leaving our financial advisor

[feh]

I don't post all that often, but some of you may know that my wife and I moved to a full-service advisor a couple years ago. The firm actively managed our portfolio, charging 1% of assets.

We've decided to start doing it ourselves again. We just haven't seen the benefit I had hoped for. Our plan is to move to a passive management style, using just a handful of index funds, such as John Bogle would advise.

[disneysteve]

I seem to recall you posting when you were thinking about switching. I suspect I told you the same thing then that I'd say now - the adviser can't do anything for you that you can't do for yourself at lower cost.

You can make things as simple or as complex as you'd like. On the simple end, you could do as few as one fund - a target date fund, or control the allocation better with 3 funds - total US stock index, total international stock index, total bond fund. Beyond that, the choices are endless but I think simpler is generally better as long as it fits your needs.

[PasadenaFinancialPlanner]

I don't post all that often, but some of you may know that my wife and I moved to a full-service advisor a couple years ago. The firm actively managed our portfolio, charging 1% of assets.

We've decided to start doing it ourselves again. We just haven't seen the benefit I had hoped for. Our plan is to move to a passive management style, using just a handful of index funds, such as John Bogle would advise.

Sounds like a great idea. The most efficient approach is to use the most broadly diversified index mutual funds with the lowest costs. You do not have to keep paying tribute to the financial services industry. Find and read "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry" by Bergstresser Chalmers and Tufano (free on the Social Science Research Network), and you will understand that brokers know nothing about how to improve your returns.

A minority of the industry serves those who are skeptical of the standard, excessively expensive product offerings, and John Bogle has lead this for almost 40 years. The primary vendors of low cost funds are Vanguard, Fidelity, and Schwab, but there are a few others, as well. Spend some time on their websites reading.

When you drive the costs out of the system, you benefit from higher diversification which reduces variability without reducing the expected return. The only way to manage a low cost fund is to track an index, so you also get the benefits of lower turnover, which leads to lower brokerage fees and reduced investment taxes.

[feh]

A minority of the industry serves those who are skeptical of the standard, excessively expensive product offerings, and John Bogle has lead this for almost 40 years. The primary vendors of low cost funds are Vanguard, Fidelity, and Schwab, but there are a few others, as well. Spend some time on their websites reading.

Yes, we will be following the Bogle approach. Our accounts will be held at Fidelity.

The transfer of funds is taking place this week, and I'll be buying funds next week. I can post our final portfolio if folks are interested.

[johnnyjs]

I think its funny when customers are too scared to talk to their brokers or bankers in charge of mutual funds to ask them what the hell is going on with my performance and return? I had a friend whose mutual funds had underperformed for three years straight and never once thought to walk into a chase bank location for a little sit down. Its your money, never forget that!!

[Petunia 100]

Yes, we will be following the Bogle approach. Our accounts will be held at Fidelity.

The transfer of funds is taking place this week, and I'll be buying funds next week. I can post our final portfolio if folks are interested.

I'm interested, please post what you are going with.

[MonkeyMama]

I appreciate you sharing your experienced. Not surprised with the outcome.

The other problem with leaving other people in charge of your money is it *really* opens you up to fraud. May be my primary motivation for DIY. Working as a tax professional, have seen many many many people swindled by financial advisors. (Tax advisors are not always better - the more you can DIY And not turn over personal financial information, the better).

[feh]

I'm interested, please post what you are going with.

Here you go. Comments/questions welcome.

25% intermediate term bonds (PTTRX & FSITX)
8% REIT index (FSRVX)
20% international equities index (FSIVX)
37% US total market (FSTVX)
5% US small cap value (VBR)
5% international small cap (VSS)

[EEinNJ]

If you're a typical middle-class schmoe saving from a salary, investing for retirement in mutual funds, etc. you can DIY it if you're so inclined.

I've heard that high-net worth people with "real" money to invest use financial managers to put them in the private equity market, which has done much better than pedestrian index funds in recent years.

[Petunia 100]

Here you go. Comments/questions welcome.

25% intermediate term bonds (PTTRX & FSITX)
8% REIT index (FSRVX)
20% international equities index (FSIVX)
37% US equities index (FSTVX)
5% US small cap value
5% international small cap

I like it a lot! And no wonder, here is my own:

15% Total Bond Market
15% Tips

(so, 30% bonds, average duration intermediate)

10% REIT index

15% Large Developed Intl
_5% Intl Small
_5% Emerging Markets

(so 25% International)

25% Total US Stock Mkt
10% Small Value

(so 35% US stocks)

It reminds me of something.

[feh]

I like it a lot! And no wonder, here is my own:

15% Total Bond Market
15% Tips

(so, 30% bonds, average duration intermediate)

10% REIT index

15% Large Developed Intl
_5% Intl Small
_5% Emerging Markets

(so 25% International)

25% Total US Stock Mkt
10% Small Value

(so 35% US stocks)

It reminds me of something.

Yup, very similar indeed.

I considered throwing 5% at emerging markets, but in the end decided it wouldn't make much difference. I think the expense ratio for the entire portfolio is around .15%.

[stockmarketmate]

I don't post all that often, but some of you may know that my wife and I moved to a full-service advisor a couple years ago. The firm actively managed our portfolio, charging 1% of assets.

We've decided to start doing it ourselves again. We just haven't seen the benefit I had hoped for. Our plan is to move to a passive management style, using just a handful of index funds, such as would advise.

A lot of financial advisers get you nowhere and charge high fees. In the end it's much better to do this yourself if you have the time. There are a lot of books on the subject that you can check out.

[feh]

Here is the problem with the full-time adviser
1. Normally they return about 8-10% and then minus off the 1%
2. If you invest in the SnP 500, you will get 10% per year. Just check the previous years.
3. Most management systems will not get close to the growth of the SnP 500.

If you want to invest yourself, try to read a few books and Completely understand a few companies first. I suggest in investing in an entire index instead of single companies to minimize the risk that certain things such as earnings can cause.

Well, not really a fair comparison, as nobody should be 100% invested in the S&P 500.

[poweropp]

Do not buy leveraged ETF's

Don't buy any of those leveraged ETF's unless you are a trader and you are buying and selling them in the same day. Never hold a position in them overnight. They erode. They are losers.

The market had a pretty decent run. Myabe it has more legs. I wouldnt go all in here. Go with stuff that can best weather a downturn and with your cash periodically invest. I'd go small here. If yiu get a decent pullback you can ratchet it up.