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Old 02-03-2024, 07:57 PM   #1
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Greedy Investor

Is it wishful thinking or greedy of me to ask my financial advisor to get us a higher return than the index SP500? The financial advisor says that "he can help me and manage my portfolio" . If not, what is the point of paying them? I could just stick with what I already have....

FA can't even beat sp500...so they hoover around 5-6%.... maybe I just buy CD ladder?

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Old 02-03-2024, 08:20 PM   #2
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Depends what you expect/ use your FA for. I use ours for much more than “investment allocation/advice. Estate planning, social security draw strategy, bucket allocation and timing based on income needs. Matching SP500 isn’t a bad result….especially the past 18 months.
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Old 02-03-2024, 08:22 PM   #3
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Definitely wishful thinking. Very few professional fund managers manage to beat the S&P500. Your neighborhood FA is very unlikely to do better than those pros.

Unless he can document exceptional results for the past 5 years or more, I'd save his fee and add it to your S&P ETF.
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Old 02-03-2024, 08:33 PM   #4
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I would say good luck with that. First, few FA will put clients into a 100% stock asset allocation due to associated risk. Therefore, it is definitely wishful thinking to ask them to beat the S&P. If you want to beat your FA, just fire him/her and invest in the S&P or TM ETF. Done.



There is no way an AUM FA is worth their fee to manage your portfolio. It will cost you half your portfolio, or more, over 20 years.
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Old 02-03-2024, 08:59 PM   #5
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I would say good luck with that. First, few FA will put clients into a 100% stock asset allocation due to associated risk. Therefore, it is definitely wishful thinking to ask them to beat the S&P. If you want to beat your FA, just fire him/her and invest in the S&P or TM ETF. Done.



There is no way an AUM FA is worth their fee to manage your portfolio. It will cost you half your portfolio, or more, over 20 years.
so stick with sp500 on my own for now? they want to invest in balance funds so no way that we can do better than sp500 but we can't lose as much either.. Basically hoover around CD, bond, dividend returns and a chunk in sp500. Why am I paying them then?
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Old 02-03-2024, 10:31 PM   #6
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There is no way an AUM FA is worth their fee to manage your portfolio. It will cost you half your portfolio, or more, over 20 years.
Curious on the math to lose half.
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Old 02-04-2024, 03:07 AM   #7
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Curious on the math to lose half.
I could see it maybe costing you half of the amount of your total contributions over the course of a lifetime's investing ... most of your balance ends up being growth vs. contribution. But there's no possible way that a 1-2% AUM fee every year for 20, 40, or 80 years could eat away half of your portfolio.
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Old 02-04-2024, 06:02 AM   #8
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I could see it maybe costing you half of the amount of your total contributions over the course of a lifetime's investing ... most of your balance ends up being growth vs. contribution. But there's no possible way that a 1-2% AUM fee every year for 20, 40, or 80 years could eat away half of your portfolio.
Using 6% CAGR for a portfolio, and an AUM fee of 1.5%, after 40 years the managed portfolio would have 56.5% the value of the unmanaged portfolio.
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Old 02-04-2024, 06:03 AM   #9
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so stick with sp500 on my own for now? they want to invest in balance funds so no way that we can do better than sp500 but we can't lose as much either.. Basically hoover around CD, bond, dividend returns and a chunk in sp500. Why am I paying them then?
If you aren't a panic seller, you shouldn't be paying them.

https://www.bogleheads.org/wiki/Bogl...g_start-up_kit
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Old 02-04-2024, 07:41 AM   #10
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I would not expect anyone to consistently beat the S&P. I also would not pay a FA. I just invest in index funds myself.
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Old 02-04-2024, 08:06 AM   #11
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If you are going to shoot yourself in the foot, you need an advisor to remove the bullets from the gun. If you think the only reason to have an advisor is to beat the S&P 500 then I worry you might have a loaded gun without him/her.

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Old 02-04-2024, 09:15 AM   #12
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When we had our investments managed at ML, our FA said their job was not to make us rich, but it was to ensure that we never became poor. After 12 years with them, we went on our own. So far we are neither rich nor poor managing our investments on our own.
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Old 02-04-2024, 09:23 AM   #13
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Advisors are good for you the same way that applying leeches to pull out evil spirits is good for you.

If you want higher returns, just increase your stock allocation but stick to the S&P 500 or a Total Market fund for your stocks. Telling an advisor you want to beat the market is a license for them to churn your account chasing shiny objects, leaving them smiling and you in ruin.

Jack Bogle, the late CEO of Vanguard, said something like "I don't know anyone that could consistently beat the market, in fact I don't know anyone that knows anyone that could do it".

If Vanguard's CEO didn't know anyone that knew anyone that could beat the market, neither you nor some random retail advisor will be able to do it, except by taking big chances and having wild luck.

As others noted, advisor fees and fund fees get sucked out of your account rain or shine. If we are unlucky and have future market returns like, say, 1966, then the allowable portfolio draw will be 4%/year or less. Your advisor will take about 1% AUM plus will usually put you in funds with additional costs. Overall, their revenue targets are to grab 1.5-2%/year. Leaving you only 2-2.5% to live on. Who would want to give away so much?

