Managed brokerage account: should I pay the 1%? And a TSP question.
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Anonymous
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I have a bit of inheritance and am considering leaving with the financial advisor who managed my relative's money. For those who have some money in a managed account, do you feel you're getting your fees worth? I would own corporate bonds and equities, no mutual funds. I'm thinking the fees won't be any worse than what I'd end up paying for mutual funds. Thoughts?
On another note, I've been employed by the Feds for a couple of years now and never moved my IRA over to the TSP. Is it too late to do that now? If not, can I move any amount? Thanks for any wisdom. |
Anonymous
| For 1% a year, the guy better do better then the s&p 500 index. Most do not. |
Anonymous
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I wouldn't bother with a financial advisor. You can figure out what to do with your own money pretty easily and keep more of it for yourself. 1%? Seems too high for me.
Buy yourself some index funds, index bond funds with a lower expense ratio and you'll come out ahead (not paying as much for fees) and making the same returns. |
Anonymous
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I work for a financial firm. I'd love your 1% since it pays my bills.
For my own money? Never, never, never. "Alpha" does not exist --> you are wasting your 1%. |
Anonymous
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All good advise above. 1% per year compounds into enormous losses over 20 or 30 years. No one will care for your money better than you yourself. It amazes me that most people find managing their money to be uninteresting or too complicated. Do a little homework, determine your own level of risk tolerance and determine a financial strategy that you can live with and still sleep at night.
Be a capitalist and get in the game. |
Anonymous
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I'm in the same boat. I've been paying 1% and I feel as thought I'm actually doing worse than the S&P 500. I'd like to withdraw my money from a managed brokerage account, but I don't know where to begin in terms of managing money.
Suggested reading? |
Anonymous
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Managing your own money is generally NOT a good idea if, by that, you mean picking and choosing your own stocks. Most individuals who try this end up losing money. They read about some hot stock in the Post or a personal finance magazine and they move money into it. But frequently the news blurb basically represents the peak of the stock's popularity, because everybody like you is now buying it, and then there's nowhere to go but down from there. Also, to make really informed decisions, you need to have the time and skills to read an annual report, especially the notes.
The best way to manage your own money to achieve the twin goals of (a) diversification, especially if you have less than $25K or so, and (b) minimizing investment fees is to invest in a broad index, like one of the Wilshire indices. Funds that follow indices basically follow a simple mathematical formula, so that they weight the fund holdings of each stock by the stock's weight in the index (there's some modelling going on, to prevent them from having to buy every single stock in the Wilshire 5000, but it's pretty basic modelling). Index funds don't pay expensive MBA grads and mathematicians to run mathematical models that, as several above have noted, get it wrong. There are several good books on indexed mutual funds out there, and how this is a good way to manage your own IRA money. Also, if you can, hold on to your stocks for the long term. Don't sell at the next market dip, unless you know for sure it's a dog. (Like the high tech stock my cousin persuaded me to invest in, where the technology was taken over by somebody else's better technology. Lesson learned!) And, most important of all: save! Don't dip into it to get a nicer car you really don't need. |
Anonymous
I'm one of the PPs who says just manage your own money. I'd recommend a year subscription to something like Money Magazine or Kiplinger's if you're really just a beginner. You only need to subscribe for a year, it's pretty inexpensive, and it'll give you a feel for what you need to do. Or, get them out from the library (save yourself even more money!). There's lots of great information online - Google things like 'Investment Risk' or 'Asset Allocation strategies'. Basically, decide on how much risk you're comfortable with. You can find quizzes on this online easily. Based on your 'risk tolerance' and how long you plan to invest the money for (college/retirement), they can give you an idea about how your assets should be divided up. Then, just buy one fund in each of the different asset classes. Look for low cost, no load index funds (Vanguard is a good