Is it time to move on from DIY Investing?

[DrRoy]

I say no, unless you consider FA's some sort of charity. I had an FA for a number of years but fired him because the returns on the $ that I still managed myself outperformed his.

 

[rkser]

I guess the FA would have kept me on a even keel & helped me to not get swept up & make mistakes during Market gyrations last year.

Stupid mistake was made this way, let me explain -
The 2 Vanguard Index Stock Funds we have are in Taxable & Roths, the Bonds are in Tax Deferred IRAs. We do not have earned income & cannot contribute to our IRAs.
Now, during Feb - March 2019 the S&P goes down & I get excited & buy VTSAX in Taxable (Just followed the rule - Stocks in Taxable) from some Cash I had & also rebalance from the Muni Fund we have in Taxable. Our Asset Allocation now is around 70/30 from intended 55/45

Now in June the Market rebounds, I get uncomfortable with 70/30 AA I sell the Long Term lots of VTSAX, to get AA back to around 50/50 - 55/45 as we are near to start withdrawing from savings. Still with me.

I end up with a huge long term cap gains Tax which I am getting ready to pay now. Did I benefit from this Market Timing or instant rebalancing as AA was way higher than the 5% Ribbon I have set for myself. YES I made some money as the Market was down 25-30%.

Little did I think that I could have made the above sell the VBTLX & then buy VTSAX in our IRAS without any tax consequences.
Although it is in no way connected, as investing is emotional (Human) I carry the memory of wounds from 2008 market gyrations, when I sold a small part of Stocks & sealed my losses, luckily the portfolio was small then so no harm done in the larger scheme, but the memory of that dumb mistake is still carried on.
So yes another pair of eyes would have directed me to the IRA to make trades in & to keep emotions in control during market gyrations.

 

[capjak]

If you have 100x expenses than I guess it doesn't matter what you do.

But a strategy may be to purchase deferred or immediate annuity to purchase a baseline income that meets most of your expenses (minus SS/Pension etc..). That limits the requirements on your portfolio.

If you are against SPIAs, than find a dollar amount that you want secure for lifetime expenses. For example: $3,000,000 put in low volatility investment (TIPS/Govt Bonds/Higher Grade Corporates/Cash/CDs).


Heck, it could be as simple as placing 1 year in cash and the rest in a Vanguard Lifestrategy Fund and never having to do anything other than sell the fund when you want to replenish cash. (minor tax drag in taxable but no big deal)

I do not see the need to pay someone 1% of your savings in perpetuity just because you can afford it. (35 years x 1%fee=35%).

 

[rt-texas]

Wife and I both had fairly major health scares about 3.5 years ago at the same time. Paid the 30 basis points for a year and let Vanguard PAS re-balance and keep an eye on things while we focused on our health.

Once everything settled and we knew we were ok, dropped the PAS and went back to self managing. They spread things out a bit into more funds than I had, so I have consolidated back down a bit during yearly re-balances.

I was happy with our advisor. He listened to me and stayed true to my wishes for AA and general directions. So I'm glad I did it at the time.

Did make me think about my wife if something were to happen to me. I am the one who handles everything financially for us. So did my research and interviews and created plans A, B and C for her to start with if I shuffle off or become incapacitated.

Still keep my CPA and attorney from my business owning days. If they retire, I have several others I have interviewed and will go to the next one on my list.

 

[aleabo]

This question that I'm asking myself recently. But:
- not sure if working with adviser will achieve better results minus adviser cost
- Since I have a lot in taxable - not sure what adviser can do without incurring capital gain taxes.

 

[OPULENT RV]

I have always said they are called Brokers because you will be substantially more BROKE when they are through with you

 

[imnontrad]

I think as people get older, they should simplify their investment if for no other reason than to make it easier for their executor to settle their estate. A little over a year ago, I went to an AAII meeting. the person conducting the meeting talked about some of the complex investments he had. And then one month later, he suddenly passed away. I get the feeling that it has been a big mess for his widow.

 

[braumeister]

This question that I'm asking myself recently. But:
- not sure if working with adviser will achieve better results minus adviser cost
- Since I have a lot in taxable - not sure what adviser can do without incurring capital gain taxes.

