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Rundy, thanks for your detailed response. I did not realize that services like yours could be so reasonably priced.
Can you give any advice in general about the finding reliable financial advisors? As I explained I have had more than my share of disappointments in this regard and so have most of the people I know. Many of the "advisors" are very personable and are good salespeople. I just have not been lucky enough to find any that are also wise.
You are welcome and sorry to hear about your past experiences. There are many reliable FAs out there. You need to find someone who can display an investment strategy that you agree with and are comfortable with. I am not a good advisor for people looking for buy and hold strategies because I do not believe in it. We all buy insurance on our cars and homes....why not our investment portfolios which are often times worth more?
Once you find that person do your due diligence on their process and investment strategies. Make sure everything they say can be validated with proven track records. Take a specific look at the investment returns in early 2000 and 2008-09 when the last bear market occurred.
I would generally recommend trying to use a Registered Investment Advisor over an Advisor at a Broker Dealer or insurance company because we are required to be transparent in our fees and business processes. The RIA generally has more flexibility then someone who works at a large firm or insurance company. There are still reliable advisors at BDs and Insurance firms it is just they do not have to be as transparent as the RIA which is unfortunate.
Educate yourself on investing and read lots of books about it so you understand it. The more you understand the easier it is to determine who and how you want your money managed.
Do not fall for all the fancy designations. There are many advisors with a litany of designations behind their name that have blown up portfolios for different reasons.
I am prejudiced in this regard but look for an advisor who displays dynamic/tactical asset allocation strategies. The market runs in cycles. We are maybe halfway thru a secular bear market. I do not recommend anyone try to manage their own portfolio thru a secular bear market. It is easy when the market is going up but once it shifts if you are not proficient in a reliable form a technical/trend analysis you will probably get burned just like 08-09.
Thanks again for the great response. Unfortunately I don't think you helped very much or if you did I just don't know enough to understand. First it seems that funds are easily evaluated based on returns, but how does that apply to selecting an advisor? I certainly don't understand "dynamic/tactical asset allocation strategies."
I was wise enough or lucky enough to have most of my assets parked in cash when the market tanked in '08. I don't want to trust my wisedom or luck for the surprises in the future. I guess I don't expect anyone to have a crystal ball that works well. I don't expect to be able to time the peaks and valleys, but I do want to invest based on reasonable evaluations of the trends. At this point I am trying to decide if I can ride the market a while longer or I am getting too greedy and it is time to sell. I think I am getting close to the selling significant amounts. I plan to drop from 60-70% equities to around 40%, probably over the next year.
Thanks again for the great response. Unfortunately I don't think you helped very much or if you did I just don't know enough to understand. First it seems that funds are easily evaluated based on returns, but how does that apply to selecting an advisor? I certainly don't understand "dynamic/tactical asset allocation strategies."
I was wise enough or lucky enough to have most of my assets parked in cash when the market tanked in '08. I don't want to trust my wisedom or luck for the surprises in the future. I guess I don't expect anyone to have a crystal ball that works well. I don't expect to be able to time the peaks and valleys, but I do want to invest based on reasonable evaluations of the trends. At this point I am trying to decide if I can ride the market a while longer or I am getting too greedy and it is time to sell. I think I am getting close to the selling significant amounts. I plan to drop from 60-70% equities to around 40%, probably over the next year.
Sorry I am not helping. Funds are not easily evaluated based on returns. This is a mistake most investors make and they chase the hot funds and often invest too late. The key is identifying the macro and micro trends in the market based on your risk and developing an allocation strategy around it. The next key is minimizing drawdown. If you lose 50% in the market it takes 100% to get back to even.
If you want just PM me your # and maybe I can point you in the right direction after speaking with you. This topic is complicated and hard to explain on a chat board.
