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Message
My Take On The DIY Debate
Posted on 2/16/09 at 5:05 pm
Posted on 2/16/09 at 5:05 pm
Since wampa put the debate full front and center Id like to officially throw in my take on the idea. I think wampa brings up some good points that I had overlooked. But, although a few of you think his my alter, trust me when I say we do not agree on everything.
First thing, I do think it is possible to manage your investments on your own and be successful at it. After all anything is possible. In my opinion in order accomplish this feat, you must be willing to dedicate a sizable portion of everyday to your portfolio and the news that is relevant to it. I have known some DIYers to spend between 3-6 hrs a day on this. Probably about right.
If your are not willing to put in the neccesary time, if you already have a full time job, family, and other major time constraints then do yourself a favor and entrust your money to a financial advisor who does this everyday. You will be better for it then trying to do it half arse on your own. More on my recommendations about FA's later.
If you are doing the neccessary legwork on your portfolio, and have found competent sources for your financial information(tigerdroppings isnt one of them) then you may be able to do this successfully without the aid of an advisor. Just do not get so arrogant that you think you can predict the market.
I want everyone here to admit something. You are investing to hopefully make yourself wealthy one day. If your doing it on your own, you are probably starting with a modest amount of money. Say 10,000. The stakes are lower and who wants to pay fees on the little youve been able to save so far, right?
Well lets say you are successful at this, and your nest egg grows to 100k or even a million. I would argue that now your stakes are somewhat higher.
Now throw in an inevitable market correction of say 20%. On your 10k you would lose 2k. That stings, but you can recover from that. Now figure your million loses 200k in the same downturn...That would ruin anyones day. May even cause a few of us to get emotional...who knows maybe even cause you to make poor decisions on your portfolio based on fear instead of fact.
Heres my point. If you are successful enough at the do it yourself game, then eventually it becomes prudent for you to "hire" an advisor to help you manage it.
Manage what? That depends on you. Some want to create trusts and living wills, others want to sheild themselves from taxes, some still want garuantees on their money. The list of wants and needs can be long, and even the most savvy stock guru can need help in other areas.
Who should I "hire"? From what I gather on this site 99% of you thinks that the people in my profession are either dishonest or incompetent, or both. I can only assure you that that assertion is completely untrue. But for the wary investor there is a way to protect yourself. In my opinion there are two classes of advisors. The ones that are Certified Financial Planners(CFP) and the ones who are not. That simple. Its like the difference between a bookkeeper and a CPA.
If I were in your shoes, when looking for an advisor I would insist on a few things:
1. That the advisor brings something to the table. I have clients who are very hands off, and other who are very hands on.
2. That you tell the advisor in no uncertain langauge what your expectations are.
3. That you expect the advisor to earn his fee. No free lunch. If they dont add value, then find someone who will.
4. That your advisor is a CFP, or at the very least is in the process of obtaining one. It takes about a year and a half of intense studying to be able to sit for the test, and well over 50% still flunk it. It is a true litmus test of quality and knowledge.
You can only gain with a competent advisor on your "staff". I know personally when it comes to difficult questions I employ as many as a dozen experts, analysts, and home office personnel to consult with. I am OCD about getting it right. Sometimes with this, you dont get a second chance.
You eventually will come across an issue that you need help with. It could be setting up a 72t on your IRA. Getting some info on the possibility of a bond of yours might fail. A better explanation of a Variable Annuity and its benefits, or the ability to watch out for terrible investments like an index annuity. It might be something as simple as a second opinion on a stock idea.
Knowing the resources I have available, and the lack thereof in comparison for the DIYer, I shudder at the thought of any of you doing it 100% start to finish on your own.
This is one of those things where the more you know, the more you realize how little you know.
No General goes to war alone, but instead surrounds himself with an army
First thing, I do think it is possible to manage your investments on your own and be successful at it. After all anything is possible. In my opinion in order accomplish this feat, you must be willing to dedicate a sizable portion of everyday to your portfolio and the news that is relevant to it. I have known some DIYers to spend between 3-6 hrs a day on this. Probably about right.
If your are not willing to put in the neccesary time, if you already have a full time job, family, and other major time constraints then do yourself a favor and entrust your money to a financial advisor who does this everyday. You will be better for it then trying to do it half arse on your own. More on my recommendations about FA's later.
If you are doing the neccessary legwork on your portfolio, and have found competent sources for your financial information(tigerdroppings isnt one of them) then you may be able to do this successfully without the aid of an advisor. Just do not get so arrogant that you think you can predict the market.
I want everyone here to admit something. You are investing to hopefully make yourself wealthy one day. If your doing it on your own, you are probably starting with a modest amount of money. Say 10,000. The stakes are lower and who wants to pay fees on the little youve been able to save so far, right?
