Who does your investing?

[Vladimir]

Having someone manage your money is an interesting experience. Especially if you have done it yourself in the past. What you "think" you would do is sometimes significantly different than what you ACTUALLY do if you manage your funds. Thus the reason I use a shadow account. Yes, it takes work - the same amount of work as if I was actually managing the funds. But it is the only real way to know if you are getting what you are paying for from the money manager.

 

 

So Jack what did you learn when you started shadowing?? I am just interested in generalities. How did you deal with the bias of having information on what your managed account was doing versus the shadow account??

[FULLTIMEWANABE]

Fool me once, shame on you. Fool me twice shame on me. Case of twice bitten now very very shy of FA's, but still believe they can't all be tarred with the same brush. Can they?

 

Up until 18 years ago used Manulife FA, talked a good talk. Prior to that Standard Life 25 to 30 years ago and watched our investments eaten up in fees and go south based on both advisors way worse than the overall market averages performed during the same time frames. Decided to self direct, after lots of reading, studying, attending trading courses, and learning that 90% of fund managers perform at worse than the S&P500 index etc. Of course before this didn't know like most folks about how them churning the fund cost us, MER's, Front Loading/Rear Loading Mutual Funds and so on and so forth that weren't years ago highlighted to us.

 

Opened up TD Waterhouse Brokerage Accounts 18 years ago and been doing it all myself including our children's TFSA's, RESPs ever since. Made a lot of mistakes at the start, mainly due to emotions, but learned a ton in the process.

 

As our circumstances are soon to be changing exponentially, (no longer unlimited internet or being glued to the Business News Network) we are now at the stage where we would love to find a F.A. that has genuinely consistently performed better than the overall market returns after fees have been deducted. If we can't find that needle in a haystack/diamond in the rough, based on our experiences in the past with two different companies in two separate countries, we will likely create a diversified bucket of Indexes/ETFs, and dividend aristocrats - briefly reviewing on a monthly basis with a more in-depth analysis on a quarterly/bi-annual basis.

 

I do wonder in another 15 to 20 years how adept the mind might be to manage our current set up, and whether by then our youngest daughter will show some interest into how her monies have miraculously grown exponentially so far without her doing little more than initial deposits (LOL).

 

Horses for courses and we all have different comfort levels at different stages in our lifetimes when it comes to handling our investments. For us I have found the Keep It Simple and If It's To Be It's Up To Me method has worked best thus far, but for sure would love to find a wonderful money manager to take it all over. Reading Kirk, Jack, Dale&Mark and Dennis&Nancy, it seems in this day and age with more transparency this could be a strong possibility, just where to start looking?

 

Our biggest risk exposure the way we are right now, is if anything happened to me before hubby - he wouldn't have a clue other than to go to the girl at the bank and ask her to liquidate it all as is where is and earn 0.1% likely till he joined me. Quite likely he'd do it on the day the markets hit their lowest in the past half century!

[TheDuke]

I see only one person gave an answer to my question about rate of return they get from their adviser doing their investments I will show mine anyhow.

I do my on investments, but what that means is that I only have index funds both for bonds and stock market. Therefore I am not able to "beat the market" but I sleep easy at night.

I do have a stock utility fund that has paid .06 percent a month after month and originally sold for $10 a share. The share price has been as low as $9 and as high as $10.60. To me it is the same as a bond fund.

Last year on my own, I had a total overall of 11 1/2 percent return with zero cost to a adviser. There is no need to reallocate except once a year but that isn't necessary. I don't worry if the market goes up or down.

In 2008 I didn't worry as I lost little but was in as the market recovered.

I don't need a yearly meeting with anyone, nor worry about tax issues as I don't sell or trade etc.

Smart investors recognize this way of investing and know it is not my idea, it is John Bogle's idea. If you don't know who he is, you shouldn't be in the market.

[BooneDocks]

it is John Bogle's idea. If you don't know who he is, you shouldn't be in the market.

I didn't know who John Bogle's was; guess I should be sorry that I invest.

