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Old 06-03-2011, 08:33 AM   #21
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I do think an adviser can be worth something regardless of how simple & easy many here think DIY is.
In my view, I can't see how picking the 'right' advisor is any less difficult than picking something like a Target Retirement fund, or a blend of Total Stock and Total Bond index funds. I actually think picking the funds is easier.

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Not confident I would always make good decisions on my own or at some point will be able to.
But you had to decide on an advisor - so this is actually two decisions. You choose an advisor that will choose the right funds. It doesn't really change the picture as I see it. is

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Also, reduces risk of family disputes with a professional leading.
Never underestimate the power of family disputes They will say you picked the wrong advisor!


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And lowest internal fund costs aren't necessarily the best answer either. The risks taken to achieve a given return counts too.
And how are these advisors going to change that? From what I saw, they were picking the low cost index funds. Is there a better answer?

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Old 06-03-2011, 10:23 AM   #22
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I think one or the other of these ventures might be quite useful to very many people, though likely not many here. ( Not even sure of this last part!)

It is easy for us to say that everyone should learn about investing, but everyone is not going to, anymore than everyone is going to exercise and eat more health foods or follow safe sex. Just not going to happen.

Look at cigarette smoking. If anything should be both clear and simple, it is don't start smoking. But a walk down the street shows me that plenty of young, well dressed people smoke.

It may even be easier for many people to start a savings program if they feel confident that having savings will not just present them with another frustrating and anxiety arousing problem of what to do with these savings. Also, as Gerntz said, having a third party do it may head-off family disputes. Being a member here gives us the idea that the world is made of of utility maximizing, rationally investing high dollar savers who never have conflict with their spouses over money. This is true only at ER.org. and heaven.

Ha
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Old 06-03-2011, 10:36 AM   #23
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Being a member here gives us the idea that the world is made of of utility maximizing, rationally investing high dollar savers who never have conflict with their spouses over money. This is true only at ER.org. and heaven.

Ha
My wife and I fight over whether to invest or pay off the mortgage. Can I still post here?

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Old 06-03-2011, 12:05 PM   #24
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I think one or the other of these ventures might be quite useful to very many people, though likely not many here. ( Not even sure of this last part!)

It is easy for us to say that everyone should learn about investing, but everyone is not going to, anymore than everyone is going to exercise and eat more health foods or follow safe sex. Just not going to happen. ...

Ha
I agree with that, but I'm looking from a different viewpoint.

I don't consider picking a Target Fund the same as 'learning about investing'. So let's take a typical Joe/Joan who does not want to learn about investing. It seems to me that their odds of connecting with one of these low cost managers who do a basic diversification into index funds for a low fee, is maybe lower than coming across a recommendation to just buy a Target Fund or a simple index blend and be done with it.

Another way to say that is, there is a decision to be made in either case. They very likely had to do some basic 'learning about investing' to decide that a low cost manager might be better than going with a high cost manager. That high cost manager will imply that the fancy desks and printouts will help them to do better, but most of us think those fees are a drain and they will actually do worse. But our Joe/Joan don't know that - they probably have to educate themselves to get past the marketing hype of the higher-fee guys/gals.

By the time you get far enough to identify a low-cost manager from a high-fee manager, the battle is over. I think it becomes pretty obvious that you can do it yourself, and that it isn't a lot of work (how hard is it to buy a Target Fund and forget about it?). But if you never get that far, you'll probably get in-line for the high-priced guys that are looking for you.

I agree that many will never get that far. But I'd say the decision is not between low-cost manager and DIY for these people, I think the decision is do you learn enough (not much learning needed) to DIY or do you go with the high-fee players?

-ERD50
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Old 06-03-2011, 12:34 PM   #25
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By the time you get far enough to identify a low-cost manager from a high-fee manager, the battle is over. I think it becomes pretty obvious that you can do it yourself, and that it isn't a lot of work (how hard is it to buy a Target Fund and forget about it?). But if you never get that far, you'll probably get in-line for the high-priced guys that are looking for you.
That seems right to me. It takes a fair amount of thinking about the topic to get your head around the counter-intuitive idea that you should pay somebody to not manage your money.
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Old 06-03-2011, 01:03 PM   #26
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My wife and I fight over whether to invest or pay off the mortgage. Can I still post here?

