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Old 04-24-2016, 02:27 PM   #61
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Remember that we on this forum set the bar pretty high with regard to math skills. We are mostly well-educated introverts, and introverts tend to think math is actually interesting. Most of us have skills well beyond those needed to understand a statement like "If I allocate 40% to bonds and 60% to stocks, my portfolio has an X% chance of surviving 40 years", but I bet that the majority of the population does not have the math skills to really understand what that means, much less to do the legwork, e.g., FireCalc, needed to figure that out.
+1. I doubt your average Joe considers making spreadsheets of projections fun.
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Old 04-24-2016, 03:36 PM   #62
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with a little time a person could do it himself and avoid the fees. The original poster immediately replied that she was 'not good at math' and therefore needed the advisor.
I was chatting with my doctor at my last checkup and somehow the conversation got around to finances. I made some general comment about which sectors were due to go up and which were overpriced. He got a glazed look in his eyes and said something like "Oh, I don't pay any attention to that stuff. My guy takes care of it for me -- there's no way I could find the time."

Thinking about it, I decided he was probably right. Here's a guy who, when not actually performing his medical duties, spends a very large chunk of his time reading medical journals, attending continuing education, and generally being a professional. He also has a family with two kids who are both into soccer, and he volunteers as a ref to stay tight with them.

With all that going on, I think he desperately needs a very simple DIY portfolio that he can mostly ignore, but he would have to sit still long enough for someone to convince him of that. It certainly wouldn't be me, on my annual 45 minute checkup.

So this IMHO is a good example of where a good FA can be useful. Maybe costing more than really necessary, but still a worthwhile expense.
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Old 04-25-2016, 07:04 AM   #63
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Hummmm.... I actually seek out advice from select others, but always make my own decisions in the end. Last time I did this was when I got a complimentary plan from VG earlier this year. The main reason I seek advice from others is for the purpose of getting new perspectives.

In the end, though, I make the final decision, and I don't pay for advice I get so I guess that makes me a DIY.

As I have gotten older I have become a better DIY mainly due to an increase in age, maturity, experience, and education. So younger DIY people may be doing the best they can for the stage of life they're in, but still be DIY, but just not be as good at it as those of us with more experience.

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Old 04-25-2016, 08:07 AM   #64
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I know about as many DIYs as I know people who established a goal of being wealthy in life and then followed through and took action. Not many.
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Old 04-25-2016, 08:07 AM   #65
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Originally Posted by Which Roger View Post
Remember that we on this forum set the bar pretty high with regard to math skills. We are mostly well-educated introverts, and introverts tend to think math is actually interesting. Most of us have skills well beyond those needed to understand a statement like "If I allocate 40% to bonds and 60% to stocks, my portfolio has an X% chance of surviving 40 years", but I bet that the majority of the population does not have the math skills to really understand what that means, much less to do the legwork, e.g., FireCalc, needed to figure that out.
Granted the group here is a pretty nerdy bunch but the math skills needed to understand and DIY investing are pretty basic. The folks here that are DIYers have the desire to understand how the system works and utilizes that information for their benefit. Many have the intelligence but just not the desire to be the man in the arena and maker of their own financial destiny.
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Old 04-25-2016, 08:24 AM   #66
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Originally Posted by Which Roger View Post
Remember that we on this forum set the bar pretty high with regard to math skills. We are mostly well-educated introverts, and introverts tend to think math is actually interesting. Most of us have skills well beyond those needed to understand a statement like "If I allocate 40% to bonds and 60% to stocks, my portfolio has an X% chance of surviving 40 years", but I bet that the majority of the population does not have the math skills to really understand what that means, much less to do the legwork, e.g., FireCalc, needed to figure that out.
Yes, but I think that info could be put in a clear, concise form that the average person could follow. That doesn't mean they would have been able to do the math on their own, but they would grasp what was shown. Stocks volatile, bonds less so. Stocks generally higher growth, Bonds less so. As you add more bonds to the mix, you gain some smoothing, but give up the potential for higher gains. I don't think that's too hard for the average person if it is explained to them.

A few FIRECalc-like examples can get the major points across.

So even if someone does not get the inspiration/motivation to DIY, a 'pro' could put them on the right track in maybe a 1 hour session? I'm not saying everyone should DIY, I'm saying that just about everyone (assuming typical basic situations) could DIY, and that it shouldn't require the typical 1% AUM plus higher ERs to get the help they need. But they would need to be educated to get far enough to realize they could do it for less. But what are the chances they come across that info?

For me, I'm pretty sure it was mostly from Bob Brinker's radio show. He kept talking about low cost, no-load, (mostly?) index funds, and that made a lot of sense to me.

I read plenty of studies where I skip over the math/stats - based on the source, I can assume the math/stats are done correctly, and I get to the result w/o all the derivations. The result may be all I need. I think your average investor is the same. How many people with a mortgage could calculate their int/principal payment for month X of a 30 year loan? Probably very,very few. Yet most could understand the basics of the shift from interest to principal over time, if shown in a clear manner.


