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How many of you self manage your investments?


Kirk W

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The various discussions have made me wonder just how many of us actively manage our invested funds, especially once you go on the road fulltime? I'm not so much thinking of the "self directed" IRA/401k where you have a group of different mutual funds to shift money between, but more the actual buying and selling of either investment funds or individual stocks. If you do choose to do the management of your funds, do you then invest in individual stocks, or do you stick to mutual funds? Are you managing all of your investments, or do you have a separate IRA/401k with professional management as well as some invested funds that you control directly?

 

The other factor that may play a part in all of this is the age of each of us when we make that decision. I was far more inclined to take risks back when I was still employed, and as the years have gone by I have become much more careful and conservative in my chosen investment approach. Have you found this also and changed your strategies with increasing age?

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I have always managed my own investments. At first, say in my 20's, I only invested in mutual and money market funds. Years later with more money accumulated and gaining confidence in my investment skills I started investing in individual stocks.

 

Now I find that my full timing lifestyle doesn't give me the time to follow and keep abreast of individual stocks and have paired my portfolio down. Just last week I was telling Cathy that I thought it was time to sell my Apple and put the money in one of my ETF's. I didn't get around to doing it and the next day it reported earnings that missed expectations and dropped around 10% in one day.

 

I have considered paying 1% of my balance each year to a professional to manage my savings for me. Right now, I still think I can get a return by myself that would beat the net after the fee of using a professional money manager. But it's a close judgement call. I could go either way. Looking around me, at brothers, sisters, and friends, etc. that I might give advice to, 95% I would probably suggest they carefully choose a professional to guide them.

 

Jim

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Kirk when I was in my late 40's (age 66, now), I took our accumulated 401K & 403B funds and split (rebalanced) them - Roughly Half stayed with a long time trusted Financial Advisor and the other half ended up 'under my management' mostly in TIAA-CREF funds which I fully & actively managed. I maintained that balance for future deposits until we quit working three years ago.

 

I ended up never engaging in individual stock investments/transactions as it became a "busy" time in life and I did not have the time to study the market well enough to develop an investment strategy. I felt more confident with the CREF Mutual Funds, and did make positional changes there that worked out to be beneficial. The funds left with the Financial Advisor have done well enough, and are still there to this day.

 

The FA funds are in areas that provide defense against market decline and hopefully some return. Funds I manage are in Money Market funds simply because of what I view as extreme market uncertainty.

Jim

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EVERYBODY self manages their investments. Even if it only the choice of financial advisor you use.

 

Managing investments is not rocket science. As I have gotten older I have quit being so "active". In the long run I was much better off moving slow.

 

I have given up on individual stocks, you really have to be right TWICE. First the purchase of the stock and second that other people will LATER agree with you. I have made money on individual stocks based on "inside knowledge". The interesting point, was that it was always for ANOTHER reason. Really folks on Wall Street are not that smart, they have rigged the game!

 

In one case, a computer company got a long-term contract that would provide 40% increase in earning over the next DECADE. The stock did NOT move. Then they announced that they would start building PC's and the stock took-off for the races!! They dropped their PC line a couple of years later since they could not compete in that market. That experience, pretty much made me realize how difficult picking individual stocks can be for the average person. Yes, I made money but for the wrong reason and really that means I was just lucky.

 

I strongly recommend that people listen to Bob Brinker for three hours. After a couple of months you will be amazed at how much you will learn!!

 

You really do need a basic understanding of tax law and investments just to know which financial advisors are "sharks". My investing got a lot better when I finally decided to apply my economics background to investing. That made it a lot simpler!!

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I've always managed my own investments and continue to do so in retirement. Yes, age and retirement have changed my acceptable risk profile. When I was working and earning much more than I needed to live on, I invested in a wide range of assets, including individual stocks and speculative real estate. These days my primary goal is protecting my existing nest egg, so it lasts as long as I do. I'm no longer concerned with growing it further by taking on more risk. I'm much more conservative now than I used to be, and hold no individual stocks.

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I have been my own FA since the 1980's. This is timely as I just reviewed my last 10 years of investments and compared them to the Dow and SP500. I won't reveal how good or bad I did as the last time I posted that, I was shot down as "anyone can post anything here".

I am a firm strong believer in Index funds. A lot of investment managers have a lot of their own personal funds in index funds. Both Bogle, and Buffett have their personal funds in them. There are very few FAs that have done as well as index funds over any substantial period of time like 3, 5, 10 years. Dick Davis has a book that is kind of out of print now, that lists 28 major investment advisors that have their own money in index funds.

Following are 8 lazyman portfolios.

Paul Farrell is a senior investment columnist for MarketWatch who prefers "Lazy Portfolios." Below are ten-year annualized returns ending today for 8 portfolios recommended by 8 different investment authorities that he posts about.

