Right on.

Investing is quite simple: have a reasonable asset allocation plan and stick to it. However it’s hard for ordinary investors to carry it out:

1. The financial industry is constantly dangling the seduction of “beat the market.”
2. Our reptilian brains want us to “do something, just do something” whenever the market falls.

I figure if I can help my clients avoid these two pitfalls, I am probably worth more than the money they are paying me.

Michael

Don’t lost hope. Get a book by Jack Bogle or Bill Bernsteins. They will set you on the right track.

Michael

I can agree with most of what you said. If you spend one hour each month on your personal finances, either to learn something or to take care of your own finances, you will be twice as wealthy as otherwise. That’s according to Thomas Stanley, author of Millionaire Next Door. However, for many folks who have no interest, that’s one hour too many to spent on finances.

As for hiring a financial advisor, alignment of interests is extremely important. And on that, you can be sure a FA from a major Wall Street firm will not have an aligned interest with you. Their bonuses are dependent on them making money off you, not for you.

Michael

I wrote about that here http://investment-fiduciary.com/2011/11/09/i-bought-a-short-sale-townhouse-as-investment-property-should-you/

and had a discussion here http://investment-fiduciary.com/2011/11/28/what-it-takes-to-be-a-landlord/

Michael

I don’t know the specific details of Michael’s example, but from 2007 through 2009 you could easily lose 50% of your portfolio without the help of a salesman. All you had to do was “stay the course” and the market tide would wash you away. If someone starts grasping at straws at that point, looking for that one thing to save him, that’s a calamity waiting to happen.

I’ve haven’t had much success with products or investments recommended by the big boys. Usually, they have an agenda of their own and that may not be in my interest. My humble successes have happened because of doing my homework and finding things that have the ability to succeed and a trend wave to ride. I also like to buy things that I like.

I traded my savings bonds for gold in 2003. Bonds sucked, in an unstable political world gold should go up. I have sold all the gold now. When every other ad on TV is for gold, it’s probably time to sell. If it were really going to double again the gold broker would be better off to hold than to sell for a 5% fee.

I started buying F in late 2008. I don’t think we or the world will ever go back to walking and Ford is positioned to move ahead while other American makers have government considerations beyond CAFE standards.

In the last 2 years I have purchased distressed real estate, fixed the problems and rented the homes. The principle is protected by the intrinsic value of the property, and unlike gold, the residents send a check every month. If poeple ever go back to work in big numbers inflation should make for some very heady LT capital gains.

I also have the IRAs and 401Ks that most of us acquire. Those are either institutionally managed or I have a finacial planner that manages one account. Because of the structure of those investments, they don’t do as well as my stocks, gold, and real estate have done. I leave it there anyway. I could have a bad day.

They say off shore is where all the profits are. Maybe, but with exchange rates, rules on foriegn sales, timeliness of execution, and other complications it seems too hard to understand to me. So, I stay domestic and look for something poised for success. And, I don’t play with all the chips on the table. Even in a game you understand there are still surprises and too much money on any one thing is bad strategy.

My advise? If you don’t want to learn about your finances, hire someone. Underline hire. The guy with the big company has an agenda. The % of the pie guy does too. He would like us to live on social security while he keeps making the pie grow. The bigger the pie the bigger his slice. What’s the need for wealth if all you’re allowed to use is social security? Hire someone with specialized knowledge to manage those affairs.

Great clarification! Thanks! and Happy New Year!

Michael

It’s a lot like expecting a doctor to fix her own Mercedes or wire her own 10,000 square foot home for electricity; sure she may have brilliant mind and 10 years of post graduate education under her belt, but she hasn’t been trained to do these other things, so when they need to be done, she’s be well served to retain a professional who has.