DD
Frankly, that's the only way you can post here
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Old 06-03-2011, 01:08 PM   #27
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Even if it is, you are comparing Vanguards total expenses with the additional expenses charged by the advisors. Even though the ETF have lower fees than Vanguard's funds, you probably don't have the correct total cost.
1966-2006. Target Retirement 2015 - jan 2006. Sometimes it takes a while and I never added up the cost of 'education.'



heh heh heh - plus I still 'need' a few good stocks - for medicinal purposes to keep the hormones in check. Sigh - I guess you get it when you get it.
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Old 06-03-2011, 02:44 PM   #28
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That seems right to me. It takes a fair amount of thinking about the topic to get your head around the counter-intuitive idea that you should pay somebody to not manage your money.
That's a great way to look at it. You hear people say "you wouldn't perform surgery on yourself", but it takes a while to understand that this isn't really that complex for most people. It isn't like surgery, or re-building an engine, or anything hard or dirty. But there is a lot of stuff to slog through to understand how simple it can be.

But w/o understanding how simple it can be, those people won't understand they should choose the low-cost no-frills guy. So they probably won't. And once they do understand, they know enough to DIY (DIT? - themselves?).

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Old 06-03-2011, 03:35 PM   #29
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In my view, I can't see how picking the 'right' advisor is any less difficult than picking something like a Target Retirement fund, or a blend of Total Stock and Total Bond index funds. I actually think picking the funds is easier.

But you had to decide on an advisor - so this is actually two decisions. You choose an advisor that will choose the right funds. It doesn't really change the picture as I see it. is
.....
And how are these advisors going to change that? From what I saw, they were picking the low cost index funds. Is there a better answer?

-ERD50
If you believe the target fund is the best return for risk equation, no need for adviser. But why would you think that is so? Why is any one target date right? Seems you're deciding that investment mix is right, no questions.

As I said when I wrote it, the DIYers have decided that's right & easier for them. You've reconfirmed my statement. Thanks. All I said is why it may not be right for every one. I happen to believe that's a real possibility.

The Target fund you may have made a decision to select is picking investments too. So I don't see a difference. Target fund managers select investments or the adviser does.

I wasn't necessarily talking about those advisers but in general.
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Old 06-03-2011, 03:52 PM   #30
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If you believe the target fund is the best return for risk equation, no need for adviser. But why would you think that is so? Why is any one target date right? Seems you're deciding that investment mix is right, no questions.

As I said when I wrote it, the DIYers have decided that's right & easier for them. You've reconfirmed my statement. Thanks. All I said is why it may not be right for every one. I happen to believe that's a real possibility.

Target fund managers select investments or the adviser does.

I wasn't necessarily talking about those advisers but in general.

I was just making generalizations, based on the portfolio they show here:

https://www.betterment.com/about/investments/

I would expect a Target Fund to perform pretty similar, as would a simple blend of Total Stock and Total Bond. I don't think there is any 'secret sauce' to the mix they have, it's just a reasonable diversification. One that would probably be similar to Vanguard's free advice, and probably similar to a Target Fund. So it's not a matter of what I think - I would say it is what they think also. So why pay the extra fee?

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The Target fund you may have made a decision to select is picking investments too. So I don't see a difference.
The only difference that we can know for a fact is that these low-cost advisors will tack on a (relatively) small fee. What do we get for that fee?

Overall, it's not unlike some DIY jobs I do around the house. Sometimes it's easier to DIY than to bother finding someone to do it for you, regardless the savings. That varies depending on the person's skill and the job, but my point is that it is as easy to DIY with a simple index blend as it is to find someone and pay them to do the blend. And I don't think that is related to skill - the same skills are required to choose an advisor group (maybe more so) than to choose an index mix.

edit/add: I meant to say - I think the first rule of personal investing is similar to the Medical Oath - do no harm. As long as you avoid mistakes, you'll probably do as well as can be expected. Simple indexing, or a Target Fund is an easy way to avoid mistakes.

-ERD50
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Old 06-03-2011, 05:52 PM   #31
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My wife and I fight over whether to invest or pay off the mortgage. Can I still post here?
DD
Pay off the mortgage. Believe me, the return will be better.
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Old 06-04-2011, 02:11 PM   #32
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My wife and I fight over whether to invest or pay off the mortgage. Can I still post here?

DD
Having been single all my life on the outside looking in - I suggest doing it the wife's way.

There are things in life more important than investing optimally.

