Edelman vs Do It Alone

[purplesky]

Quote:

Originally Posted by Ronstar His radio show is carried in my area also. I stopped listening to him when he advised listeners to have a large mortgage. May be ok for some but not for me. Sent from my iPhone (:.using Early Retirement .//82339)

What was Edelman's reasoning for having a large mortgage.

[purplesky]

Quote:

Originally Posted by brewer12345 1.4%. That is reason enough to start throwing poop.

Not saving anything for retirement is more of a reason to throw poop than paying Edelman 1.4% to build a nice portfolio.

[ERD50]

Quote:

Originally Posted by purplesky What was Edelman's reasoning for having a large mortgage.

IMO, greed (on Edelman's part).

If you took out a large mortgage, you had more money to invest with him, and he made 1.4% on that extra amount. Good for him, risky for you - but he didn't appear to care about that. At least not as much as his 1.4%.

And this is coming from someone who has no problem holding a low rate mortgage in retirement, but Edelman was talking big mortgage, and refinancing every time your equity increased. Geez, what happens if you end up up-side down, and need to move to keep your job? Not Ric's problem!

-ERD50

[Animorph]

Quote:

Originally Posted by purplesky Not saving anything for retirement is more of a reason to throw poop than paying Edelman 1.4% to build a nice portfolio.

Someone who charges 1.4% does not have the client's best interest in mind. They're just lining their own pocket, unless they're sending out really nice birthday cards. 1% is common, and you can easily find much cheaper services.

On the other hand if someone introduced themselves by saying they had no pension, no retirement savings, and wanted to retire in 10 years but hadn't really started thinking about how to do it yet, I think they'd be receiving the poop also. Some things just cross the line.

[RetireAge50]

It is scary that so many people (25,000?) just give away so much money year after year. When they open their statement and see it is merely invested in regular mutual funds why wouldn't they cut out the middleman going forward? I'm glad we have a group of people here on this forum to help people come to their senses.

[scrabbler1]

+1 on that 1.4% "fee" being way too high. And as has been pointed out, that is not includng the expenses any funds your advisor puts your money into charge. So, even if you pay around 0.6% on the fund's ERs, you will now be paying around 2% overall. That's a huge bite from your portfolio over time.

You don't have to work hard to find funds other than index funds which charge reasonably low ERs, always under 1% and usually around 0.5%. You can easily create a portfolio which has a combination of index funds and other, low-ER funds. Stay away from FAs, especially those which charge anything close to or north of 1.0%.

[Ronstar]

Quote:

Originally Posted by purplesky What was Edelman's reasoning for having a large mortgage.

I don't remember him explaining what his reasoning was for carrying a big mortgage in the time that I listened to his show. Maybe I should have continued listening to see what his explanation was, but I lost interest after hearing the big mortgage advice. That said, I did enjoy the show somewhat.


Sent from my iPad using Early Retirement Forum

[samclem]

Quote:

Originally Posted by purplesky What was Edelman's reasoning for having a large mortgage.

There's no way to know, and that's a problem, isn't it? Since he benefited when people invested more money (regardless of where they got it), we just can't tell what his reasoning was--regardless of what he might have said.

[ERD50]

Quote:

Originally Posted by purplesky What was Edelman's reasoning for having a large mortgage.

This was sounding all Deja-vu-eee to me, here you go, from a year ago:

http://www.early-retirement.org/foru...ml#post1369598

and my reply back then...

Quote:

Now, I've been vocal about not being afraid of low cost mortgage debt, and to look at the numbers, but IMO, this was SCARY! So he thinks nothing of putting just 10% down (doesn't that incur PMI payments?). And he says his clients were glad they followed his advice to pull the equity out of their houses (refinance to the max) when housing was at its peak! Isn't that what gets people in trouble if they need to sell and they are underwater? Whoah! I hear ads from this guy on the radio all the time. I got the impression he probably had a reasonable approach for people who need some hand-holding - but this video changed that. Run! edit/add - and he cheerfully assumes an 8% return on investments, no dips, just a straight 8%. Nice! -ERD50

-ERD50

[Taiko]

Quote:

Originally Posted by purplesky What was Edelman's reasoning for having a large mortgage.

So that you won't have so much tied down in a nonfluid asset. He figures it is best to have it in hand should an emergency hit rather than trying to sell a house or get a loan under stress. Secondarily because of the tax breaks government provides

[brewer12345]

Quote:

Originally Posted by Taiko So that you won't have so much tied down in a nonfluid asset. He figures it is best to have it in hand should an emergency hit rather than trying to sell a house or get a loan under stress. Secondarily because of the tax breaks government provides

The real reason: 1.4%.

[Lakewood90712]

Oh Brewer , your'e so judgmental

[wolf]

OP: Run don't walk. 1.4% bad. Is that a one time fee or annual?

Don't assume, if you use a FA, you will earn more our lose less
than a DIY.

Keep things simple. Vanguard/Fidelity index funds. Proper asset
allocation. Investing is simple, but gets complicated when the
FA talking heads get going.

Just because Edleman has a lot of clients does not make him
right. He is just a super salesman.

Rental Properties, CD's, some Equities. Served me well.

