Investing

  • Dutchboy
    Central Mn.
    Posts: 16650
    #1962575

    How do you pick out a financial guy to invest with? I’ve been involved with dealing in the aftermath of guys caught up in Ponzi Schemes so I have a real distrust of investing. Don’t even suggest online anything in regards to money, I’m not interested in that.

    Banks are a joke as far as interest paid so they are out also.

    Idea’s?

    munchy
    NULL
    Posts: 4931
    #1962578

    I heard there is an African prince you can send your money to and he will make you rich beyond your wildest dreams!

    Jon Jordan
    Keymaster
    St. Paul, Mn
    Posts: 6019
    #1962583

    One step in the process would be to verify with FINRA they are licensed and no current or prior violations/complaints.

    https://brokercheck.finra.org/

    Also sending PM. wave

    -J.

    Evan Pheneger
    Hastings, MN
    Posts: 838
    #1962584

    Ask someone you trust who they use. And make sure they are flat rate fee based. You pay them for their time they consult you on investments.

    So many people use financial planners who takes a percent of your investment or percent of you asset holdings. To me that is like “hiring” a guide show you how to fish and then charging you 1 fish for every 4 you catch every single time you go out fishing FOR THE REST OF YOUR LIFE! Why would you do that?

    Either that or just read for weeks on end on the internet and learn about it. And pick an area of investing that interests you and get good at it.

    Side note: everything on the internet is true and the best financial advise is found on fishing forums )

    crappie55369
    Mound, MN
    Posts: 5757
    #1962585

    im no expert but i think Evan provides some good advice. Ask someone you trust who they use. In my case the Mrs and I are starting to get a little cash heavy the last few years. We have our emergency money put away and a good cushion in the checking account and now its time to do some investing with the remainder of the money coming in. In my case i know my FIL uses a financial advisor and ill probably start out by asking him who he uses. I have an uncle who is also in the “finance game”. Im with you Dutch i have a healthy distrust as you hear about a lot of scammers.

    I also have zero interest in learning about investments, the stock market, finance. The whole subject turns me off profoundly so, for me, in part im paying someone else to make me money so i don’t have to participate in the process myself.

    Tommy
    Posts: 95
    #1962595

    Usually a good idea to see if the advisor is a Fiduciary. They are bound by law to act in your best interest. If the advisor is not a Fiduciary, they can opt to invest your money in accounts that gets them better commissions, even though there may be better options for you.

    Obviously not all advisors would do that, but if it’s not someone you know personally, probably a good way to start out.

    DaveB
    Inver Grove Heights MN
    Posts: 4469
    #1962599

    What are you looking for, advice on investments or a financial planner to get you into a comfortable retirement?

    I manage 19 billion of investment for a bank, but for my retirement, I don’t try to spend the time and effort to “out think” the market. I put it all into low cost indexed mutual funds. A fund manager will take 1-3% and have a hard time beating the market in the short run, much less the long run. Index funds (of even index linked stocks like SPY or QQQ) have much lowers costs and, in most cases, deliver higher long term returns.

    Make sure you consider all your wealth (home, cabin, toys, stocks, bonds, retirement, pension) to make sure you aren’t over/under weighted more than you want to be.

    Be careful of “investment guys” who charge high fees or put you in investments that sound good, but they make all the money. Anyone who wants you to move in and out of things constantly is probably acting in their own interest as much as they are yours. Be leery of 12B-1 fees, annuities and life insurance. Some can be good and might fit your need, just make sure you thoroughly understand what you are getting into. Kinda like a timeshare!

    TheFamousGrouse
    St. Paul, MN
    Posts: 11640
    #1962600

    We looked for a couple of things when choosing a financial planning firm.

    First I looked for an established track record. I wouldn’t do business at all with any firm that was less than 10 years old.

    Secondly when meeting with firms I immediately crossed off the list any firm and advisor that simply started talking about the fantastic high returns they’ve been able to achieve. Before they start talking about results they should be getting familiar and assessing your investing style and risk tolerance as well as other factors. A firm that’s only interested in chasing high returns is eventually going to strike out.

    Personally I was only comfortable with advisers who are certified financial planners. Others may have other opinions on this but to me it represents a level of commitment to the client and the profession.

    Recommendations from others that you trust can be helpful but there is a downside. If those people are simply boasting about the impressive results they’ve achieved with a firm, that can be as much a warning sign as a recommendation. Be very wary have any claims of constantly high returns in all markets.

    So many people use financial planners who takes a percent of your investment or percent of you asset holdings. To me that is like “hiring” a guide show you how to fish and then charging you 1 fish for every 4 you catch every single time you go out fishing FOR THE REST OF YOUR LIFE! Why would you do that?

