Wrong. An advisor can easily be worth more than 0.8% in tax minimization alone.. maxing tax-advantaged contributions, proper asset allocation between taxable and tax-advantaged, roth ira conversions, deferring capital gains, hedging concentrated positions, optimal withdrawal strategy in retirement, estate planning, etc. Plus there's low-hanging fruit that can have some value.. simply encouraging consistent/increased savings, or holistic advice re: mortgage and insurance.

Keep in mind you don't have to turn over your whole portfolio to the advisor; it's basically a no-brainer for anyone in the top 1% who's not well-versed in the aforementioned topics to at least give the minimum amount to an advisor and milk their advice.

This advice is good in theory and I used to do something like it. The problem is that it is very rare to find an advisor that is a true fiduciary that really knows what they are doing and gives good advice. So in addition to the useful advice, you'll get advice on buying permanent life insurance products, actively managed funds, etc. For someone who is clueless, there is a great chance that the advice will cost them in the long run.

So the problem becomes how do you choose a good financial advisor and evaluate their advice? Well anyone that can do that well should be able to a pretty good job managing everything themselves.

If you got a recommendation for an advisor from someone whose acumen you really trusted, I guess that would be fine.

I have no doubt that an advisor could theoretically be worth that much, but in practice, many may end up costing you more than just the AUM fee. So for the right person and the right advisor, your advice is good. For many others, it is not.

The original question assumed we were pulling from the top 25% of advisors from brokerage firms. Which of course eliminates the bottom 75% of advisors at brokerage firms, but more importantly eliminates 100% of people calling themselves advisors that work at insurance companies and banks. That will severely reduce the chance we are being sold annuities.

I think for the most part my question gave me some results I believe are wrong and some I know are wrong, but about what I expected.

I have another question for this thread. What kind of odds would you lay against someone calling themselves an advisor if they had to use managed mutual funds (or pick stock themselves and charge themselves .8% AUM) against your index funds over a 15 year period? Assuming they were restricted to funds that use a similar allocation as you are using.

I was kind of grunching, so I didn't see that. With that context in mind, then the advice is better. Once again, though, its practical application is a bit limited. The top 25% won't just walk around with a tattoo on their heads. So identifying those advisors who are actually good will require a good deal of knowledge. If you have that, you've got a lot of the knowledge you need to do it yourself.

I assume they charge themselves the AUM whether they buy stocks or mutual funds.

Without researching it (I'm sure studies have been done, so a pretty precise answer could be determined), I'd say around 10:1.

If this is the original question, then > 90%.

Most people are going to need really basic advice, like they need someone to make them a monthly budget. I have a hard time believing that the top advisors at brokerage firms actually provide these services, but surely they could. So the situation is a little contrived, but as the question is written, it's definitely greater than 90%.

Most people don't have a pot to piss in. If my numbers are correct, less than 65% don't have enough liquid assets put aside to afford an hour of a financial advisor's time.

The vast majority of the remaining 35% can't even match the returns of a 60/40 portfolio because they are normal humans. So, around 34.5% would benefit. Maybe more if you want to worry about silly details like taxes.

I agree with all of this, but I was taking the question completely literally. Perhaps too literally. The 65% without a pot to piss in would benefit from super basic things like having someone do a budget for them. If an advisor is going to do this for them for 0.8% of nothing, then they too would benefit. Obviously, in the real world, it would never happen, but in theory, most of those people would benefit from the advisor.

I don't disagree.

so I have been receiving Barron's for free. I am receiving it because I do a lot of clicking on the internet/signup for stuff, that's my only guess.

Today, I read an article titled "Blood Money." It had a caption "Vanguard tends to couch its ethical arguments in financial, not moral, terms."

It was interesting, a group of activists is asking Vanguard to adopt a new policy to avoid buying stock in companies that "substantially contribute to genocide or crimes against humanity." Vanguard is urging voters to vote against the proposal, Vanguard wants to continue to contribute to such companies, one noted in the article is PetroChina.

