (Crash) - how much preservation was in the clients portfolio (only if the clients listen)
this is when I have seen guys get out of the business 00' & 08' for examples

They generally don't tell me when they screw up / under-perform
some of them have messed up royally and do things that get them fined or fired - which I have seen more than I like to discuss

If you really want to do your investing - go get a series 7 ...it will give you enough basic information to manage your own IMO ... but unless your in the biz and are reading and seeing the stuff they see everyday 99% of the avg people are costing themselves $$$

people just need to find the wolf they trust the most

This is not financial advice nor guidance... do not use a internet forum for decision making. Please seek professional advice.
 
#7 ·
Maybe divide the investments threeways. SOme to an advisor, some to SP500, and some to do your own investing. A lot depends on your age and horizon for investing. The younger you are, the easier it is.


Monty has this right... Start YOUNG.. learn as you go along.. 40s and 50s is NOT the time to start planning....
 
#9 ·
If you really want to do your investing - go get a series 7 ...it will give you enough basic information to manage your own IMO ... but unless your in the biz and are reading and seeing the stuff they see everyday 99% of the avg people are costing themselves $$$
I guess I'm a 1% er. Sweet. No I won't be going to "get a series 7." I've sampled both managed accounts and self managed for decades. I win by so much it isn't even close to debatable.

A little input from my accountant on retirement strategies and I'm good. Not to mention I will continue to earn 100s% more than my big league so called "advisers" ever did.

I'm a little bothered by sales pitches like this. Your back up evidence is another sales pitch produced by those selling advisory services without real numbers but with imaginary scenarios. Vangaurd sites a "potential" net improvement of 3%. OK. Not rocket science to realize that low cost investment, reduced tax liability and managing risk as they note "may" add 3% to one's bottom line.

These sales pitches and assertions to take one's own series 7 or you just don't get it sort of thing is not so different than the guys at the dealership encouraging my 78 yr old mother to do a radiator flush, change her rotors and pads, replace her tires, and another $600 of unnecessary services on her vehicle with 20,000 miles.
Yeah, she doesn't get it. She trusts them. But her kids with a smidgen of research can figure it out without getting a mechanic's certification.
Same goes for investing for many people.

I am thrilled with low or no cost investing these days and the wealth of knowledge on the internet. Advisers took advantage of too many people for too long. I like to push back on the you just wouldn't understand mantra.

Nothing personal. That's just my thoughts on that.
 
#10 ·
I get that there are a lot of things about retirement that most of us could use expert advice about. However this does not justify having an "investment advisor" on the payroll constantly at a percentage of portfolio value. There are fee based advisors and attorneys that you can consult periodically for advice. Over time a 1% fee makes a huge difference in portfolio value. For example, take a portfolio with an initial value of $100,000. Assuming a 10% return, at the end of 20 years the value will be $673,000. Assuning the same facts but with a 1% investment advisor fee, the end value will be $560,000. Was the advice you got worth $113,000? I don't think so.

I didn' see anything in the article to indicate that investment advisors reliably beat a broad index fund or low cost no load mutual fund.

While I am on my soapbox, There is no place in your portfolio for individual stocks. Your portfolio cannot possibly be properly diversified. It is very much more risky. Buying "story" stocks recommended by your broker or brother in law or that you saw an article about in the paper usually does not pan out--it will be a **** shoot.

If you need advice hire someone and pay them for it. For your investment portfolio slow and steady is the way to go. With a broad market index fund you absolutely will not do worse than than the market you are tracking. You will end up with more money in the long run. You will not lose sleep wondering what to buy or sell.

End of sermon and worth what you paid for it.
 
#11 ·
I admire those that manage their own retirement, I’m not one of those. I’ve been with my broker for 20+ years and have no regrets. I interviewed 5 or 6 advisers before I settled on mine, I gave them all a scenario that I wanted to see what they would invest in, moves they would make in a changing market and their commission fees/ year. I received some interesting scenarios along with some outrageous fee plans. My broker won me over when he said his job was not to lose my money and manage my account at a low cost to me. It has been a highly successful partnership with him doing the worrying and me getting a check on the 1st of the month while my fund keeps growing. Just my experience.
 
#12 ·
CMAN - no sales pitch from me, just trying to give different perspectives from the article

Its good to hear how well you have done in the market, and saved more from doing it yourself ... well done sir!

I am a big believer in smart beta factor based ETF - I use one that cost me 6 bps (0.06%)
I hate giving money away to fund managers that don't out perform the index
At the same time one should learn whats in the index and what they are buying.

For example the S&P 500 index (SPY is the etf ticker)
solid performance in 19' ... but most are surprised that you are really investing to the top 10% of the names in that index - those top 50 names make up 50% of that index

which is why I choose to use "FACTORS" or smart beta etf's to help with cost and outperform

This is easy when your in the business.... but If I was a mechanic, i would rebuild my motor when it wore out and save money ... instead I go to a mechanic to get the work done right - so I'm not broke down on the side of the road

Smart guys in all industries but more in those industry I would not trust to change my oil
 
#13 ·
Your smart beta fund at .06% costs $60 a year on a $100,000 investment.The one I use is the SPY 500 index. It is .0945 or $95 per year. Vanguard's 500 index is lower at .04 (40.00 per year.). I don't want to pay someone $1,000 a year to save me $35.

As I understand it Beta refers to the price volatility of a stock.The plain 500 index funds have a beta of 1. A beta of more than one is more volatile , less than 1 is less volatile. Are you aiming for more volatility or less? I believe that it is generally recognized that less volatile stocks go down less in a down market but go up less in an up market. More volatile stocks go up more when the market is up but also go down more when the market is down. A beta of 1 seems like the sweet spot to me unless you know the direction the market is headed (which nobody does) Do you switch from a high beta fund to lower (or vice versa) based on your market analyis?

Whatever the composition of the 500 index its performance over many years in both up and down markets) has been good enough to satisfy me.
 
#15 ·
I've managed my own investments for my entire life and was able to retire early with a nice nest egg. However, I spent a lot of time studying and learning along the way and still do. As my portfolio grew, my experience and skills grew along with it.

As pointed out above, a management fee plus mutual fund fees (which most advisors use) are a huge drag over time on the order of up to 2% typically. Compound that, and it's real money. I invest in individual dividend growth value stocks and, if anything, am over diversified, but I prefer that to minimize risk. The nice thing about individual stocks is there is zero friction vs mutual funds.

I also invest in the best stock picking newsletter in the business that has consistently beat the S&P 500 for ~50 years with less risk. So, beating the market plus no fees has worked for me. And if I screw up, there's no one to blame but myself. I prefer that to worrying about an advisor doing their job.
 
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