Take an investment course at your local community college, you can even audit it so that a grade isn't an issue. Amazing the amount of information that is out there, you just need someone to teach you how to use and evaluate it. Financial advisers aren't necessarily any smarter than the rest of us, they've just been trained. But remember, every financial adviser on the face of the earth wants your business because of the income it generates, not because they care about you as an individual. If they did, they'd offer to only take their fee when you made money and none when you didn't - don't see that being offered do you I'd gladly pay an adviser 25% of my return in good times and nothing in bad and you'd think, if they were all that good and confident, they'd take that deal in a heartbeat but frankly they simply aren't any better at prognosticating than the rest of us. They just have a better eye for identifying trends and understanding the technicals.
I also took a course..adult ed at the local HS. I learned some stuff....mostly just new vocabulary. The advisors teaching the course were sure to talk about annuities, portfolio management and other high cost products. I got a free analysis and counseling session. The analysis was so full of errors I just listened and left without any followup. I did get a lesson that free financial advise can be worth what you pay for it.
Take an investment course at your local community college, you can even audit it so that a grade isn't an issue. Amazing the amount of information that is out there, you just need someone to teach you how to use and evaluate it. Financial advisers aren't necessarily any smarter than the rest of us, they've just been trained. But remember, every financial adviser on the face of the earth wants your business because of the income it generates, not because they care about you as an individual. If they did, they'd offer to only take their fee when you made money and none when you didn't - don't see that being offered do you I'd gladly pay an adviser 25% of my return in good times and nothing in bad and you'd think, if they were all that good and confident, they'd take that deal in a heartbeat but frankly they simply aren't any better at prognosticating than the rest of us. They just have a better eye for identifying trends and understanding the technicals.
Not every adviser. I would gladly take you up on this deal.
I am a full believer in clients learning and educating themselves. I love clients who are bright and knowledgeable. However, many of you are making huge mistakes trying to manage your portfolios on your own. You will not learn enough from books and class to properly navigate this secular bear market. The licensing advisers receive is just an entry point to doing business. The real work is learning investment strategies that work in all types of markets. Do you really want to experiment with your own money? I am all about saving money but I do not go try to fix my own car, operate on myself, do my own taxes or represent myself in court to save a few bucks.
I feel it is also nice to have someone to speak with regarding investment strategies before, during and after execution. This market has had a nice run the past 4 years but many of you have short term memories and are going to get burned with what is coming over the next decade. Be careful if you are a DIYer.
I have a little different take on 401(K) management. Most employees investing in 401(k)'s are not stock experts. They are not in-tune with markets and are not able to to predict market movement. The are working their jobs and taking care of their families.
In my opinion, most people investing in employer provided 401(k)'s are best off researching and selecting several mutual funds offered in their 401(k) fund and then leaving it alone. While the investing employee is not a money-manager or expert in evaluating the market, trends and stock movement, the manager of the fund is. And they are doing their best to management the fund every day to bring the best possible return to the investors in that particular mutual fund. So in essence, you do have a professional managing your investment in a 40(k) mutual fund.
I think the most common mistake people make when they try to predict the market and manage their 401(K) on their own by constantly moving it around is that they re-act to what has already happened ... not predict what will happen. And by re-acting to what has happened, they too frequently get out after things have already gone bad. And then they get back in after things have already gone up. In the end, they've trailed the market and bought high and sold low.
I think most people are best off picking several good mutual funds and leaving it alone. That's what I did and I rode out the bad times and realized great gains the past 2 years as it's all grown back.
I have friends who moved out of the market after things went bad. Now that things have gone good, they are thinking about getting back in. Yes, they sold low and are going to buy high.
The only caveat I would make to this is to determine your risk threshold and your $$ need as you get closer to retirement and make adjustments to the risk you carry based on that evaluation.
For comparison purposes, my 401(k) earned a 15% return for 2012 and earned another 10.49% during the first quarter of 2013.
I have a little different take on 401(K) management. Most employees investing in 401(k)'s are not stock experts. They are not in-tune with markets and are not able to to predict market movement. The are working their jobs and taking care of their families.
In my opinion, most people investing in employer provided 401(k)'s are best off researching and selecting several mutual funds offered in their 401(k) fund and then leaving it alone. While the investing employee is not a money-manager or expert in evaluating the market, trends and stock movement, the manager of the fund is. And they are doing their best to management the fund every day to bring the best possible return to the investors in that particular mutual fund. So in essence, you do have a professional managing your investment in a 40(k) mutual fund.
