I manage mine and my mother's investments, which is pretty easy given my strategy. For years, I paid brokers 3-5% to advise on stocks and funds. The investments were always measured against "the market" - some did good in the short term, but none "beat the market" in the long term once you factored in funding fees and expense ratios (there's a reason nobody has ever one Buffet's challenge). Then, I was hit with an epiphany - if the measure of performance is always "the market," why not just invest in the market. So, a few years ago, I moved all of our money into the Vanguard S&P 500 ETF (VOO); it has zero funding fees and nearly zero (currently at .03%) expense ratio. With the funding fee and expense ratio, I'm already more than 5% ahead of where'd I'd be with more traditional investing.
I disregard the conventional risk strategy of diversification for two reasons: 1) the various investment sectors are incredibly interdependent these days - one goes down, they pretty much all go down; 2) the S&P has never been down over any 10 year period.
Being a financial advisor trying to beat the market is a suckers bet also I have never seen anyone charge 3-5% a year. There are some individual investments with fees that high for instance a variable annuity that you pay extra for a guaranteed income or minimum death benefit. But never for just managing your money.
We earn our fees for keeping people from making impulsive stupid decisions like I put in a previous post on this thread. That advice has saved my clients tens to hundreds of thousands of dollars. There is a reason the average investor earns less than 4% while the S&P 500 has averaged about 10% over history. They buy at the top of the market and sell at the bottom because they panic.
Actually your statement that the market hasn’t lost money over 10 years is incorrect. From January 1st 2000 through January 2009 we experienced the first time the “market” was down ten years later. Now how would you react if Jan 1, 2000 was the day you retired. You now have negative compound interest and could be out of money in the next ten years. While a diversified portfolio with stocks, bonds and cash averaged about 8% in that time period. But when the market is down 50% over three years a very large portion of investors panicked out and made those losses permanent. We also saw those retires kids invest much too conservatively and get significantly below market returns in the recovery.
Today with the run off the bottom last year and the frothiness with the new investors throwing money around at any idea that they hear on snap with no research is going to end at some point as badly as the tech bubble. Last week Elon Musk posted something and people thought he was talking about a penny stock and on Monday the stock was up like 800% and went from like a million dollar market cap to 100 million in a few hours. That is the definition of a bubble.
No investing is not rocket science but most people aren’t equipped to make the best choices for them selves because they don’t know all of the options available to themselves. For instance someone retired with more cash than they need for two years. Something that is quite common today. They can significantly increase their income and protect their heirs with estate puttable bonds so at their death even if the bond is down 50% the heir would get the full face value by giving the bond back to the company y that issued them. If the bond is worth more then you sell it in the market with the stepped up cost basis from the time of death. There are annuities that let’s say hypothetically you put in $1 million and at your death between the management fees, a bad market and taking out more money than you should have they will pay the beneficiary the original investment amount just like the estate putable bond I mentioned above and if it’s worth more your beneficiary gets the stepped up basis too. These are just two things that the average investor has no idea about.
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You are right, my statement about 10 years was wrong.
With that said, were you an advisor during the aftermath of 9/11 or the housing crisis of 2008? What common investment strategy would have made money across those world events without a crystal ball? There are certainly strategies that would have reduced risk of loss, but it is still a loss. Not to mention, those same strategies would also at least partially shield the investor from the substantial gains that began in March 2009.
I agree that some people need protected from their own poor decisions. That should not be the default; that is what has lead our country to the social security crisis we have. I am definitely not one of those people, and the fees associated with management of finances is definitely not worth it to me.
I suppose I'm not the average investor. I got serious about understanding my investment strategy during the 2008 crisis and went in strong in March 2009. Since then, my TSP C fund has had an annualized return of 16.9%, my TSP S fund has had an annualized return of 18.7%, my kids' 529 plan has had an annualized return of 13.7%, and the S&P has had an annualized return of 13.96% (all percentages may not be exact, but are pretty close for comparison's sake).Again there is a reason the average investor has a return of about 4% when the market has averaged about 10%.
I shake my head every time I look at this thread with over 5k posts. Hopefully some of them come over here and read the Vanguard advice.Funny story, my 22-year-old son is killing me right now. He is doing the day trading type stuff with very small amounts of money but his last four trades average up 80%. He sent me over this thing that he’s going to do AMC calls and two days later he sells it for a 150% profit.... and he is complaining because he sold it too early he could’ve been up much more than that.
before that it was gamestop and Southwest Airlines calls.
it’s hard to tell him that that is not investing.....