Outsmarting Other Investors?

                 

I have been  commenting about the absurdity of using expensive professional advisers when it’s so easy to invest on your own. Especially when you give up the notion you can outfox the next guy by trading stock in and out of the market, or picking hotshot winners before they become the next bonanzas.

                       

Use low-cost indexed funds and ETFs and you’re on your way to better performance. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Investment Advisor Lack of Discipline

                 

I have recently repeated reasons why using an investment adviser may be too costly for you, when all you need is a tax or estate lawyer and/or CPA if you have the wealth suitable for management.

                       

It’s also essential to note that good investment policy is disciplined That means your investments will not be constantly changed or timed because the lack of discipline alone is costly.

                       

Yet, too many advisers are guilty of making constant portfolio changes and touches just to show they’re on the job earning their keep; in the process, making results worse for the client. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

An Investment Advisory Lesson

                   

I repeatedly explain how expensive it is to use financial advisers whose fees run 25%, 30% and even more of your earnings each year.

                                           

This sounds like an outlandish statement only because the financial media never points it out, due to conflicts of interest. And because the SEC is too busy nitpicking trivia.

                       

Pay a fee to an adviser of 11⁄2% each year (some take more) for advice you can perform for yourself, and you have lost $1,500 for every $100,000 of your assets. If you are lucky to get a 5% return these days, or $5,000 for every $100,000, that fee represents 30% of what you earned!!

                       

Unless you are a complete economic and financial amateur, there is absolutely no reason you need an  adviser to tell you what to invest in. There are simple to understand, low-cost index funds for you to choose.

                       

If you have a valuable estate you need a CPA and estate lawyer to assist you, but expensive hand-holding by an adviser is too much of an absurd luxury that will considerably diminish your net worth.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Investment Advisor Fees

                  

The U.S. has about 66,000 certified financial planners, wealth advisory firms and assorted investment advisers, whatever term they use to market their services, certified by organizations they belong to, by virtue of conventional training and tests. But none of which make them truly the unusual experts they claim to be.

                       

Some are acting as estate and administrative agents, but this is not a service normally attached to the conventional requirement or need. This added service is an expensive undertaking on behalf of celebrities in the entertainment world and the extremely well-to-do.

                       

They all offer the average investor services which can be easily evaluated and bought on one’s own, without the costly need of such adviser.

                       

Pay a fee to an adviser of 1 1⁄2% each year (some take more) for advice that you can perform for yourself, and you have given up $1,500 for every $100,000 of your assets. If you are lucky to get a 5% return, or $5,000 for every $100,000, that fee represents 30% of what you earned!! That makes a tremendous difference in your eventual net worth. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Better Returns due to Risk?

                    

The Financial Analysts Journal reported a study made about the ability of added investment risk, in order to produce more returns. Many investors have the impression that high risk spells more profits for them.

                       

The study showed otherwise: Over 41 years, through 2008, lower-risk stocks actually performed better than higher risk types. This was not supposed to be the case according to prevailing theoretical mathematical risk models.

                       

Diversification of risk and avoidance of real speculation would be the solution.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

A Further Example of Social Security Unfairness

                   

Just one example of a lack of Social Security equity that any insurance program would have: Should their husbands earn similar incomes, two spouses will get the benefits from their spouse’s retirement, even though one wife could never have paid a penny in Social Security taxes. The working wife gets an adjustment only if she had earned more than her spouse.

                       

There is little to show for payments made by a worker who dies before he is 65. And so on, as I have noted in the past. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Social Security and Ponzi Schemes

                   

The definition of a Ponzi scheme: It taking funds from someone with the promise of paying it back in the future with attractive dividends or earnings. And using the funds in the meanwhile to reward another to whom the same promises were made. All of which being done without truly investing those funds.

                       

In that respect, Social Security fails a legitimacy test. Despite repeated political promises and certifications, there is no true investment, nor the use of a lock box or reserve accounting of funds. Nothing of what is required in a legitimate insurance program. Despite the aura of insurance, there is no element of that assurance. Those getting benefits are receiving them from taxes collected on plan participants still working. (See the Earl J Weinreb NewsHole® comments and @BusinessNewshole at twitter.)