    In my view a good financial planning or wealth management firm is worth paying for. Not just for the results they get you but the confidence that they give you that you have a sound strategy that matches your goals and your risk tolerance.

    Also a good wealth management firm will bring investments to your attention that you would not have thought of or understood on your own. All that is worth money to me and that’s why I’m very happy to pay for good advice through commissions.

    Grouse

    Dutchboy
    Central Mn.
    Posts: 16650
    #1962604

    Sounds like I should just bury a coffee can (plastic of course) in the back yard.

    BigWerm
    SW Metro
    Posts: 11636
    #1962605

    I don’t try to spend the time and effort to “out think” the market. I put it all into low cost indexed mutual funds. A fund manager will take 1-3% and have a hard time beating the market in the short run, much less the long run. Index funds (of even index linked stocks like SPY or QQQ) have much lowers costs and, in most cases, deliver higher long term returns.

    x2. And anyone selling life insurance as an investment should be shown the door immediately. For anyone reading, imo, it’s a super important piece of you and/or your families financial security, and I’m a huge proponent of life insurance and its many benefits, but it is not an investment. At least not a good one, as it will take years to be cash positive.
    Signed, An Insurance guy

    Gitchi Gummi
    Posts: 3025
    #1962608

    but for my retirement, I don’t try to spend the time and effort to “out think” the market. I put it all into low cost indexed mutual funds. A fund manager will take 1-3% and have a hard time beating the market in the short run, much less the long run. Index funds (of even index linked stocks like SPY or QQQ) have much lowers costs and, in most cases, deliver higher long term returns.

    What ^^^he^^^ said! Too many people only look at returns and fail to even consider the expense ratio of their investments. Expenses and fees are just as important as returns since they are essentially negative returns. For example – Vangaurd offers some great funds that have expense ratios that are around .10% on average (sometimes lower) where as industry average is .60%-.75%. That difference in fees compounded over the life of your investments is a significant difference.

    If you think you’re smart enough to beat the average market returns, or whatever broker you are paying is smart enough to do so, that is just not feasible in the long run.

    eyefishwalleye
    Central MN
    Posts: 182
    #1962609

    Sounds like I should just bury a coffee can (plastic of course) in the back yard.

    Yes! The house of cards is a’comin down eventually. 1929 will be nothing compared to this next one. Keep some more cash in your freezers disguised as food! I like orange juice concentrate containers…

    littlepineguy
    Posts: 27
    #1962612

    As a CFP I’m admittedly a little biased, but I like a lot of what Grouse has to say. Dave and Evan are spot on as well – online is undoubtedly the cheapest for those so inclined, but it’s like anything: I can re-roof my house over a weekend save some money, or pay a pro while I make a tee time or launch the boat.

    Tommy makes a good point about fiduciaries as well. It’s a term that hasn’t really permeated our field en masse, but one I expect you’ll see more and more as consumers start to see the benefits. Committing to acting in clients’ best interest seems like an obvious thing to many, but unfortunately it is not yet the standard in financial planning. CFPs are generally fiduciaries, as are all advisors that operate under an RIA (registered investment advisor). The CFP site for investors letsmakeaplan.org has a nice little packet with 10-questions to ask a prospective advisor. It’s a great place to start whether you’re interviewing CFPs or not.

    TheFamousGrouse
    St. Paul, MN
    Posts: 11640
    #1962649

    As a CFP I’m admittedly a little biased, but I like a lot of what Grouse has to say. Dave and Evan are spot on as well – online is undoubtedly the cheapest for those so inclined…

    I think we should spend a little time on the difference between investing and financial planning. I think many think these are the same thing.

    Could you give us a some thoughts on the difference between going to an “investment firm” vs a financial planner, please?

    Grouse

    Matt Moen
    South Minneapolis
    Posts: 4268
    #1962673

    Great advice…..I think a certified financial planner starts to make sense as your finances get more complex. If you are simply looking to invest for a return then you can do that yourself….Dave lays it out really well.

    If you are looking to figure out ways to setup trusts (ie grandkids) or create tax shelters for certain scenarios you need help with that. Inheritance or gifting and the taxes created can also get extremely tricky. In that case, it’s worth paying someone….both a certified financial adviser and a tax dude.

    TheFamousGrouse
    St. Paul, MN
    Posts: 11640
    #1962679

    Great advice…..I think a certified financial planner starts to make sense as your finances get more complex. If you are simply looking to invest for a return then you can do that yourself….Dave lays it out really well.

    If you are looking to figure out ways to setup trusts (ie grandkids) or create tax shelters for certain scenarios you need help with that. Inheritance or gifting and the taxes created can also get extremely tricky. In that case, it’s worth paying someone….both a certified financial adviser and a tax dude.