Which is exactly why it may be a good idea for you to simplify your holdings before talking to anyone.

 

[Kalm]

I grew up with the stock market as my dad was an active investor. Since then I have managed 60% of my portfolio as diy managing to do better than 2 of my FA. I recently decided to pull my investments over for consolidation and I will be managing it myself. Why pay someone a 1-2% commission when their returns are below par? I strongly believe no one will watch your money closer than you since its your money. When the FA collect a commission regardless of how your portfolio is performing, IMHO it is sending the FA the wrong message. I say if you have the knowledge and experience, you should continue manage it! But what do I know!

 

[DougJohnson]

When you cross the eight figure mark you should focus on capital preservation through extremely conservative investment vehicles...

Why?
-- Doug

 

[winyaz]

An investing professional is more likely to cost you money than to help you make more. I think Fidelity offers a free review with a professional for folks with a lot less in assets than that, though I have never taken them up on it. I would consider whether your objectives have changed along with your assets. Perhaps protecting what you have rises in importance relative to growing your account.

 

[zippy2020]

I guess the FA would have kept me on a even keel & helped me to not get swept up & make mistakes during Market gyrations last year.

.......So yes another pair of eyes would have directed me to the IRA to make trades in & to keep emotions in control during market gyrations.

Exactly. Sometimes our brains are too busy and we end up outsmarting ourselves.

It's well-established by many studies that people remember best the bad things that have happened to them, but tend to forget the many mistakes they themselves have made - instead, focusing on their own positive achievements.

If you (the financially savvy partner) dies, it is more than just a spouse needing to pick up the reins. Their situation has changed. The will or trust needs to be changed. The financial decisions are different: keep the house, or move somewhere more manageable/better weather/closer to family? The tax circumstances have changed, from primary residence cap gains profit limits to inherited IRAs and the original cost basis of assets (especially since Congress can and does change tax laws - do you really want to depend on someone else to let your spouse know?).

Health changes may have occurred over the years with spouse. Life expectancy may have changed, as well. Neither a lawyer nor CPA should be advising on what might be the best current senior living alternative for spouse. And asset investing/withdrawals in retirement may require a different approach than during the working years.

I get tired of repeating this, but one doesn't use a CFP to get the biggest/highest/most spectacular financial returns. You can do that yourself - just don't expect anyone else to duplicate that (unless you're really lucky to have an interested family member!). One uses a CFP to work on a holistic approach to retirement, estate planning, and eldercare*.
* I've posted on other threads about eldercare discussions with our CFP.

I learned how to do retirement planning from employer seminars, and did well enough that two different independent CFPs congratulated us on our long-term strategies. Our CFP has done an outstanding job of making sure our portfolio withdrawals have the lowest possible tax cost. There is no 'churning' of accounts, nor excess costs over fund NAVs.

We just finished setting up a Donor Advisory Fund for 2021, on their advice. This came from our last general discussion about giving to charity. That, plus another couple of changes I'm making which they approved of, should pay a positive dividend in 2022 for this taxable year.

I enjoy finance. I understand investments. I track business and financial trends.

But my spouse isn't interested in any of it. Nor is anyone else in my family, or his.

I use a CFP, even though we are not in the 8-figure bracket, because their advice can be even more useful for middle-class and upper middle-class folks. But middle-class couples seldom have the minimum level of investible assets, while many upper middle-class folks are too busy, and keep "putting it off till next week/next month/'things stop being crazy' " - the usual mantra.

 

[steveark]

That's an interesting question. I have friends like me who are seven figure millionaires, friends with ten million, one hundred million and over a billion. Somewhere between ten million and one hundred million they set up a family office to handle all assets. But I am a small time multimillionaire, I'm not sure where that break point is. I think you are right at that breakpoint.

 

[I am He]

Little did I think that I could have made the above sell the VBTLX & then buy VTSAX in our IRAS without any tax consequences.

I get your logic. However, would you feel the same way if the market either tanked or stayed down for 5 years? If your bond-ballast, was halved, it would be an interesting/exhausting dilemma.

Hindsight is great in a scenario where we live in a pandemic that could still take a hard left and we have a market that bounces back to all time highs.

For the record, I too feel kind of dumb with most liquid funds sitting in the IRA for tax reasons.

