investment frustrations

[spark0506]

I’m just under 50 and looking to FIRE within the next few years. My question has to do with investing and feeling inadequate at handling it personally. I joined the board a couple of months back and have been extremely impressed at the level of financial expertise that many of you have. When it comes to investing I feel very frustrated and nervous about pulling the trigger and making some much needed decisions. I have some pretty large sums of cash that I need to move from my business and get invested. I have met with a couple of so called financial advisors and have a stock broker but I have pulled back from them because I constantly get the feeling that they’re just trying to line their own pockets and don’t really care about really helping. Have any of you folks been down this same road and if so I would be very interested in how you dealt with it. Do you find that you're constantly second guessing yourself in regards to your money decisions or are you able to just make them and roll over and go to sleep at night?

 

[Cut-Throat]

but I have pulled back from them because I constantly get the feeling that they’re just trying to line their own pockets and don’t really care about really helping.

They are interested in lining their own pockets, and they do care about helping - themselves!

You need to do some basic education. Read a few books. That will give you the confidence to do it yourself. Search the forum for some Books on investing. About 30 hours of reading should put you in a better frame of mind.

 

[Cb]

I think that if you can manage to:

1) get most of your portfolio over to Vanguard to minimize investment costs

2) and then set up the "Margaritaville Portfolio" Scott Burns talks about (1/3 US Total Market Index, 1/3 International Total Market Index, 1/3 TIPS)

3) with the TIPS held in a tax deferred account

...you'll have about 80-90% of the diversification possible, it will be quite tax-efficient, and will likely be quite close to the "Efficient Frontier" for a Safe Withdrawal Rate in retirement.

But you should still do the 30+ hours of reading suggested above, if only to give you the confidence to hold that portfolio through thick and thin.

It's also likely that after a lot of reading you'll be inclined to diversify that portfolio a bit further for some incremental gains.

Cb

 

[brewer12345]

Heh, I second guess myself all the time, but that is because I am picking individual securities and running a fairly concentrated portfolio in an effort to shoot the moon.

As CT said, stay awa from all the sharks (brokers) at the moment.  Do some reading and take time to educate yourself.  The capital markets will still be there in a couple of months.  What you want is a well doversified portfolio that will spit out solid returns, stay ahead of inflation, not have big downswings and not cost a lot to run.  This may sound like a tall order, but it really isn't that hard to manage with low cost Vanguard funds or by buying ETFs.  Just take your time.

If you do decide to hire an advisor, ind a fee-based planner that charges an hourly set rate and receives no commissions.  At a minimum, they should also be a Certified Financial Planner (CFP).

 

[nun]

I completely agree with the poster that advised putting the money in Vanguard. If you have considerable assets they'll give you some free financial planning. What I'd do for the moment is just stick the money in Vanguard Money Market until you come up with a strategy.

For my part, if you are actually retired, I like the strategy of puting 5 years expenses into a ladder of CDs and the rest in a mix of International and US index funds, blue chip, mid-cap, small cap etc and then taking the money from either the stock or CD buckets depending on how the market performs. I'm definitely an indexing kind of investor. Also part of my retirement strategy is to purchase big ticket items like a house and a car outright to reduce my annual expenses so that I can get myself into the lowest tax bracket that I can. That way I pay less tax and don't have to concern myself too much with tax advantaged investment strategies which I find very complicated.

If you want a really simple invetsment go for one of Vanguard's Lifecycle funds which allocates investments in a way consistent with your age.

 

[kcowan]

I have a basket of individual 20 stocks and I rebalance them twice a year. I also have a mad-money portfolio for having some fun investing (4%). The rest (57%) are in retirement mutual/hedge funds and a bond ladder. Have been retired for 4 years. So far so good. Still ahead of expenses by over 10%.

Like Brewer, I am doing a little moon-shooting and MER/fee avoidance. The key to success is to stick to your own rules including to get rid of losers. When I reach my investment objective, I will likely move to index funds and relax a little more.