The article mentioned this too: "The proxy gives fund managers discretion over when to raise red flags. Sudan(he says, Eric Cohen - Investors Against Genocide), was an obvious case of genocide that Wall Street chose to ignore. The gov't and its proxies slaughtered hundreds of thousands of civilians in the Darfur region."

Kind of crazy. I have never thought about implications of things I hold in my portfolio(I am strictly target date through Vanguard). I learned something today and need to read more.

Does anyone here read Barron's often? What is the general view of the paper? is it bias in anyways?

What's the difference between putting money in a diversified robo fund vs a target date fund? I put a bunch into Wealthfront and this is what they did with it. If you look at what the actual investments are, they're all just Vanguard index funds. Is it even worth keeping money in a robo fund in the long run or just buy the Vanguard funds yourself? The annual fee is 0.25%

Can anyone give me a list of companies that Vanguard and or "Wall Street" invested in that profited off the Darfur Genocide?

Might as well save yourself the .25% and invest directly in Vanguard imo

Has anyone here ever done research on how robos performed the last few years? Are they way underperforming the market like investors that don't use an advisor?

I assume that research is out there but I've never heard anyone talk about it. It is always all about lowering the fees.

A quick google search will reveal some articles, Schwab seemed to do the best in 2016 according to multiple comparisons. Schwab is also the cheapest one with $0 fees at all, though they make money by keeping a relatively high amount of your money in cash (to use for themselves likely) and by primarily purchasing Schwab related funds.

Thoughts on GE? It's tanked like 33% in the past year.

It took a significant hit from announcing a 50% cut to its dividend recently, and then another significant hit after announcing its new direction/recovery under new CEO John Flannery. Investors did not think the restructuring is aggressive enough. Are they right?

Is it in danger of losing its Dow status?

Seems like the price has bottomed out and now is a good time to buy.

You should probably ask in the value investing thread. The second half of the last statement (bolded for simplicity) should be in question form instead of statement form, and it is the only good question.

How would you compare the average (mean, not median or any other measure) return over the next 100 years of the following two strategies?

A) Investor picks a random stock in the S&P500 (pick probability is market cap weighted) and holds for 100 years. Dividends (or similar cash returns) are reinvested in this same stock. If stock gets acquired for cash, the cash is invested following the same strategy (with a new random stock). If stock falls out of S&P500 index, it is sold and the cash is invested with the same strategy.

B) Investor buys an S&P500 index fund with an hypothetical 0% fee.

I would expect both investors to have the same mean return over 100 years. Do you agree?

Now what if investor A only sells if stock reaches 10% of purchase price?

I definitely qualify as an investing newbie, so I thought I'd run a scenario by the fine folks here to get some feedback on a situation I'm faced with. Will be happy to provide any additional details if they would be helpful.

My wife and I are targeting retirement in 2038. I will be 58.5, and will receive a state pension. Wife will be 61, and is in the corporate world with the bulk of our retirement savings in her 401k (invested in a Fidelity target date fund). We believe we are on track for this target without the need for additional substantial investment.

We have been paralyzed with indecision regarding other investments/use of our capital, and as such we have accrued ~250k in cash sitting in literal bank savings accounts. It pains me to even type that out. We are looking to maintain a healthy cash balance for emergency purposes, but have at least 150k that we need to do something with.

We have a 30-year fixed mortgage at 4.25% with a balance of ~180k.

Questions:

1) Pay off the mortgage or invest the cash?
Dummies like me have heard stuff like "well, if you can make more than 4.25% in the market, you should always invest it and just eat the mortgage". But, paying off the mortgage seems like it ALWAYS yields 4.25% regardless of market conditions. Due to the tax changes, it seems like losing the deduction of mortgage interest also is an additional tick in favor of paying down the debt. Pay some, invest some?

2) Assuming we start pushing into additional investments, should we always be maxing out pre-tax retirement vehicles first before putting any money in taxable brokerage accounts?
My wife is maxing her 401k, and I have access to a 403b that currently has a 0$ balance that I could drop the 18k annually into. Had thought that the restrictions on accessing the funds until 59.5 might have been a downside toward "overfunding" pre-tax retirement accounts. I have access to a Roth IRA, and my wife could open one as well if that offers upside over something like a taxable Vanguard brokerage account, but those present liquidity issues as well, no?