If you get lured by slick performance comparison graphs an advisor shows, know that they will be intentionally misleading. Some common tricks:
-They will compare their portfolio to a less risky benchmark (often one they dreamed up) to claim superiority
-Their comparison will often omit dividends from index funds but not their own
-They like to cherry pick start dates where their investment choices shown brightly for a moment (but their investment choices were made after the fact, so they had the answers to the test)
-Index investing is very tax friendly compared to active investing, but they don't mention that.
-They often even omit their own fees from the comparison.

But there is no point in even letting them show you a comparison, it's all just a magic trick. They would like to get you into a mental pretzel where if can't figure out the trick, they want you to believe it must be real magic.
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Old 02-04-2024, 11:02 AM   #14
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Especically if they are going to pick a balanced fund for you pick one yourself. VG VBIAX is a 60/40 indexd fund, may suit you. I like VG Wellsley, Wellington and hold Global Wellington, they suit me, work well and I leave them alone. My son still has VG STAR fund for 20 years since I set up a Roth IRA for him for work during high school. Worked well for him. Three, two or even one fund and leave it alone.
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Old 02-04-2024, 11:19 AM   #15
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Originally Posted by Enuff2Eat View Post
Is it wishful thinking or greedy of me to ask my financial advisor to get us a higher return than the index SP500? ...
Worst case you could successfully convince the FA to try to hit your goal. This is done by taking on a lot of risk; betting on a few stocks and hoping...
William Bernstein: ďDo you think that by choosing a portfolio of only a few stocks that you hope will score big, you are maximizing your chances of becoming wealthy? Indeed you are, but you are also maximizing the chances of a retirement of cat food cuisine.Ē
The bitter truth is that 70 years of data shows that only a tiny fraction of professional managers are lucky enough to beat their benchmarks over investor-length periods of five or ten years. S&P SPIVA reports prove this every six months; the are all the same. https://www.spglobal.com/spdji/en/sp...icle/spiva-us/

Worse, S&P Manager Persistence reports are also all the same. Past results are not predictive. https://www.spglobal.com/spdji/en/sp...nce-scorecard/
Burton Malkiel " ... The indexing strategy is the one I recommend most highly. At least the core of every portfolio ought to be indexed. I recognize, however, that telling most investors that there is no hope of beating the averages is like telling a six year old that there is no Santa Claus. It takes the zing out of life.
Finally, if the FA had the skill to reliably beat the market he would not be working as an FA. He would not be working at all.
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Old 02-04-2024, 11:36 AM   #16
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Presumably, the FA will want to protect her clients in the event of a sustained market downturn. (Look up the Bear market of the late 70ís and 80ís). So, she may recommend some investments that will never match the S&P in the long run. Things like CDs, highly rated bonds, etc. Thatís a drag on performance but for a retired person, minimizing the down hill slides may be more important than squeezing out the last penny of gains from the stock market.

At my age it would do me little good to match or even exceed the S&P if the Bear Market of the 70ís and 80ís came out of hibernation and once again started its slaughter of investors. My heirs might profit in 20+ years, but that would be far too late for me to have a comfortable retirement.

Of course, most of us here donít need an FA. We know enough to do it ourselves. But, out in the wild, there are a lot of people who would do little or nothing without a FA to push them. I meet them every week when I help out for the senior meals. They live in crummy modest little apartments, and itís a big deal to splurge on tea and biscuits twice a month.
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Old 02-04-2024, 02:25 PM   #17
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My T Rowe Price Midcap Growth Fund occasionally beats the annual S&P but that's not why I own it.

Would I even try to contruct a portfolio to beat the market? No. I'm quite happy with steady and respectable gains that loosely mirror the market.

OPs title says it all.

Greed isn't good...greed is dangerous. IMO be happy with an index fund.
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Old 02-04-2024, 02:39 PM   #18
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Focussed index funds like QQQ and VGT tend to beat the S&P 500 (VOO) most years.
So if you're investing for the long run, put some in those...
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Old 02-04-2024, 02:43 PM   #19
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After being pitched by numerous FAs, I did some research on mutual fund managers. They get paid huge sums of money for what looked to me to be completely hit or miss performance. I decided I would be really irritated if I paid someone to lose money for me, and went the DIY route. It’s turned out pretty well, I think. Maybe I was good, more likely I was lucky, but now 15 years into retirement I feel like it was the right choice for me.
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Old 02-04-2024, 02:58 PM   #20
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Having had an advisor at one of the big companies for years, my general feeling is that they setup a call every quarter or half year, say "everything is balanced properly" and ask you if anything changed.

My gut tells me they have an internal robo-advisor that they "adjust" your balances by..nothing more unless you really demand something different.

For this., they take their 0.5%-2% fee .

If I'm correct-they will never beat S+P even with a 100% allocation because after you get it, they have to take their 0.5-2.0% away from the gain .

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