 

[Dawg52]

As previously said, do plenty of reading. Here is a pretty good site for some basic principles.

www.coffeehouseinvestor.com

 

[spark0506]

Thanks for the good comments. I’ve been reading a lot of posts and Vanguard seems to come very highly recommended. Do they seem to have some of the lowest cost/fees out there?

 

[brewer12345]

Thanks for the good comments. I’ve been reading a lot of posts and Vanguard seems to come very highly recommended. Do they seem to have some of the lowest cost/fees out there?

They do for mutual funds. If you decide to go with ETFs, then it doesn't really matter where you choose so long as brokerage commissions are competitive. I think you probably couldn't go wrong with any of Vanguard, Fidelity and Schwab.

 

[Cransten]

Don't do anything right now.  Stay in cash.  There's no magic in Vanguard or any other fund.  Take a year or two to read about investing, run some trial portfolios and see how you do, and don't touch your money till you really feel ready.  Don't run out and get an advisor, or feel you have to invest your capital right away.  There's nothing wrong with cash.  Take your time.

 

[spark0506]

Cransten,

Thanks for the tips. When it comes to investing decisions I just feel so indecisive and I don’t know why. I own a small mfg business with 50 employees and deal with all the issues that go along with that but have had a heck of a time making personal investment choices for the past few years. My company is very capitol intensive so over the last few years I have personally purchased pieces of equipment and then leased them back to the company; basically I have become the banker. Not a bad return but now I'm looking at an exit strategy and I'm trying to gather up my money and move it to places where it can perform well. I'm not opposed to some risk I just don’t want to bet the farm so to speak; I just need the right balance. I have spent over 20 years, working very long and hard hours building up my net worth and I don’t want to make some bone head mistakes that set me back. I’ve been so focused on running the business that I haven’t spent the time to learn how to invest and now I'm playing catch up. My life goal has been to get out around 50 years old and enjoy, I'm so close now I don’t want anything to set me back. This board has been a great source of information and I’m amazed of the level of knowledge that is here. I’ve got my thinking cap on and I’m here to learn….and share any way I can.

Spark0506

 

[Leonidas]

I have spent over 20 years, working very long and hard hours building up my net worth and I don’t want to make some bone head mistakes that set me back.

I've had to deal with that same thing - as, I suspect, have more than a few other posters here. Just about everyone here has been in the same position, that of being very competent in what they do/did to make their money but confronted with a whole new world when it comes time to invest it. It's a humbling and scary experience to be challenged that way. I second what Cransten said about first investing some serious study time - it's the only way you'll ever feel some sense of comfort in all of this.

When it comes to dealing with financial advisers I treat them the same way I treat doctors, lawyers, etc. I listen to what they suggest, but I always do my own research and make my decisions only after I understand exactly what it is I am doing. Plus, getting a second opinion never hurts, and I never feel bashful about saying No, that's not what I want to do.

 

[kcowan]

...When it comes to dealing with financial advisers I treat them the same way I treat doctors, lawyers, etc.  I listen to what they suggest, but I always do my own research and make my decisions only after I understand exactly what it is I am doing.  Plus, getting a second opinion never hurts, and I never feel bashful about saying No, that's not what I want to do. 

I never let a lawyer advise on business matters. I get the deal written down and agree to then have them translate it. For doctors, I do some due diligence on the internet and I track my lab in a spreadsheet. But I trust the doctor to know his business.

For FA/brokers, I just take their opinions as an input. Many help with where to look but none can make decisions for me. Definitely in a different class.

 

[Leonidas]

I never let a lawyer advise on business matters.

I wouldn't either - but I would let him give me his opinion on legal matters.

But I trust the doctor to know his business.

I'm not that trusting. They make mistakes just like everyone else.