Well lets say you are successful at this, and your nest egg grows to 100k or even a million. I would argue that now your stakes are somewhat higher.
Now throw in an inevitable market correction of say 20%. On your 10k you would lose 2k. That stings, but you can recover from that. Now figure your million loses 200k in the same downturn...That would ruin anyones day. May even cause a few of us to get emotional...who knows maybe even cause you to make poor decisions on your portfolio based on fear instead of fact.
Heres my point. If you are successful enough at the do it yourself game, then eventually it becomes prudent for you to "hire" an advisor to help you manage it.
Manage what? That depends on you. Some want to create trusts and living wills, others want to sheild themselves from taxes, some still want garuantees on their money. The list of wants and needs can be long, and even the most savvy stock guru can need help in other areas.
Who should I "hire"? From what I gather on this site 99% of you thinks that the people in my profession are either dishonest or incompetent, or both. I can only assure you that that assertion is completely untrue. But for the wary investor there is a way to protect yourself. In my opinion there are two classes of advisors. The ones that are Certified Financial Planners(CFP) and the ones who are not. That simple. Its like the difference between a bookkeeper and a CPA.
If I were in your shoes, when looking for an advisor I would insist on a few things:
1. That the advisor brings something to the table. I have clients who are very hands off, and other who are very hands on.
2. That you tell the advisor in no uncertain langauge what your expectations are.
3. That you expect the advisor to earn his fee. No free lunch. If they dont add value, then find someone who will.
4. That your advisor is a CFP, or at the very least is in the process of obtaining one. It takes about a year and a half of intense studying to be able to sit for the test, and well over 50% still flunk it. It is a true litmus test of quality and knowledge.
You can only gain with a competent advisor on your "staff". I know personally when it comes to difficult questions I employ as many as a dozen experts, analysts, and home office personnel to consult with. I am OCD about getting it right. Sometimes with this, you dont get a second chance.
You eventually will come across an issue that you need help with. It could be setting up a 72t on your IRA. Getting some info on the possibility of a bond of yours might fail. A better explanation of a Variable Annuity and its benefits, or the ability to watch out for terrible investments like an index annuity. It might be something as simple as a second opinion on a stock idea.
Knowing the resources I have available, and the lack thereof in comparison for the DIYer, I shudder at the thought of any of you doing it 100% start to finish on your own.
This is one of those things where the more you know, the more you realize how little you know.
No General goes to war alone, but instead surrounds himself with an army
Posted on 2/16/09 at 5:10 pm to amsterdam
quote:
First thing, I do think it is possible to manage your investments on your own and be successful at it. After all anything is possible. In my opinion in order accomplish this feat, you must be willing to dedicate a sizable portion of everyday to your portfolio and the news that is relevant to it. I have known some DIYers to spend between 3-6 hrs a day on this. Probably about right.
I thought your strategy was buy and hold. And you can't time the market. Why the frick would I need to spend this much time if I am always buying in, and holding the asset? i.e. not trying to time the market.
Makes no sense to me.
BTW, I easily spend 15 hrs a week on finance related matters.
Posted on 2/16/09 at 5:14 pm to MileHigh
IMO the minimum is 1 hour per week, per position. I do at least 2 hours a day. I'd like to do more, except my wife seems to think that being married means that we are supposed to spend time together.
Posted on 2/16/09 at 5:16 pm to MileHigh
quote:
I thought your strategy was buy and hold
It is, but you shouldnt buy, hold and forget
quote:
BTW, I easily spend 15 hrs a week on finance related matters
Good for you, then you prob know what I am talking about
Posted on 2/16/09 at 5:18 pm to Colonel Hapablap
quote:
I'd like to do more, except my wife seems to think that being married means that we are supposed to spend time together.
I know the feeling. My girlfriend says I spend more time on this site than with her.
Posted on 2/16/09 at 5:19 pm to amsterdam
quote:
It is, but you shouldnt buy, hold and forget
So you are saying you should try to time the market? Otherwise forgetting about would make sense.
quote:
Good for you, then you prob know what I am talking about
DINK who loves $$ more than anything else. I think you could do it with a lot less time.
Posted on 2/16/09 at 5:22 pm to MileHigh
quote:
I think you could do it with a lot less time
Good luck with that then
Posted on 2/16/09 at 5:30 pm to amsterdam
quote:
...competent sources for your financial information(tigerdroppings isnt one of them)...
frick
YOU
quote:
Now throw in an inevitable market correction of say 20%. On your 10k you would lose 2k. That stings, but you can recover from that. Now figure your million loses 200k in the same downturn...That would ruin anyones day. May even cause a few of us to get emotional...who knows maybe even cause you to make poor decisions on your portfolio based on fear instead of fact.
Why? It's the same percentage in either case.
quote:
From what I gather on this site 99% of you thinks that the people in my profession are either dishonest or incompetent, or both.