I think the most common mistake people make when they try to predict the market and manage their 401(K) on their own by constantly moving it around is that they re-act to what has already happened ... not predict what will happen. And by re-acting to what has happened, they too frequently get out after things have already gone bad. And then they get back in after things have already gone up. In the end, they've trailed the market and bought high and sold low.
I think most people are best off picking several good mutual funds and leaving it alone. That's what I did and I rode out the bad times and realized great gains the past 2 years as it's all grown back.
I have friends who moved out of the market after things went bad. Now that things have gone good, they are thinking about getting back in. Yes, they sold low and are going to buy high.
The only caveat I would make to this is to determine your risk threshold and your $$ need as you get closer to retirement and make adjustments to the risk you carry based on that evaluation.
For comparison purposes, my 401(k) earned a 15% return for 2012 and earned another 10.49% during the first quarter of 2013.
Anyway, it's worked for me.
I completely disagree. Has it really worked for you?
What were your returns during the 2008-09 bear market. Most people who did their own research got slaughtered and lost 30,40 and 50%. The money managers offer very little risk management in the mutual fund when the market turns bearish because they can not hedge or shift to cash and/or treasuries. Many of these "money managers" are lucky if they beat their benchmark each year.
The best way to think of managing your 401k is similar to playing Fantasy Football. You are the owner of the team. The market is usually on offense and sometimes defenses. Depending on whether the market is on offense or defense you need to pick the best players (mutual funds) on the field. The key is overweight/underweight based on asset class trends. Most people who are DIYer do not even have the proper asset allocation once they start investing much less know how to pick the right funds.
I do not know anyone who keeps the same players year after year on their fantasy football team. It requires research, knowledge, and statistical research to find the best players. Football is a tactical game and so should be managing your 401k.
What most of you are doing is picking a group of players and leaving them on the field forever with no changes. You always keep the offense on the field. Those who use the buy and hold approach it would have taken you 4 years to get back to even. Again you are lucky because of QE that has artificially boosted this market.
Championship football teams are always tweaking their rosters and must have high quality offense and defensive units. No different in your 401k. When the offense is on the field are you using the best players. I overweight these better mutual funds and have outperformed the market because of this approach.
Keep in mind that just like football, DEFENSE wins championships and most of you will never know when to put it on the field. With the approach mentioned above you are just an average or below average team and will only be lucky to win. Investing is NOT as easy as the "boggleheads" claim it to be. They are drinking Kool Aid and will get crushed again during the next market downturn which is coming in the future.
It worked better for me than for my friends who reacted to what had already happened and got out after the market tanked. They lost out in two ways: (1) Because they were only able to react to something after it happened, they also did not get back into the market until after it had already made a substantial climb back out of the hole. So they lost out on some of the gain. (2) they didn't continue to buy more shares in the mutual fund when the prices had tanked. So their gains were exponentially slower once they did re-enter.
I'm no investment expert. But in taking a long-term view of my 401(K), I don't worry about the short term ups & downs. And I know I can't predict them, I can only react to them after they've happened. And if I try to do that, I would always be buying & selling on the wrong end of the up or down.
Yes, over the long term it has worked fine for me. And I believe it will continue to work well for me over the next 10 years as well. I also would say that I don't just leave it totally alone. I do review my allocations and their performance compared to the other funds available to me through my employer provided 401(k).
I also have friends who have paid someone to review their 401(K) allocations and make re-balancing recommendations. That's fine. To each their own. But they have not had better results than I have with my approach. They've had the same results or lower. But I would also say I have a very high tolerance for risk and market swings. They don't bother me in the least because of my long term approach.
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I'd gladly pay an adviser 25% of my return in good times and nothing in bad and you'd think, if they were all that good and confident, they'd take that deal in a heartbeat but frankly they simply aren't any better at prognosticating than the rest of us. They just have a better eye for identifying trends and understanding the technicals.