 

As I see that he is the founder of Vanguard, I will note that Vanguard was mainly built around the theories of Burton Malkiel who wrote the book, "A Random Walk Down Wall Street" -- a great read for investors (but you may be able to invest and should even if you haven't or won't read it). Malkiel eschewed the principles of technical and fundamental analysis positing that if they really worked others would figure them out, use them, and bring the markets back into equilibrium anyway -- "The Efficient Market Hypothesis". The index fund is the practical application of this hypothesis.

 

I ascribe to the "the efficient market hypothesis" which makes my investing very easy. I simply buy the broadest base of index funds that I can and hold them. But I understand that most simply cannot bring themselves to believe that the market can't be beaten ongoing and will always be trying -- that's why there are so many brokers and advisers. There are a few who do regularly beat the market but most of them in doing so are unable to cover the additional transaction cost of trading versus buying and holding. And the very rare fund like Berkshire Hathaway has been able to beat the market, even considering transaction costs, over an extended period of time. But the bigger the fund becomes, the harder it is to keep outperforming.

 

I haven't felt like venturing away from my index funds lately but if I did, I still wouldn't pursue individual stocks. If I wanted to try to beat the market, I would look at sector funds and try to pick which sectors of the economy I felt would out pace the overall economy and become even more prominent going forward. In this fashion, one would still have the diversity of owning a large portfolio of stocks and your only risk would be for the sector versus the market as a whole.

[whj469]

I have read that the vast majority of financial advisors, including mutual fund managers, don't beat the

index averages! This is nothing new as I have been reading this for over 40 years. I use 100% no load

mutual funds now after having bought and sold stocks and bonds for many years. I know a few people who only put their money

in index funds like the S&P 500, which have no sales load and very low management fees because they are not managed.

I feel that I have done very well over the years by keeping a long term objective in mind. Even as I am older now, 65, I don't review them very often.

I have about 45% in bonds and 55% in several different stock funds and I don't look for that to change much in the future.

[Kirk W]

I see only one person gave an answer to my question about rate of return they get from their adviser doing their investments I will show mine anyhow.

I do my on investments, but what that means is that I only have index funds both for bonds and stock market. Therefore I am not able to "beat the market" but I sleep easy at night.

I just went online to check and my 3 year net rate of return after all fees and commissions is 11.76%. For calendar year 2014, the net rate of return is 7.16% increase including our annual required disbursement. If you add our withdrawal back into the figures, that then pushes the annual return to just under 12%, in spite of the fact that the withdrawal came out before one of the largest growth spurts that came late in the year. And all of this with no activity on my part beyond reading the emailed reports, going online to observe the activity results and a quarterly phone consultation.

[soos]

Our rate of return last year was 11.6% doing it all ourselves.

 

In each of the last 5 years we usually beat the S&P by a little, or come close to it.

 

Sue

[TheDuke]

BooneDocks: John Bogle not only started Vanguard but started Index funds with the knowledge that mutual funds sometimes beat the market and other times do not beat the market but index funds in the short and long run beat mutual funds. So since you invest only in index funds you have followed Bogle's advice without knowing about it. Good for you.

Actually I posted the comment about John Bogle to make someone read about him and why he is considered the father of index funds.

[Randyretired]

Comparing returns without considering investment types is like comparing apples and oranges. Each is an investment but beyond that the different types have much different returns, risks and timing. The current bond market has me investing in other areas but we have a plan and income sources that we feel allows this and still allows us to ride out periodic down turns. If the bond market were to significantly improve I might invest some funds there. Another consideration is taxes. This also drives a lot of investment types and impacts the changes I might make. A lot of our funds are in taxable accounts and low cost index funds have proven difficult to beat so the majority of our stock funds are invested there. However, I still remember municipal bonds that returned around 13%.

[BooneDocks]

BooneDocks: John Bogle not only started Vanguard but started Index funds with the knowledge that mutual funds sometimes beat the market and other times do not beat the market but index funds in the short and long run beat mutual funds. So since you invest only in index funds you have followed Bogle's advice without knowing about it. Good for you.

Actually I posted the comment about John Bogle to make someone read about him and why he is considered the father of index funds.