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Old 04-25-2016, 08:34 AM   #67
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To answer the OP, I do know a few people who DIY. Offhand, I don't know any I think, that use an FA that charges a % AUM - that doesn't mean they don't, some probably do, it just hasn't come up in conversation.

My Mom has some small, old accounts that my Dad set up many years ago (60's - 70's?), they are with Wells Fargo (was something else earlier - a consolidation/name-change) and Legg-Mason. Looks like they were loaded funds (but that was probably pretty common back when these were opened). There is a 'guy' associated with the account. I'm assuming he's not getting any AUM (got his from the load?). Does the AUM fee typically show up as a line item each quarter?

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Old 04-25-2016, 08:55 AM   #68
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Granted the group here is a pretty nerdy bunch but the math skills needed to understand and DIY investing are pretty basic. The folks here that are DIYers have the desire to understand how the system works and utilizes that information for their benefit. Many have the intelligence but just not the desire to be the man in the arena and maker of their own financial destiny.
I agree in part. Investing is simple, but understanding that investing is simple is far from simple. At a sound-bite level, it's counter-intuitive that investing in an index fund that provides "average" returns is better than buying the hot fund that has beaten the market for the past 6 years, or that you should hold plenty of bonds even when the stock market is going up, up, up.

So the key is getting over that hump. I have always been a DIYer, but for a long time I invested my 401k like most others in the workplace - held a lot of company stock because the stock was doing well, held a lot of Magellan because it was hot, etc. I don't remember the trigger that led me down the Boglehead path, but whether or not one has that aha moment is partially luck, and even at that point one must have the desire and skills to analyze deep enough to get past the sound bites and really understand why paying an "expert" to manage your portfolio is usually a waste of money and why "average performing" index funds are better that actively managed funds in most cases.
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Old 04-25-2016, 09:23 AM   #69
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Granted the group here is a pretty nerdy bunch but the math skills needed to understand and DIY investing are pretty basic. The folks here that are DIYers have the desire to understand how the system works and utilizes that information for their benefit. Many have the intelligence but just not the desire to be the man in the arena and maker of their own financial destiny.
I agree with this. I've certainly found for myself that in areas where I have no interest, I don't retain details, or even concepts very well. If I have interest, I soak it up like a sponge. I suspect this is true of most people. I can even tell myself I need to learn, but I still have a lot of trouble, and the knowledge doesn't stay with me as long.

Not only that, but if you really dislike dealing with money and numbers, you're likely to put things off. Time to rebalance? I don't want to deal with that today...or tomorrow...or this month. Got a new chunk of money to invest? Ah, put it in the bank and figure out what to do with it later.

And I'm constantly amazed at how some people can't grasp concepts related to numbers. On a ski lift a couple years ago, a friend and I were talking about the vertical drop of set of runs serviced by a lift. He claimed if you took the more roundabout intermediate run you'd get more vertical drop than if you took the straight down expert run. I tried to explain that the top was a certain elevation, the bottom was a certain elevation, and with no uphill section, the vertical drop has to be the difference between the two. He said, no, you get a few feet more because of the extra distance you cover. I tried to explain it a few different ways, but his mind was set, so I finally gave up. He actually brought it up again this year and I just shook my head and said I wasn't going to get into that again.
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How many DIY Investors Do You Know
Old 04-25-2016, 10:00 AM   #70
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How many DIY Investors Do You Know

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Granted the group here is a pretty nerdy bunch but the math skills needed to understand and DIY investing are pretty basic. The folks here that are DIYers have the desire to understand how the system works and utilizes that information for their benefit. Many have the intelligence but just not the desire to be the man in the arena and maker of their own financial destiny.

I agree with you 100% on this. I w*rked in IT and everyone in the department had basic math skills plus some, but had no desire to learn.


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Old 04-25-2016, 11:42 AM   #71
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I agree with you 100% on this. I w*rked in IT and everyone in the department had basic math skills plus some, but had no desire to learn.
I w*rked in the business world as a design engineer. I feel that the business and technical training has been an essential part of my FIRE. From the technical side, the analytic skills and inclination have been hugely helpful. From the business side, I learned that the best way to make money is to have someone else earn it for you, then take your (significant) cut.

I realized I wanted to FIRE after only a handful of years at w*rk, for the usual reasons often mentioned here. It took about half a decade to focus this into a FIRE plan, with freedom 20+ years out.

I started out as a DYI investor in the 401K, then soon after in after tax savings. I was a mediocre investor that saved about 20-25% of my gross income. Fortunately, DW was also a mediocre investor that banked about 10% of her gross. Despite our mistakes (too many bonds too soon, active funds & yield chasing, etc) and the Lost Decade of 2000, we FIRE'd anyway in 2015.

I do wish that I learned more sooner (Bogle!!), but we did well enough. FIRE is my greatest "career achievement"!
In short, perhaps the ability to learn to be free is not that rare, but the willingness to pay the price of freedom is truly uncommon.

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