company for this) and hold on to them. For example, you could invest a certain percentage (whatever you are comfortable with) in a fund from each of these classes: Big Cap Index Fund Small Cap Index Fund International Index Fund Real Estate Index Fund (REIT) Bond Index Fund My dad has been investing like this for years, and I have been doing the same thing since my first job. It's easy and we get decent returns (knock on wood). I check on everything only once a year and rarely buy/sell a fund. Not as glamorous as short selling and active trading, but it's a decent way to keep your money growing and working for you. If you want the fun and excitement of trading stocks (which I think of more as gambling... no matter what the pros tell you, they don't know that much more than you do), then just buy some stocks on the side through an inexpensive online brokerage like Scottrade! Good luck! I guarantee you can do just as well with your money, if not better (since you're not paying fees to the manager!). |
Anonymous
| PP here - Just to clarify, I recommend just getting the subscription for the magazine for a year, because I think you'll find that after that, the info is just the same issue after issue! Because there is only so much you need to know for basic investing. |
Anonymous
Holy hell, 1% is a lot. Fidelity charges like 0.14% |
Anonymous
| And that 1% doesn't include transaction fees. Which will be ENORMOUS if your "advisor" is buying and selling stocks and bonds. |
Anonymous
how much is "a bit?" sorry OP but lots of crappy advice here so far. the amount you have informs much of what follows. if you elaborate I'll weigh in. I don't have time to pick apart the various comments. I'm a NY advisor managing $1 billion or so..I'm here checking out another forum for family in DC. |
Anonymous
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Read this an look at numbers. Does it look likes smart bet?
http://www.economist.com/blogs/buttonwood/2011/11/active-fund-management Buttonwood's notebook Financial markets PreviousNextLatest Buttonwood's notebookLatest from all our blogs Active fund management A Miller's tale Nov 28th 2011, 14:39 by Buttonwood BILL Miller, the fund manager who recently retired from running the Legg Mason Value Trust, is best-known for beating the S&P 500 for 15 successive years. It seems plausible to suggest this was down to skill, not luck. Had he a 50-50 chance of beating the market every year, the odds would have been 1 in 32,000 or so; allow for the fact that there are lots of fund managers (and lots of time periods in which the feat might have occurred) and luck might have been responsible. But allow for costs and it seems less likely; if the average return is 10% a year and his costs are 1%, then his odds of beating the market in any year are 45%. To keep it up for 15 years, is a 1 in 159,000 chance. Sadly for those who like to chase hot fund managers, admitting that Mr Miller has skill is only part of the problem. You need to recognize that skill early in the fund manager's career, otherwise you will not benefit. What tends to happen is that the manager does very well when the fund is small (and thus few clients are invested); by the time clients recognise his skill and the fund balloons in size, the returns tend to be much less impressive. The return per dollar invested tends to be a lot less impressive than the average annual return. Mr Miller's record is a classic example, as figures from Lipper show. He started his fund in 1982 with just $1.8 million under management. By the time his streak started in 1991, he had $748 million under his belt. The fund peaked in size at the end of 2006, with around $21 billion; in the next two years, Mr Miller lost his investors almost $9 billion. Over the entire life of the fund, Mr Miller made investors a net $4.1 billion. But all of that money had been made by the end of 1998, only half way through his streak. (At that stage, he had a 1-in-256 chance of being lucky, assuming a 50-50 bet.) Investors started to become convinced of his skill by this point; the trust received net inflows of nearly $3 billion in 1999, its best ever year. But those investors were, on average, too late. From that point on, Mr Miller made an absolute loss in cash terms. |
Anonymous
LOL! Really? Can you point out the crappy advice? If it's that crappy, it should only take you a minute to tear it apart, even though you're so busy and 'don't have time' to pick apart the various comments. OP, this PP sounds like a scammer just from his post - is this the type of fool you want managing your money? He/She has the time to browse DCUM, but is 'too busy', blah, blah, blah. |
Anonymous
I wouldn't assume that people will consider your response more credible because you work in NYC. As a matter of fact, some of us think that you 'wall st' types are partially responsible for the economic mess that we are currently in. I'll handle my own money TYVM. |