 

Yes, Vanguard was strongly influenced by The Efficient Market Hypothesis of Burton Malkiel.

[DogFather]

I have read that the vast majority of financial advisors, including mutual fund managers, don't beat the

index averages! This is nothing new as I have been reading this for over 40 years. I use 100% no load

mutual funds now after having bought and sold stocks and bonds for many years. I know a few people who only put their money

I feel that I have done very well over the years by keeping a long term objective in mind.

The reason financial advisors, including mutual fund managers, don't beat the index averages, is the fees they charge. The financial markets are run by so-called professional money managers (MBA types, from Harvard, Wharton & U of Chicago). They hold over 80% of exchange traded stocks, in mutual funds, pension funds and with other big institutional investors. The rest is mostly owned by very savvy people, who can compete in that environment. So you have very skilled and educated people all competing against one another! That is what makes the market efficient. You can avoid those fees by buying the Total Stock Market Index. Vanguard pioneered these funds for the individual investor, but you can buy them at Scottrade, T Rowe Price etc. In the form of an ETF (exchange traded fund), or a mutual fund. To me there are about 4-5 areas to invest in: US Stocks, Foreign Stocks, US Bonds and REITs. Some would add Precious metals (if you can buy at the right time, which is very hard to do). So, an asset allocation, like 50% US Stocks and 10 - 15 % in each of the rest. All in index funds, and all for the long term. The idea of listening to Bob Brinker is a good one. He has done a good job for his listeners in the past. For instance

he suggested in 1999 (as did others) the market was getting pretty high. He then suggested investors get back in, in 2003. When I lived in CA, where Briker broadcasts from, I began to think he was a self fulling prophecy. He says the market is too high, so people see and the market goes down. Then he says buy and the market goes up. But, I don't think enough people listen to him for that to be the case. Anyway, he has given out a lot of good info over the yrs.

[Smitty77_7]

I managed our 401K's, a few Rollover IRA's, our Real Estate purchases and our TD Ameritrade accounts while we were both still working.

 

My DW was very concerned about 'would we have enough', so we worked with about four to five different FA resources, and three to four online 'What if?' Retirement Planning sites. All but one, interestingly the group that wanted us to invest more with them, all indicated we were 'OK!' to retire...

 

The DW insisted that we shift over and sort of 'lock up' the bulk of our IRA's, as well as Rollover our current 401K's and Roth 401L's with a Financial Planner. She was more concerned with 'locking things down, and in, then she was on 'Returns'. So, for peace of mind, and to get her agreement to retire at 59 for me, and 54 for her - we did shift a large hunk over to the Financial Planner we both liked the most during this two year retirement planning journey. These are now spread into a mix of investments, some annuities, some hybrid variable life annuities. The amount we shifted over, even at a 1.5% return - will cover us. (Along with my pension, SS and her SS in the future.)

 

I retained our Real Estate to manage, and about 10% of 'money assets' in our TD Ameritrade Brokerage account. I use the Long Term profit from this account, to fund upgrades to our RV, and a few other fun related items. This 10% is skimmed off yearly (now year two, so not much of a track record on this), with anything I have not spent on the RV or 'fun' going back into 'park it for the future' investments.

 

I like individual stocks for this TD Ameritrade, with about 75% in different stocks. I have 25% mixed into three DRIP's that I harvest yearly to make available to invest in more speculative stocks.

 

Five years ago, I never thought I would have turned as much of our 'money assets' over to a series of fixed vehicles lightly managed and re-balanced by our FA. But, it allowed us to retire and keep the DW 'peace of mind'. And being older then she is, if something happens to me, she has someone I feel comfortable with her working with in the years ahead. (He is in his late 30's...).

 

Our costs, are substantially higher then they were when I self managed our IRA's, 401K's and Roth IRA's - with very few exceptions, I very seldom had Cost of Funds exceeding .75%. I would estimate that the bulk of money assets, average out now to 1.5-1.75% now. But, the FA gives the DW the confidence to feel comfortable now...

 

You do what you need to do, as individuals and as couples. I compromised, and was still able to retire - so consider this a Win/Win.

 

Best to all,

Smitty