God love them all, I'm sure most people in these fields are all well-intentioned and competent. But, how do you tell them apart from the bad ones without knowing them? I can't, so I wouldn't go under the knife without a second opinion nor would I buy a stock just because someone with the title of "adviser" said it was a great deal. I don't see the differences between any of them in this regard - if they make a mistake they still bill me (or my estate) for their services and go home to their families - while I might be stuck in jail, dead or broke.

 

[Martha]

I never let a lawyer advise on business matters. I get the deal written down and agree to then have them translate it. For doctors, I do some due diligence on the internet and I track my lab in a spreadsheet. But I trust the doctor to know his business.

I like it if the client talks to me about what they intend on agreeing to before completing the negotiations. There may be any number of issues I spot that they may not. They also may not be well suited for negotiations and a lawyer might be able to do better. I negotiate agreements all the time.

I have had to, on a number of ocassions, say to a client that a particular deal makes no business sense. Especially in family transactions.

Tell me, what is legal work anyway?

 

[AltaRed]

I’m just under 50 and looking to FIRE within the next few years. My question has to do with investing and feeling inadequate at handling it personally. I joined the board a couple of months back and have been extremely impressed at the level of financial expertise that many of you have. When it comes to investing I feel very frustrated and nervous about pulling the trigger and making some much needed decisions. I have some pretty large sums of cash that I need to move from my business and get invested. I have met with a couple of so called financial advisors and have a stock broker but I have pulled back from them because I constantly get the feeling that they’re just trying to line their own pockets and don’t really care about really helping. Have any of you folks been down this same road and if so I would be very interested in how you dealt with it. Do you find that you're constantly second guessing yourself in regards to your money decisions or are you able to just make them and roll over and go to sleep at night?

Lots of good advice given about taking the time to read some good books first. Thus put your money in a good MMF with Vanguard or Fidelity while you get some confidence up as a result of reading.

Key point to remember: Even the very best of money managers and investors cannot be certain how markets will perform and not all investments made will provide positive results. Additionally, there is nothing bad about being middle of the pack in terms of investment returns - hitting base hits has a lot less volatility than trying to hit home runs. I'd rather make 6-7% returns on a fairly regular basis than +12% one year and -10% the next year.

You may well find that 3 or 4 investments is all that you may need for a balanced asset allocation going into retirement:
- an index fund or ETF covering the USA broad market such as Vanguard VTI,
- an index fund or ETF covering International,
- a short/medium term bond ETF or fund, and
- a 5 year bond/CD ladder to cover near term (1-3 yr) cash flow

Invest it, forget it and go sailing or a trip around the world, or whatever makes you happy.

 

[unclemick]

Hmmm - buy the appropriate VG Target Retirement fund. Hint - use age as your primary criteria.

Then read books - if you must - just don't be like me and get too smart. I wasted a lot of time reading over the last forty years - luckily I was invested the whole time.

heh heh heh heh - Being dumb, low expenses and diversified helped compensate for the reading. De Gaul was right - even in his sour grapes sort of way.

 

[Siv]

I too read a lot but felt like don't know even more.

I'd like to think that I can invest on something, forget it and hope all will turn out well. We know that's not the case...at least not me. Have to admit that I check the balance too often, not because I want to buy and sell, just curious.

I'm not even dreaming about making 12% straight every year...6-10% deviation will do me good.

 

[mb]

I feel very frustrated and nervous about pulling the trigger and making some much needed decisions.

Lots of good advice so far.

If you are worried about investing it all at once I suggest putting it in a money market and dollar cost averaging (DCAing) into your investmensts of choice over a year or two. On average you will be better off putting it all in up front but DCAing reduces the exposure to a bear market starting right after you invest a large lump sum.

Most fund companies will set up automatic investments where they will take x$ out of your money market fund and invest it into a stock, bond, etc. fund automatically on a given day of the month. That way you don't think about it and perhaps get gun shy of the market has gone done for a couple of days.

MB