Aronson Family Taxable ------------6.62%
Fundadvice Ultimate Buy & Hold--5.66%
Dr. Bernstein's Smart Money-------5.88%
Coffeehouse--------------------------6.35%
Yale U's Unconventional------------6.87%
Dr. Bernstein's No Brainer----------6.45%
Margaritaville------------------------5.67%
Second Grader's (3-Fund)----------6.69%

 

The SP500 --- not only beat all the lazy portfolios with a 10 year return of 7.67% but you need to remember that most of them if not all have Bonds included which lowers their returns.

Myself, because of my age, I do 50 Stock index and 50 Bond index.

If you are using a FA, you are losing 1%or more a year and maybe up to an other 1 % if they have you into funds that are not an index fund. Those funds charge anywhere from .40% to 1.5% to manage the fund.

The SP500 over 10 years returned an average of 7.57 %. 2% from 7.5 % is a lot of money. If you have $100,000 invested, you would have average 7,500 a year. With a fee of 1 or 2% a year, means you have $1000, or up to $2000 less each year even if they do as well as the SP500 which is probably not true.

Granted these are general numbers but you should be getting the idea. Also keep mind that SP500 is only stock investment and not bond.

So if you want to do it yourself, you have only a few choices to make initially.

1. What percentage in stock market index.

2. What percentage in Intl stock index if you so wish.

3. What percentage in a REIT index if you so wish.

4. What percentage in a Bond index.

If your FA has you in any of these, your work is cut out for you. Instead of wasting 30 minutes deciding yourself, you can use 5 minutes instead. Unless the FA is buying individual stocks, that is all the time he/she is taking to determine the percentage you and others should be at, and even then, it is still the same percentage. Take the 1or 2 % and spend it foolishly on something you felt you couldn't afford.

Maybe once a year you could readjust what percentage in each fund, but that may take a little bit of your time. Myself, I don't have to readjust my 50 50 percentage yearly, just once in a while. So what if it is 45 55 or 55 45 for a while, it will even out or I will adjust it.

Now some proponents of index funds suggest that 80% of you money is in Index and the other 20% in individual stocks. I tried that and it didn't work out very well. Some hit, Tesla, Apple, and some didn't, FIT. I don't do it any more.

I have read a number of books on index funds, and haven't found anything new, except some now recommend ETFs instead of index funds. They do just as well.

Now to answer Kirks questions.

Yes I manage all my money, especially since 1995 when I stopped working for any company and all my 401k/IRA were moved to or at Fidelity.

Yes I have become more conservative and am now at 50 Stock / 50 Bonds. I will probably keep it that way.

Although I am not full time and actually not even part time as of last year, I wouldn't need a computer to manage money, just a TV with news which I wouldn't use, and a phone call which would suffice.

I am in agreement with JIM2 as far as my philosophy goes.

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I also use index funds for the majority of our investments. I tend to shun bonds at these returns as the returns don't keep up with inflation, especially after taxes. I am always looking for good investments outside of the market, such as real estate but that can be tricky. As we age I am not comfortable with large investments in individual stocks.

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Very good question. I have managed my investments for years and felt like I did quite well. However, at 76 I recently noticed that I had ignored investments that needed dealing with by simple lack of interest. And we just sold our main house in OR (haven't lived there for years) and didn't know what to do with the money so decided to go with Vanguard. Moved all of our mutual funds from Schwab and hired an investment advisor...but Vanguard charges only .30%, a fraction of most houses. All the money goes into index funds. And I can fire the investment counselor with a month's notice. I look at what the advisor has done and know I could do it myself very easily but I know I haven't been staying on top of it. I also know my wife would have no idea what to do if I croaked so she feels good knowing the financial part is taken care of. It was hard giving up control so it is still a wait and see, but I basically feel good about turning it over to a very conservative institution that has an unassailable reputation.

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Self directed here on all our investments since the 1990's: TFSA's, RRSPs, RESPs (last one cashed out last month as youngest completing Uni), as well have Canadian Dollar and US Dollar Margin accounts actively traded. Had a lot of our investments until recent times in Real Estate Revenue properties and construction builds (hubby builder). Don't trust FA whatsoever based on previous experiences and returns when compared to the S&P500 index performance, plus their Management Expense Ratios as well "churning" fees and it is well documented that approximately 9 out of 10 fund managers perform at worse than the S&P500 index so just makes sense to avoid losing a percentage of our returns to their MER's and other fees charged and just buy index and bond funds. Mutual funds MER's too expensive generally so avoid them also.