[travelover]

I've posted this before, but I found out that my nephew (a big city fireman) was paying over 3% within his 401(k) investment program. So, I guess only a 1.4% take is almost charity.

[racy]

Quote:

Originally Posted by kannon ...They pushed for further diversification using large number of ETFs in different sub classes like Large Cap Value, Large Cap Growth, Small Cap, ... within US Stocks. Similar for International Stocks, Bonds, and Hedge Positions. My question is - can a normal FIRE'er accomplish somewhat similar diversification using Vanguard mutual funds in the different classes or worth the 1.4% (approx) fee (ouch)....

Hi Kannon,
Here's a list of lazy portfolios with varying levels of complexity but all made up of Vanguard funds: Invest Simple with Lazy Portfolios - MarketWatch.com

[HawkeyeNFO]

I'd never hire Edelman, the fees are too high compared to other FA's. However, I don't see any reason to ever hire anyone to manage my money, even if they offered their services for free.

I do like his show though, it's good edutainment. Take the good from it, and leave the bad.

Whether or not you agree with his mortgage advice, it is the kind of thinking that, at least in my case, has been very lucrative: I have 2 mortgages on 2 different properties, the big mortgage is at 3.25% fixed for 30 yrs. Paying that off early would be foolish from a numbers perspective, as the average market returns are about 2.5 times the rate. In fact I may never pay off that mortgage. My other mortgage is on a rental property at 2.625%. It's on a 5/5 ARM - even when it adjusts in 2017, the highest possible rate will be only 2% more. Putting extra money into a market averaging 8% returns beats paying down debt at 3.25% or even 4.625%.

[mpeirce]

Quote:

Originally Posted by travelover I've posted this before, but I found out that my nephew (a big city fireman) was paying over 3% within his 401(k) investment program. So, I guess only a 1.4% take is almost charity.

In my experience the worse are teach 403(b)s. I have a few various relatives who are teachers and for some reason (clueless (or worse) school districts and/or unions) their plans are often outrageously bad. Very high fees and a very poor choice of funds to choose from.

On top of that, I've been helping my DM roll over her old 403(b)s into an IRA. What a hassle! They want all sorts of paper work to get this done. It works too - DM still hasn't moved one of the 403(b)s simply because they make it so hard for her. She'll get to is "soon" she says :-(

I'm thankful that my last employer not only offered an excellent 401(k) with great low cost funds including some vanguard funds, they also offered an option where I could simple manage it all myself through Schwab - nice! And rolling it over was painless.

[scrabbler1]

Quote:

Originally Posted by mpeirce In my experience the worse are teach 403(b)s. I have a few various relatives who are teachers and for some reason (clueless (or worse) school districts and/or unions) their plans are often outrageously bad. Very high fees and a very poor choice of funds to choose from. On top of that, I've been helping my DM roll over her old 403(b)s into an IRA. What a hassle! They want all sorts of paper work to get this done. It works too - DM still hasn't moved one of the 403(b)s simply because they make it so hard for her. She'll get to is "soon" she says :-( I'm thankful that my last employer not only offered an excellent 401(k) with great low cost funds including some vanguard funds, they also offered an option where I could simple manage it all myself through Schwab - nice! And rolling it over was painless.

My ladyfriend's 403b plan with a non-profit hospital is also lousy with respct to fund choices. Nearly all the funds offered had ERs well over 1% (many near or over 2%), even the bond funds, and it wasn't like they were showing magnificent returns. Thankfully, there was a good PIMCO bond fund (one I was in a few years earlier in my working days) which had an ER under 1% so I had her put her rollover money from her previous employer's (the one the big hospital bought out) profit sharing plan. I was like, "BLECH!" at the summary sheet for each of the other funds in the plan.

[purplesky]

Quote:

Originally Posted by ERD50 IMO, greed (on Edelman's part). If you took out a large mortgage, you had more money to invest with him, and he made 1.4% on that extra amount. Good for him, risky for you - but he didn't appear to care about that. At least not as much as his 1.4%. And this is coming from someone who has no problem holding a low rate mortgage in retirement, but Edelman was talking big mortgage, and refinancing every time your equity increased. Geez, what happens if you end up up-side down, and need to move to keep your job? Not Ric's problem! -ERD50

Actually I think Edelman's point is to have a large portfolio that produces enough income to pay your mortgage comfortably in retirement. To avoid the house rich cash poor scenario.
I agree with Edelman. I would rather have a portfolio that produces income to easily pay all expenses and still grow the principal.
If I have 500k in cash to buy a house and buy a 500k house I am going to keep most of that cash in a diversified portfolio. With todays low rates. I am at 3.25%

The other end of the spectrum is Dave Ramsey who tells his listeners to pay off their mortgage as quickly as possible and only save 15% for retirement.

Everybody has to decide what works best for them so they can sleep at night.
I just prefer money in a portfolio producing income vs. a paid for house and a small portfolio.


Obviously people who live on this website are not going to pay the 1.4% fee to invest with Edelman. But many really smart people that make a good income would rather watch paint dry than manage their own investments.

Much less visit this website. Some people just hate money and are willing to pay others to deal with it.

[travelover]

Quote:

Originally Posted by purplesky ...........Some people just hate money and are willing to pay others to deal with it take the excess off their hands.

Fixed it for you.