There are however some actively managed funds that have beaten their benchmarks for a considerable time and also have low fees. I'm thinking of Vanguard's Wellington and Wellesley funds in particular. Some Fidelity funds have done it too.
He's probably got a gig like that. He just takes some small retail clients as a way to pay back society for all it has given him. He'd charge them nothing at all, but then they wouldn't appreciate the fantastic value of what they are getting.
The generosity of some people is heartwarming.
There are however some actively managed funds that have beaten their benchmarks for a considerable time and also have low fees. I'm thinking of Vanguard's Wellington and Wellesley funds in particular. Some Fidelity funds have done it too.
Interesting link. Thanks.Interesting question. A search of "actively managed funds vs. index funds" came up with this:
Actively managed mutual funds fall short again — and investors notice - latimes.com
I would be curious to know if those funds would have beat the index funds if you had to layer an additional 1.5% in advisor fees to access them, versus doing it yourself and buying index funds without an advisor.
In Paradise, you may be assuming that everyone on the forum *only* uses index funds, when that may or may not be the case.
Everyone makes their own decisions, though, and if you are happy, then that's it. But there are plenty of folks who enjoy the research element of DIY, and aren't likely be dissuaded from their own ways.
Not at all.
I totally understand the DIY drift, having managed our portfolios through individual stocks and mechanical investing for 17 years before going through a FA. DH could not handle my risk tolerances anymore, and as we approached retirement it was necessary to tone it down.
I really don't understand the seemingly automatic correlation between wanting to discuss a topic and it being viewed as trying to dissuade someone from their own POV. The only horse I have in this race is pursuit of a good discussion that leads to the possibility of learning new things. What people choose to do with their own money is up to them. Who knows, maybe down the road when things get less hectic I may decide I have the time to go back to managing our funds. After all, what is the point of being on a discussion board if you don't have an open mind?
It is also interesting to note that I am the one who has not tried to convince others to change their investment approach, but took quite a bit of heat for simply professing that it is net return that counts, more than just focusing on minimizing expenses, and citing the example of what has worked for us in this vein. This does not preclude the minimizing expenses from having the best net return!
"He's a nice guy." Oh boy, that is mentioned in every story and thread about FAs, isn't it? The important question to ask is, "What's the benchmark?" I'm going to an FA dinner tonight. Gonna ask that question and bring the answer back here.A nice article in today's edition of USA Today. It summarizes how excessive fees can become over time, and how overpriced financial advice really is. I know this is not new information to the members of this forum, but I thought it was nice to see an article with such a strong opinion published in a mainstream newspaper. Hopefully it will catch the attention of those who don't think about this stuff and allow others to make far too much off their retirement savings.
Are excessive financial fees eating your returns?
I think the "heat" offered up on this board comes from the collective experience of seeing lots of people come here for help extricating themselves from parasitic relationships with stockbrokers. This may give the appearance of piling on when it is just that they've seen it all.
You might not have had time to look at my profile, but I'm a Certified Financial Planner, one who actually does manage people's money, for money.
Not at all.
I totally understand the DIY drift, having managed our portfolios through individual stocks and mechanical investing for 17 years before going through a FA. DH could not handle my risk tolerances anymore, and as we approached retirement it was necessary to tone it down.
I really don't understand the seemingly automatic correlation between wanting to discuss a topic and it being viewed as trying to dissuade someone from their own POV. The only horse I have in this race is pursuit of a good discussion that leads to the possibility of learning new things. What people choose to do with their own money is up to them. Who knows, maybe down the road when things get less hectic I may decide I have the time to go back to managing our funds. After all, what is the point of being on a discussion board if you don't have an open mind?
It is also interesting to note that I am the one who has not tried to convince others to change their investment approach, but took quite a bit of heat for simply professing that it is net return that counts, more than just focusing on minimizing expenses, and citing the example of what has worked for us in this vein. This does not preclude the minimizing expenses from having the best net return!
...
I really don't understand the seemingly automatic correlation between wanting to discuss a topic and it being viewed as trying to dissuade someone from their own POV. The only horse I have in this race is pursuit of a good discussion that leads to the possibility of learning new things.
....
It is also interesting to note that I am the one who has not tried to convince others to change their investment approach, but took quite a bit of heat for simply professing that it is net return that counts, ...