You can always lie when you post here.

heh heh heh - or create a rationale to maintain domestic peace.
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Old 06-04-2011, 02:59 PM   #33
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You can always lie when you post here.
I thought that was a requirement to post here ...
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Old 07-20-2011, 10:41 AM   #34
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Yes, that would be a worthy topic.
Trends in personal finances | Military Retirement & Financial Independence
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Old 07-20-2011, 01:21 PM   #35
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duly noted. thanks!
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Old 07-21-2011, 04:45 AM   #36
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Yes, there are some budget (low cost) and therefore simplified asset management solutions.

However, the solutions offered seem to be fairly generic (because of the low cost).

IMO - there is even a lower cost solution... that is good... a low cost and well diversified balanced fund that meets the asset allocation model of the investor. Lower cost and should accomplish a similar outcome.

Why pay them $2,400/yr for the next 30, 40 or 50 years?

Also.... I am not a fan of turning over control of my assets to a small company. By definition, they can only achieve the average return... so why take the risk of a small firm?

Of course, I do recognize that there are people who are lost or need a security blanket... but still, the generic advice offered in many basic personal finance books (from the library) or even on the internet lays out a basic plan that should work. Plus, if one goes with a large Mutual Fund Company, they have basic advisory services that are either low cost... or even free for point in time checkups.
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Old 08-08-2011, 02:11 PM   #37
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If any of you have discussed this with Betterment or Flat Fee Portfolios, could you let me know how it went by either posting here or sending me a PM? Thanks.
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Old 08-08-2011, 05:58 PM   #38
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I don't get it. Everything I have read tells me that keeping costs low is very important to maximizing my investment returns. Why then would I want to pay .9% as an annual fee? Or almost $200 a month? I have not read any of the academic literature that suggests that managed accounts can beat the market by more than their fees on a regular basis. In fact, the opposite seems to be true, they underperform the market and I would pay a fee for that. I will stick to mostly index funds and rebalance at times: In fact, today seems like a good day to move some dollars in my cash/bond funds (which are now well over 50% of my assets and move the dollars into some stocks which have dropped below 40% of my assets. My 50/50 ratio has not been reality for most of the year. Had I balanced earlier (there is that market timing beast rising from the deep!) I could have saved a few dollars. But, better late than never.
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Old 08-08-2011, 06:32 PM   #39
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IMO - there is even a lower cost solution... that is good... a low cost and well diversified balanced fund that meets the asset allocation model of the investor.
I think that's a good idea. A small set of funds, one of which (60%/40%, 50%/50%, or whatever) could be recommended in good conscience to any who come here asking what to do about saving for retirement. It's not that complicated -- just keep sending your money in to a mutual fund, then you can forget about it. No need for a financial adviser, account executive, an individualized plan, or anything like that (which costs extra): just send money.
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Old 08-21-2011, 01:26 AM   #40
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If any of you have discussed this with Betterment or Flat Fee Portfolios, could you let me know how it went by either posting here or sending me a PM? Thanks.
A lot of the topics I read on this board now turn into blog posts, and someone at Flat Fee Portfolios noticed that I mentioned them. Or maybe they have a Google Alert set for their company name.

A couple weeks ago I got an e-mail from the staff of Flat Fee Portfolios, and I ended up talking to the CEO for about 30 minutes. Good guy. Knows his stuff.

When I received the e-mail to schedule a phone call, I was initially concerned that it was a legal maneuver. It turns out that it's just business etiquette, something with which military veterans are notoriously unfamiliar.

Anyway Mark Cortazzo's revenue model is that he can serve customers who are currently being fleeced by Ameriprise, FirstCommand, and other high-priced "advisers". So he's reaching out to those who are paying 2% or more for their financial management. The challenge of that approach, however, is that a blissfully ignorant customer is unlikely to be checking the financial-adviser market for a better deal. They might only come to places like FFP after getting pissed off and perhaps finding this discussion board. So he's pursuing a publicity campaign in the media and hoping for word of mouth to reach the ones who are paying an obscenely high amount.

In the meantime he's accumulated a core of investors who see $199/month as a bargain for their seven-figure portfolios. But he's still trying to reach the smaller investors.

He thinks we DIY investors could do better if we were willing to work harder for it-- especially that buy&hold crowd who doesn't do something but just stands there. We agreed that DIYers are not the customers he's looking for.

We also agreed that FFP cannot compete with the Thrift Savings Plan, but that we can't put all our assets in the TSP. Not yet, anyway.

I'll put up a blog post about the details on the morning of Wed 24 Aug.
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