 

Intention over the next 3 years is to become less hands on with my trading (currently individual stocks, ETFs, Index Funds on Day and Swing positions), and aim to follow the Canadian Couch Potato portfolio for the most part, with at least 3 to 5 years living expenses put into an HISA (High Interest Savings Account) topping up as and when, to avoid potentially being forced to sell off in a sustained bear market. Vanguard funds in the 90's weren't accessible unfortunately to Canadians, otherwise we would have been heavily invested in them. Now in a fashion they are available to us, in very recent years, so intend to use Vanguard index funds for the most part, due to their low MER in the near future. Over the next half decade or so, I can see my moving away from individual stocks to maybe a half dozen index funds maximum but still monitoring these briefly in case of pending market reversal and either short or move to cash sidelines accordingly in the interim.

 

FWIW: If I am to depart before hubby, then all funds will get transferred into HISA's, as no one in the immediate family, has any interest in the markets whatsoever, they just want to be able to easily access the monies they need as and when. Likewise if we live into our 80's, we will likely be in all or close to, cash at that stage of our lives.

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When I worked I managed most of our investments, hands on. It was a mixture of funds and individual stocks, etc. It was in various investment "houses": Vanguard, Fidelity and Merrill Lynch (with an adviser). As time went on and we started to get nearer to when I knew we would stop work I started seriously "testing" our ML adviser. They always exceeded the returns that I could personally get. Even counting the management fee. They also exceeded the index funds in almost every year. So I shifted more money to that account and less that I had to "manage". And that is the way it is today. I don't have the time or interest to spend on the topic of investments. So I let them do it, and it has so far worked out (over 20 years). I do pay close attention to performance relative to various index funds and benchmarks. If it gets out of hand then I can take steps to correct it.

 

What to do really depends on your abilities and interest. A broad-based index fund can do well for most people with little additional risk (over average market risk). Just bear in mind that the market overall is RISKY. Especially as things stand today with the Fed propping up everything...and I do mean everything. You need to diversify your holdings outside the market, IMO. But that is just MY opinion.

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We have a FA through UBS and use their Strategic Wealth Portfolio. All I really pay attention to is whether, over time, my balance is increasing or decreasing. If I finish the year with the same amount I started with (or more), I'm happy.

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What to do really depends on your abilities and interest. A broad-based index fund can do well for most people with little additional risk (over average market risk). Just bear in mind that the market overall is RISKY. Especially as things stand today with the Fed propping up everything...and I do mean everything. You need to diversify your holdings outside the market, IMO. But that is just MY opinion.

Your opinion is pretty much the same as mine. And if you use a financial advisor who is fully licensed and not just a broker, they can diversify far beyond the stock market and many do so. So long as my investments continue to grow at least some, even with me taking the required annual withdrawals, I am satisfied that our advisor is worth the cost.

 

I wonder if the replies are representative, or just mostly reaching the self management readers?

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Kirk I am glad your happy with a FP.

 

Pleases could you explain this Quote.

 

Your opinion is pretty much the same as mine. And if you use a financial advisor who is fully licensed and not just a broker, they can diversify far beyond the stock market and MANY DO SO.

 

Since,I know you don't do your own hands on investing what has your FP invested in FAR OUTSIDE the stock market.. For you or for anyone. Really please provide a link to verify your statement, since I am not familiar with other options offered outside the market by FP since my neighbor is a FP.

 

Kirk I will ask this again until you give a response.

 

Trucken

TRUCKEN

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Well, I have always considered myself to be a conservative investor, but looking back, I did assume considerable risk by my choosing to invest in individual stocks, many of them small cap. However, as I aged, I increasingly shifted to no load mutual funds, today, index funds, still some large cap dividend paying stocks, and CDs (arrrrrrgh) my experience with FAs was not good, I finally figured out I could lose my money just as well as they could, cheaper too!

 

Carl

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Well, I have always considered myself to be a conservative investor, but looking back, I did assume considerable risk by my choosing to invest in individual stocks, many of them small cap. However, as I aged, I increasingly shifted to no load mutual funds, today, index funds, still some large cap dividend paying stocks, and CDs (arrrrrrgh) my experience with FAs was not good, I finally figured out I could lose my money just as well as they could, cheaper too!

 

Carl

 

Over time, it is very hard to beat the S&P 500. If you want a totally hands off approach and don't want to pay fees, investing in a fund that tracks the S&P is a good option.

 

I use a FA to hopefully gain a little on the upside and hedge my downside risk. So far it has worked out pretty well for me, but there are plenty of other alternatives. I guess at the end of the day I'd rather pay a point to have someone watch and manage my investments over doing it myself. It just isn't a fun thing for me, and I've also learned that I'm not very good at the risk management part of it.

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I wonder how many of us who are retired with a 401k have simply left the funds where they were before we retired? I know several of my former coworkers who have done that just continuing to use the management group that the employer did. The one I had was one with 7 different funds that participants could choose from or divide their money among, with a management company doing the day to day work. I chose to move my funds into an IRA to gain more direct control and to be able to choose my own managers, but I suspect that a lot of retirees just leave things as they were, but don't really know. That was a part of what I was thinking about when I asked the question. It may well be that many who choose to leave things as they were also don't read forums like this one?