 

[Markola]

We have an assigned CFP with Vanguard Personal Advisor Services. I would do it any other way. Thirty basis points is cheap for keeping DW and me on the same page, ensuring she has financial help if something happens to me, and for Investment Mistake Prevention Insurance by eliminating counterproductive portfolio fiddling. YMMV.

 

[Joylush]

When you cross the eight figure mark you should focus on capital preservation through extremely conservative investment vehicles (individual corporate bonds, CDs, money market, etc...). You really don't need an investment adviser/wealth manager eating into those margins. Also why would you take advice from an adviser who has less assets than you? Most of them are sales people that work on a fee and commission basis.

I can’t say I agree with this. I’m in this boat. The more I have the more I can afford to risk. Sure it makes sense to keep a portion of assess in no-risk investment vehicles but in today’s virtually no interest environment I just can’t fathom letting it sit there eroding away in value. My biggest hurdle is feeling comfortable enough to spend it freely. I can’t imagine a scenario where I turn it over to anyone else to manage. I also manage my daughter’s portfolio so maybe one day she can return the favor.

 

[One Tough Puppy]

I wonder what my mental acuity will be 30 years from now and what would my wife do about investing. She doesn't want anything to do with investing. So I created a big blue binder document and told her and my son where to find it. I told them if I get hit by a truck, go hire a Vanguard advisor or use the Vanguard Digital Advisor (robot-advisor). And move all of our investments from other brokers to Vanguard. I also made a list of all our accounts.

 

[Skitso999]

I don't see any reason. I know someone who is private-jet wealthy that manages their own investments of index funds. They consulted and paid for an estate plan / trust. Also they only had bad things to say about their past interactions with investment managers.

I completely agree with this! I only invest in mutual funds, and they won't care, one way or the other, if you have $10,000 or $10,000,000. No reason to have a financial advisor siphoning off 1-2%.

 

[LV_Travel]

My best friend has a MBA from Wharton in Finance, and is also a CFA. In his earlier years, he had a trusted stockbroker that worked his money without direction--and he did very well. Later in life, one of his fraternity brokers and good friends guides his stock portfolios--again with little feedback. My friend is a venture capitalist and keeps his ownership in the venture portfolio separate of his personal funds. In other words, he trusts people in the industry that he's had a 30+ personal relationship with.

Other extremely wealthy families I've done business with have their 45ish year old children running essentially intrafamily venture operations. It's nice to have kids that can take over the family businesses, but two of the kids are flying Challenger jets seating 22 people. I sometimes wonder about priorities of the upcoming generations.

Worked in the VC Industry and observed crazy and very rational behavior of second and third generation family office offspring. If the offspring learn how to identify and secure private investments they can achieve better returns than any advisor will consistently return. I was not fortunate enough to be one of those offspring, but my offspring are, thanks to realizing 18+% compounded returns over a 25+ year career in VC. Did ER long after FI and do not entrust my assets to anyone except ETF's and the occasional private investment opportunity that meets the same criteria I followed when not ERd.

ETF investing cannot be consistently beat for risk adjusted returns without specialized knowledge and a tremendous amount of time and financial resources. For those who aren't convinced of this yet, read "The Most Important Thing Revisited" by Howard Marks. Marks generated some of the very best multi-decade returns in the distressed debt markets over the past 35+ years. Unless an advisor has access to the extremely rare investor who can consistently outperform on a risk adjusted basis over decades, just stick with etf investing.

 

[Koolau]

When you cross the eight figure mark you should focus on capital preservation through extremely conservative investment vehicles (individual corporate bonds, CDs, money market, etc...). You really don't need an investment adviser/wealth manager eating into those margins. Also why would you take advice from an adviser who has less assets than you? Most of them are sales people that work on a fee and commission basis.

Interesting that Freedom56's post is getting some feedback just now. I am one who believes in the basic concept of cutting WAY back on risk when you have "won" the game. I wouldn't set the bar at 8 figures for every one however. I'll never have that much and I'm much more into capital preservation than I am into capital growth. I get a fair amount of push-back on my opinion here (and that's fine - we all have our opinions - on everything).