We never had a financial advisor, but in-laws have had two, maybe three, firms since 2000 or so. Our path has been to read and re-read books, articles, and discussions. In addition we venture out to FA dinners to get the free food and act as filters for what we hear. We pass this info along to AARP. We are content with index funds and what the market delivers. I have one major question for any FA, which is, "How did you help your clients mitigate the great recession?" There is never an answer.I really don't understand the seemingly automatic correlation between wanting to discuss a topic and it being viewed as trying to dissuade someone from their own POV. The only horse I have in this race is pursuit of a good discussion that leads to the possibility of learning new things. What people choose to do with their own money is up to them. Who knows, maybe down the road when things get less hectic I may decide I have the time to go back to managing our funds. After all, what is the point of being on a discussion board if you don't have an open mind?
I think it was Carl Sagan(*) who said "Extraordinary claims require extraordinary evidence.".
So you've found one of the elusive advisors who can consistently beat the averages, congratulations - seriously. Are you going to give us his/her name so we can get in on the action, or tell us how to find our own above average FA beyond any shadow of a doubt? If not, what's the purpose of your post #3? Few if any of us are concerned with convincing you of anything either, it's your money. But newbies do come here to learn, so if you're going to make a claim they're naturally going to want to believe, maybe give them any basis to support it.I get zero benefit from trying to convince you guys, and have zero desire to do so. After all, I know how hard I was to convince and that is way more work than I care to do.
But the one thing I just don't understand is the desire to put your funds in an index fund. I've never been a fan of them and never used them when I was handling our investments. The result was that when the market plunged, acerbated by all the lemmings who had thrown their retirement accounts into these well publicized funds panicking and pulling their assets from the market, my account was not badly impacted. IMO index funds are the McDonalds of investing. Everyone knows about them, and many eat there for convenience.
Please realize that I am not calling you a lemming for using these funds, but it seems to be the investment tool of choice for the general public who has not yet learned what else they can do with their money. And when so many people who don't realize the market doesn't only go up, nor understand that panic selling can be the very worst thing own this investment vehicle, they can trigger irrational declines. So if you invest primarily in index funds, how do you protect yourself from the actions of the lemmings throwing themselves off the cliff when the volatility got to be too much for them?
The study looked at more than 24,000 mutual funds and ETFs available to U.S. investors for the ten-year period ending on December 31, 2012. Of these, only 7,943 were in existence for the full ten years.
- Only 24% of professional investors beat the market over the past 10 years
- Index funds outperform actively managed funds by 0.80% annually, but active managers have lower risk
- Active managers outperform the index by 0.12% before fees, but charge more in fees than the value they create
The asset-weighted average return of the actively managed mutual funds over this period was 6.50% while the passively managed index products averaged 7.30%. Similarly, for equity funds the average return was 7.19% for active managers and 7.65% for passive funds. Index funds outperformed actively managed funds regardless of whether returns were measured by asset-weighted average, median, or a simple average.
I protected myself in the last down turn by keeping to my Asset Allocation and not panicking. I bought more stock index funds when they were low and have reaped the rewards as the market has climbed. I also buffer my stock index funds with bond index funds. And I keep a few years cash in the bank so I don't have to sell low. In other words, I do what most of us here do.how do you protect yourself from the actions of the lemmings throwing themselves off the cliff when the volatility got to be too much for them?
I think it was Carl Sagan(*) who said "Extraordinary claims require extraordinary evidence.". Now, maybe your claim doesn't quite reach the level of 'extraordinary', but the data says it is at least a rare thing, maybe even an outlier (even an overall positive approach may not beat the benchmarks every time). And of course you don't need to provide any 'evidence' if you don't want - but if you really want to engage in a serious discussion, then people here are going to want some data to understand those claims. Some of those questions were about the benchmark, performance net of fees, etc.
Just one study re: index investing picked somewhat at random, out of hundreds. Study: Only 24% of Active Mutual Fund Managers Outperform the Market Index | NerdWallet Investing
I really don't understand the seemingly automatic correlation between wanting to discuss a topic and it being viewed as trying to dissuade someone from their own POV. The only horse I have in this race is pursuit of a good discussion that leads to the possibility of learning new things. What people choose to do with their own money is up to them. Who knows, maybe down the road when things get less hectic I may decide I have the time to go back to managing our funds. After all, what is the point of being on a discussion board if you don't have an open mind?
I get zero benefit from trying to convince you guys, and have zero desire to do so. After all, I know how hard I was to convince and that is way more work than I care to do.
How soon you forget where you are:Perhaps if we avoid characterizing one another a more useful discussion will result.
I'm checking out of here for a better place,... Didn't realize these are the lumpen slums of cyberspace.
Our FA beats benchmark every time.
Volume? He only does business by word of mouth. We are in our third year with him after friends recommended him. It's nice not to have to deal with investments anymore.