3) We anticipate earning about 310k in 2018. It appears that 315k is the federal threshold for jumping from the 24% to 32% tax bracket. I assume we should do whatever it takes to stay under that threshold if at all possible (which can be done by pumping my 403b), right?

4) Are we starting to get into the amount of money where we should have a "guy" managing our portfolio for 2% or whatever? It seems icky on a fundamental level, and we're both relatively financially literate (bank balance nonwithstanding). That said, I know I'm a fish in the financial game, and I'm not dumb enough to pick stocks thinking that I can beat warehouses full of MBAs and analysts. Is there a "wealth level" that it begins to make sense to offload this stuff to a professional?

Thanks!

imo pay off debt and/or buy index funds with spare cash at a minimum. 250k is a massive amount to just be sitting in cash losing to inflation.

your 32% tax bracket is only on income above that amount. you dont get everything taxed at a higher rate bc your income is 1$ above the rate.

dont pay anyone 2%, just buy index and/or target retirement date funds with low fees


grats on earning a ton. why wait so long to retire?

Thanks for the reply. My gut feeling is that paying off the house vs. investing in index funds has to be a pretty close decision one way or the other, with one side probably being marginally better. But yeah, either one is miles better than the ol' savings account.

The target retire date came from the sweet spot in my pension where you hit diminishing returns (30 years) so I suppose that just became the defacto option. We're also both fairly risk averse and have no children, so we need to be sure we bank enough to stay out of the bad nursing home where they serve cat food to the inmates.

amead:

Congrats on your financial success. Here's the order I'd recommend:

1. 100% max out any pre-tax savings opportunities like the 403b. Too bad you didn't get this done prior to 12/31.

2. If all your retirement assets are in 401k/403b (no IRA accounts), then you can do a Backdoor Roth IRA for you and your wife ($5500 each). You can still do this for 2017. Your income will make you ineligible for a normal Roth IRA contribution.

3. If you are not going to be itemizing and getting the mortgage deduction, I would definitely pay the house off next. 4.25 guaranteed return in the current environment i would snap take, particularly with the additional mental benefit of having no debt.

4. Lastly, I'd put money into a taxable account.

Don't hire a % based advisor. Go read the Bogleheads guide to investing/retirement. Until you get into a taxable account, I'd keep pouring everything you invest into target date funds and not sweat anything else.


One other thought - not sure what kind of health insurance you guys have, but if you have a HSA option...maximize the HSA account and don't use it for out of pocket medical expenses...use it just like another pre-tax IRA and invest the money. This would be same priority as #1 if possible for you.

Thanks for the reply - feel like I owe you the 2%, lol.

Yeah, here's another embarrassing anecdote. I've had the 403b ready to go, and was just planning on stuffing it with 18k at the end of the year and another 18k at the start of this year for simplicity sake. And then I learned that you can't just fund these things in bulk with post-tax dollars. Oops.

I actually have a small Roth IRA (~25k) from when I was younger that I haven't contributed to in probably 15 years. I wasn't aware that I simply couldn't contribute money into that account by virtue of AGI. Should I do something else with that existing account?

Right on. Great advice.

Will look into this - one of the huge benefits of my job is very good/cheap health insurance for the both of us, as well as free healthcare in retirement (until Medicare). Haven't looked into any HSA options that may exist, but I'll do some research.

A++ would read again. Thank you.

There are a lot of really good advisors that charge less than .75%. I agree that 2% is high and should be a huge red flag.

Considering how lost you are you should probably try to find a good advisor. The advice you get on the internet (here and boggle heads) is usually somewhere between decent to really bad. If nothing else an advisor will explain why keeping $250k in cash (and maybe even $100k) is not a good idea for you.

You should ask those people who tell you to pay off the mortgage instead of investing the money why they think that.