And, the good ones only give a shite about investors with >$1M.
Posted on 2/16/09 at 5:32 pm to Colonel Hapablap
Did your wife use the phrase 'we need to spend more quality time together'?
I hate it when they do that!
I hate it when they do that!
Posted on 2/16/09 at 5:55 pm to amsterdam
Still waiting for you to toss your hat in on the AIG discussion.
Posted on 2/16/09 at 5:58 pm to amsterdam
quote:
If you are doing the neccessary legwork on your portfolio, and have found competent sources for your financial information(tigerdroppings isnt one of them)
I would counter that I have learned more about investing from the contributions of posters like Col Hap and Jersey than from all the books/websites I have ever read, which are substantial in number.
Why? Because I now realize how important it is to think outside the box, and how important it is to question WHY instead of accepting the dogma spouted by the financial world at face value.
I have no problem with using a CFP in general. In fact, I have one, and will continue to use him for now. He has been invaluable in taking some of the retirement planning load off of me since my schedule is so busy.
However, being a good CFP means little to nothing when the topic turns to investing. If anything, I'd say from my discussions with several have led me to the conclusion that everyone read from the same "mutual funds good" / "it's a good time to buy because stocks are cheap" textbook.
It's not meant as an insult...your expertise is in financial planning, not investing. But don't try to sell yourself as something you aren't. That's a disservice to your clients.
JMO.
Posted on 2/16/09 at 5:59 pm to NOMT
Damn strong point there NOMT. Well said.
Posted on 2/16/09 at 6:17 pm to amsterdam
quote:
competent sources for your financial information(tigerdroppings isnt one of them)
Money Talk does a good job of distilling a lot of information from a variety of sources and has several people that are very knowledgeable. It should not be THE source but it is a good one. Without this board I would have stayed in the market longer than I did this summer. Jersey tipped us off to a mutual bond fund that is now up almost 50% in a few months. The financial planner I used to have wasn't bad in his picks but spent zero time on my account after pocketing his load. If I had been with someone like you for the last 10 years I would have much less for retirement than I do now. Financial planners have arrogance in spades. None that I have known have ever impressed me with actually working diligently and competently for their clients best interests.
Posted on 2/16/09 at 6:20 pm to kfizzle85
quote:
Still waiting for you to toss your hat in on the AIG discussion.
Would love to, but Im not sure I could figure out a way to comment on it without being to specific. Industry constraints.
Posted on 2/16/09 at 6:21 pm to rmc
quote:
Why on earth would I trust my funds to someone on commission?
Then dont, pay a flat fee. Most advisors are moving to this model due to the demand for it
This post was edited on 2/16/09 at 6:22 pm
Posted on 2/16/09 at 6:28 pm to amsterdam
You guys can bash me all you want for saying tigerdroppings shouldnt be one of your sources for competent financial information.
The simple fact is that it isnt. You shouldnt go to a message board for answers to your serious financial questions. You have anonymous posters, with questionable backgrounds giving you their 2 cents on something they might not even understand. Not to mention that you have the most one sided financially biased opinions here I have ever seen. No way is there a fair representation of conventional financial thought on this board.
Not hating on you guys, but everyone here knows where the bias lies on this board. There is one train of thought here(something I endeavor to remedy) and you should consider several in most cases.
The simple fact is that it isnt. You shouldnt go to a message board for answers to your serious financial questions. You have anonymous posters, with questionable backgrounds giving you their 2 cents on something they might not even understand. Not to mention that you have the most one sided financially biased opinions here I have ever seen. No way is there a fair representation of conventional financial thought on this board.
Not hating on you guys, but everyone here knows where the bias lies on this board. There is one train of thought here(something I endeavor to remedy) and you should consider several in most cases.
Posted on 2/16/09 at 6:30 pm to amsterdam
Put a disclaimer in your sig that says you aren't disseminating professional advice. None of the myriad number of lawyers or accountants who throw up advice on tax issues does, but if you're really worried about that, I think that would pretty much 100% absolve you of any of those problems. Consequently, I am not a lawyer, so if any lawyers want to chime in on that, by all means.
Posted on 2/16/09 at 6:30 pm to Tigris
quote:
I had been with someone like you for the last 10 years I would have much less for retirement than I do now.
Do you have a spy?
It sounds like you know everything about my methods
Posted on 2/16/09 at 6:31 pm to amsterdam
The fact that you think people come on here and read posts and make portfolio allocations purely on the suggestions of a poster speaks volumes for your understanding of wtf gets talked about around here. You're taking this way to seriously.
Posted on 2/16/09 at 6:34 pm to amsterdam
quote:
Not to mention that you have the most one sided financially biased opinions here I have ever seen.
The irony of that statement is breathtaking.
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