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if they are getting better performance for that money in fees then the fees they pay are well worth it.
The problem is that most active managers fail to beat their benchmark. Hence, index funds, where you most likely just under perform the benchmark by the low fees.
The downfall of many trying to actually save for retirement is trying to be more sophisticated and complicated then their abilities allow them. It would be a lot simpler for millions of folks if they had the best low cost investment funds available to them and the could do a simple three portfolio fund for life. Might not beat the market but they would beat what many are doing otherwise. Not all but many would be better off. However they have the sleight of hand choices to help someone else make money.
The problem is that most active managers fail to beat their benchmark. Hence, index funds, where you most likely just under perform the benchmark by the low fees.
You are jumping miles ahead assuming folks even know what a mutual fund is.
We are not talking fund managers ,we are talking advisors who can help these people put a functioning plan together and most important guide them
keeping them in the game, getting them to rebalance when markets are plunging.
Most folks do the wrong thing at the wrong time left to their own devices.
They need guidance and handholding and that is worth every penny for them.
You are jumping miles ahead assuming folks even know what a mutual fund is.
We are not talking fund managers ,we are talking advisors who can help these people put a functioning plan together and most important guide them
keeping them in the game, getting them to rebalance when markets are plunging.
Most folks do the wrong thing at the wrong time left to their own devices.
They need guidance and handholding and that is worth every penny for them.
In essence, advisors are creating a mini-mutual fund. If the majority of active managers can't beat their benchmark, I highly doubt an advisor can. Otherwise, they'd be managing an active mutual fund.
if they are getting better performance for that money in fees then the fees they pay are well worth it.
to many take their own knowledge and capability and apply it to everyone. the fact is most people would be ahead if they found the proper help and paid a fee compared to how they do alone.
you see every day here how folks are crying about all the money they lost in the downturn.
the fact is they should be up but their own actions hurt themselves.
I don't even open the hood on my car anymore , I take it to the dealer and they do what they have to.
someone who has mechanical ability should never think that I will work on my own car.
I have no interest in doing it , I lack the skill and I do not want to spend the time.
investing is no different.
there is a reason most small investors have gotten only 1/3 of the returns of the funds they were in.
The man speaketh truth!
Those are probably some of the same ones who believe everything they read and incessantly scout, quote and link myriad Internet sites as if that's all they do in life and their and everyone else's financial futures depend upon all this sage advice, most of which appears to be opinion.
It still amazes me that we somehow escaped losing so much as a penny during either of two major market downturns and even made money during both lf them without such "counsel." Blind and beginners luck I guess. Or maybe we just paid attention.
But, you're right, the right financial planner will do more than just make a plan for your investments. I was helping my SIL with their retirement plan, getting them to refinance their mortgage (was 7+%), get them out of a full service broker who set them up with front loaded funds with high expense ratios (gains went to these), and confirm they had enough to retire (he on disability, recommended they go with a lawyer after being disallowed). I could have done more, but they thought they were imposing, wanted to be grown-ups and got a financial planner. AS you've said, not everyone can do it for themselves.
life cycle funds are still better for 90% of those who are out there with the very little knowledge they have or lack of a plan.
most of America needs someone to buy and manage as they are not capable of doing things on their own.
they can not even stay put in investments when things fall ..
based on what I have seen being on the 401k team at our own corporation the less you leave folks to their own devices the better the masses do.
+1. Sad but true. It's amazing how even otherwise very smart people don't take the time to learn how to invest wisely. Long term investing is not rocket science, though the methodology and the discipline to follow that methodology are not one in the same. Many people who understand the methodology (Bogle for example), lack the discipline - and succumb to panicking and sell/buy at exactly the wrong times.
I watched most of my employees mismanage their 401ks year after year despite all the education we provided. Almost all of them acted on "hot tips", random financial news and looked for silver bullets - almost guaranteeing they'd fail. They timed the market, sold low, bought high, chased sector rotation, ignored asset allocation and every other basic mistake in the book.
not only are most people financially ignorant and it would be worth every penny in a fee to them to see a planner but even knowledgable people here screw up and they should know better.
the fact is many of the things wall street spews in methodology just hurts people more than it guides them . i have stated many times what i think about aged based allocations.
one of the things you mentioned MIDPACK that is supposed to be a golden rule with investors hurts them more than helps.
that buy low sell high myth has hurt more folks than it helps. it usually executes as buy low and sell lower.
the real saying should be an object in motion stays in motion until its not. buy high and sell higher should be the mantra.
buy low sell high is a great thought on paper and hurtful in execution.
when the trend is down that trend is down and it can be quite powerful . thinking you know what low is ,is just plain nonsense.
in 2008-2009 we thought buying low was after we fell 1000 points. so when it fell another 5000 many of those buy low sell high amateurs bailed and ran.
they bought low and sold lower.
when the trend is down ,low can be anywhere as the momentum is down..
but the reverse is true and more money is made buying high and selling higher.
why ? because like the odds of trying to sell a stock at the exact top which is very tiny ,the odds of being that last guy on an upward run is very tiny too. you can always sell out at a profit unless you are so unlucky to be the guy at the end.
which odds are better to you ? catching the low and buying or being the last guy in line at the top? neither stand a great chance so you want to go with buy high and sell higher for the most part.
we want the odds in our favor which is odds are we will not be that guy last in line at the top.
wall street is filled with great sayings and useless executions.
much of what has been the rules for so many years are turning out to be false as time goes on.
MIDPACK i am sure you read the works of dr pfau and kitces and follow the discussions on our other common forum . they are constantly finding what we believe and follow is false.
data is showing retirees even do the wrong thing when we believe it has to be right . we reduce equities as we age out of fear of losing our money that we cannot replace.
only problem is for 146 years retiree groups had the opposite problem, they ran out of money being to conservative and rarely if ever ran out of money being invested in broad indexes and holding withdrawals to 3.5%.
even 100% in an s&p 500 index has never left a retiree with a break in that 3.5% income stream including the world wars, the great depression , the recent meltdown and any combo of worst case scenerio events that hit us like those who retired in 1966 saw.
there is an emotional side of things too so we are not going to put 100% in the markets and stay up at night as it swings big time up and down. but that does not mean what we are doing is the correct thing by avoiding that volatility , it is just the human thing.
the financial world is turning out to be a very different place than we all were taught it should be and folks have to learn that they have to have an open mind to learning.
many just close there eyes and continue to believe their own bull-sh*t and never get it, they are wrong. they will just argue with everyone who does get it.
they will do this even as the facts are acting upon them that very moment.
they will blame the fed, the gov't, the markets ,etc etc . it is never the fact their knowledge was never updated and they are chasing ghosts with their views..
Last edited by mathjak107; 08-09-2013 at 03:49 AM..
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