I just don't see a need to put any more capital at risk than needed to meet my needs (living needs, inflation risk, charities, kids needs, etc. etc.) Once my "needs" are met, I consider that I have "won" the FIRE game. Why go for a BIG win when you've already won?

I'm okay with folks who are sitting on "fat stacks" but still keep an AA of 90/10 or whatever. I just don't understand it if you already have more than you can spend in your remaining life. Obviously, opinions vary so YMMV.

 

[WhenIsItTime]

I’ll keep a reasonably aggressive AA cuz I can and with goal of furthering wealth accumulation for my kids. I want my hard earned assets working for me. I can’t predict what future holds for my kids, but I can help them financially. I have time to figure out when and how much.

If I was 70+ years old and without them, I might coast into safe AA.

 

[LV_Travel]

I just don't see a need to put any more capital at risk than needed to meet my needs (living needs, inflation risk, charities, kids needs, etc. etc.) Once my "needs" are met, I consider that I have "won" the FIRE game. Why go for a BIG win when you've already won?

I'm okay with folks who are sitting on "fat stacks" but still keep an AA of 90/10 or whatever. I just don't understand it if you already have more than you can spend in your remaining life. Obviously, opinions vary so YMMV.[/QUOTE]

Many of us who don't follow your philosophy may be sorry unless we have a very long time horizon. The current market is so similar to 1999 it is scary. Some of us are so used to saving and trying to grow our "pile" that it has become ingrained in our being. Answering the question when do you stop accumulating and start harvesting, gifting, etc. is the toughest decision for many who FIRE especially if FIRE younger than normal. Especially if you were doing extreme saving and investing as a percentage of your income. Most here have found that spending more beyond a certain amount doesn't increase your happiness and can even reduce it if you have more homes/toys to manage. Yet we keep taking totally unnecessary risks with our pile. It doesn't make sense to me either. Kind of like continuing to work when you know you are clearly FI.

 

[FIREchief]

If I hired an FA to handle my investments, I would spend more time and mental energy monitoring the FA's actions than I do to just DIY.

 

[Live Large]

DIY vote Yes! LBYM

I've tried professional management and realized they always made money - even when I lost money. They were no better at predicting the market than I was - which is to say totally unable to predict.

So, I do it myself (not near 8 figures, but I'm very protective of MY money.) I might not make as much as some others (including many DIYs here) but I don't worry too much. The guy who cares MOST about my money IS my manager. He may not be the sharpest nor most informed, BUT he's the most interested in how I come out. Finally, he's in this with me. If I lose money, HE loses money. YMMV

Mahalo! t = 72/t My Money

OP- you have won the game but we all like to keep playing don’t we? Win one more time! I suspect this thread will grow more pages keep reading.

I believe many here know da formula but did you know the two kinds of FA’s? Most still use what’s called the Suitability Standard - recommendations that make them $ In my 20’s had a Waddell & Reed account- I didn’t know any better at the time - fees sucked me dry...lol. Ever hear of Prime America? Plenty of folk were interested in my earnings to ‘invest’. Then I also got side tracked with get rich quick schemes as well. After suffering those loss I had an epiphany, your topic Do It Myself

Opened first broker account CS in 1993. At the job deferred and learned to Max. Self-managed TD did a few higher risk trades individual stocks did my own DD. It’s My Money. I liked the learning curve. What’s that saying? First 1 million is hardest? Do well on 1000’z also least live unencumbered by debt other great post here to read on topic!

FA’s are not really Fiduciary (2%) they make money whether you do or not. Most can’t hold a candle to the ER’s here imo. I like learning from posts like this.

Sure, use the 1 or 2 “Free” consultations if you like. Better served by learning to do the basics as many post here on money topic...even W. Buffet says Vanguard a great choice - Fidelity EFT’s.

Not too worried about money as I grow older won’t run out firecalc etc need to blow mo dough plenty assets left over for estate heirs not worried about them either self driven fairly smart

Whether it’s 100k 1mil 10mil 100m 1B best keep an 👁 on your OWN money. Stick with a Win/Win!

Any NFL fans? Heard of Adrian Peterson? 13yrs as RB earnings 104mil he’s at the end of earnings doubt plays again had FA Broker? People he allowed Full access over His Money - Now? He’s worth a negative 4 mil How?