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I wonder how many of us who are retired with a 401k have simply left the funds where they were before we retired? I know several of my former coworkers who have done that just continuing to use the management group that the employer did. The one I had was one with 7 different funds that participants could choose from or divide their money among, with a management company doing the day to day work. I chose to move my funds into an IRA to gain more direct control and to be able to choose my own managers, but I suspect that a lot of retirees just leave things as they were, but don't really know. That was a part of what I was thinking about when I asked the question. It may well be that many who choose to leave things as they were also don't read forums like this one?

 

I know individuals whom I believe left their money right where it is was simply because they could not decide what was the "best" allocation for them currently. On the other hand, I think some people adjust their allocations to be too safe after they retire. A lot of us retirees are going to live 30 or more years in retirement. Moving all or most their money out of stocks or stock funds into "safer" bonds, annuities, treasuries, etc. may not protect them adequately from inflation.

 

Jim

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Jim,

 

I agree with you. I watched my parents put everything into "safe" investments including selling an inherited stock portfolio that was performing nicely. They lived longer than they expected and just barely had enough to go into assisted living. I think if they had made different decisions they would have been fine.

 

We're set up with a balance of risks from quite safe for funds we need near term through to higher risk with funds which are for growth for the long term. Hopefully, that will carry us through with regular balancing to keep the segments aligned.

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Trucken: I can help you out there, at least a little bit.

"outside the stock market". He might have meant the US stock market and therefore all the foreign markets maybe in play.

He could also be referring to an FA that is part of a Hedge Fund. That then would include putting cash in foreign banks and then do the trading from there and not have to pay taxes on growth. That is part of what might be "AND MANY DO".

It might be having you invest directly in companies that are usually called Start UPs.

Without permission, I am including something that Jack replied about diversity.

"Gold, silver and real estate are typical ways to diversify, and we have used them all. (You can argue the metals...you do have to be careful and they should be a minor diversification in my opinion) A good small business may be another, but in my mind that is iffy. Personal loans work well if secured properly. Actually, we have been quite successful with small loans - but they need PROPER security and you have to vet the person well. They can be a pain to manage if not done right. There are many other ways to diversify, but those are the main ways that most seem to use."

Another could be buying mortgage bundles. (you know how that worked before 2008)

 

 

.

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Duke: your post is well taken. I only asked Kirk the same thing he has asked countless others, that it, no argument. Just clarify your quote. I wonder why he assume he thinks it's a argument.

 

I will respond to you information, but need too wait to see if my name shows up in the Panama Papers.

 

Trucken

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I should have added these:

Bernie Madoff plan which required a FA to get you in.

The Nigerian plan which required an email account.

The virus on your computer plan which couriously doesn't require you to have a computer, only a phone.

The "kiss your money goodbye" plan similar to the Madoff plan where you give all your money to a FA and he puts it into his account never to be seen again just monthly balances.

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Trucken: I can help you out there, at least a little bit.

In addition to your list there are also CD's offered only through brokers used by larger banks to fund very large loans quickly and at a higher interest rate than those found in the bank offering them. There are things like unit trusts, metals funds, both bonds & bond funds, real estate trusts, and a host of others that any licensed advisor can use. The reason that I didn't respond to the poster was the phrase choice appears to me as adversarial and challenging. I am happy to share information, as long as it is not asked for with intent to challenge my use of an advisor, as some here have done in the past. If that was not the intent, then I apologize to Trucken for misunderstanding the post. :)

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At the suggestion of my FA when I retired, I moved most of my market investments into tax free municipal bonds. The return can be a bit less in the long run, but the stability is pretty solid. The only stock market holdings I've kept are my very long term investments, Apple and Google bought at or near their IPO's, and a GE inheritance that pays very stable dividends.

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I don't use a FA and never did. In my younger days I managed my own stocks and bonds and did very well over the years.

During the past 10 years I have used only mutual funds, 100% no load funds. As I ready for retirement, September 1st, 2016,

I have most of my money in four mutual funds with a large nationally know mutual fund company, 50% in a bond fund, 30% in a large cap stock fund,

10% in a mid cap stock fund and 10% in an international stock fund. All four mutual funds are 100% no load without 12b charges. I no longer want

to manage investments. The money that I take monthly comes from the bond fund and I leave the stock funds untouched.

I have read that Warren Buffet has a trust fund for his wife which contains 90% stocks in a mutual fund and 10% cash.

If you don't understand investments then a FA may be required for you. I wouldn't turn money over to a FA under any condition. If

I required a FA it would be fee paid only. Other investments such as real estate trusts, closed funds etc. may have big commissions attached

and even large CDs don't pay enough interest, they are very safe. Tax free municipal bonds can be useful if they are not from that island! Good Luck

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