    Totally agree. I think most of us get to a point where suddenly retirement isn’t some theoretical that’s way, way, way in the future. Then if you have kids you start thinking about a few major things that need to be taken care of then it’s no longer about just percentage gains.

    When I hit 35 I started REALLY worrying about having enough to retire when and how my wife and I want to. My parents both have classic pensions that pay very well and are guaranteed plus they invested very wisely, so basically they retired and essentially got a big raise.

    Mrs. Grouse and I will get exactly none of that and it really worried me the idea of not really knowing how much income we needed and how, exactly, we would achieve this.

    Also, I really don’t want to find myself in the same position as some good business contacts of mine. 3 good people who all were within 1-3 years of retirement and all got caught all in on stocks when the great recession hit in 2009. Yeah, the market eventually came back so they didn’t “lose everything” but what they did lose is the most valuable commodity–time. All 3 ended up working YEARS longer than they wanted to because they got caught with no good plan and no diversification when they should have had both. These were not stupid people that gambled on gold futures and hedge funds, they were smart professionals that just didn’t have a good plan.

    I guess the bottom line is to understand what are you trying to do, investing or financial planning.

    Grouse

    Ron
    Victoria, mn
    Posts: 810
    #1962684

    I heard old Dodge diesel pickups are a good investment, Dutch. razz
    Although you stated you don’t want to do anything online, that’s my suggestion. Vanguard, T.Rowe Price and Fidelity all have lots of good low-cost index funds with no commissions. Don’t get fancy. Start out with a total market stock index fund and a total market bond index fund. Put 60% in the stock fund and 40% in the bond fund. Commit to adding a certain amount monthly to each.
    And don’t take advice from strangers on the internet.

    hnd
    Posts: 1579
    #1962769

    It really depends on what you are talking about when you talk about investing.

    Are you looking to play in the stock market? or build a retirement.

    I think the best reason to use an advisor is to minimize taxes. But I think most people don’t max out their tax advantaged options enough for this to be a huge deal.

    Look at the book “Common Sense Investing” by Jack Bogle the founder of Vanguard. Its not long and if you make it through it and understand it, you can likely do everything on your own.

    Jack suggests a 3 fund portfolio:

    Total US stock market index (VTSAX/VTI)
    Total International market index (VTIAX/VXUS)
    Total US Bond market Index (VBTLX/BND)

    the % of which you invest is dependent upon a few factors but a 50 yr old might choose 55% VTI/20% VXUS /25% BND but thats basically the initial decision to make. and then rebalance each year, and go from there. Each one fo these funds have so little fees, the fees really aren’t even worth considering.

    This portfolio is boring. but with VTI/VXUS you own 10,000 companies. and thousands of bonds with the bond fund. completely diversifed in equities and bonds.

    This fund will beat over the years, 80% of managed portfolios.

    the market returns are what the market returns. no more no less. part of your piece of the pie can either go to loads, advisors, expenses, (which are like in the billions and billions each year) for advice that over the long haul hasn’t really ever proven to beat the market. Get your fair share and beat most of other portfolios.

    Jack said, most funds and advisors are looking to find the needle in the haystack. just buy the whole haystack and you’ll be fine.

    disclaimer : as a 40 yr old, 80% of my portfolio is this 3 fund portfolio( i use a few leveraged sp500 funds as a portion of my “total market” allocation.) I’m 8% in bonds and The other 20% i dabble in stocks and other mutual funds i like managed by fund managers i admire.

    I rebalance to my preferred allocation every 6 months. It takes about a half hour.

    patk
    Nisswa, MN
    Posts: 1997
    #1962771

    @dutchboy the question about are you looking for someone to help with Planning or if you are just looking for someone to help to buy a couple investments is the one here.

    Investing:
    If simply investing DaveB and Snap covered it. I posted this link into a similar thread earlier this year that really helps understand why finding a “guy” is usually worse than trusting time and math: https://www.pbs.org/wgbh/frontline/film/retirement-gamble/

    Planning:
    I’m my own planner. It’s a hobby and interest of mine so I work at it. I also don’t believe any one person is always right so every couple years I have CFP/Fiduciary expert review my plan for a second opinion. I’m not a tax expert so once a year I check in with one for planning. Third type of person I use is an estate planner.

    Chuck Melcher
    SE Wisconsin, Racine County
    Posts: 1966
    #1962796

    I don’t try to spend the time and effort to “out think” the market. I put it all into low cost indexed mutual funds. A fund manager will take 1-3% and have a hard time beating the market in the short run, much less the long run.

    X’s like 6 now… Dave’s advice is the same I got years ago from my accountant long ago. To this day, it was the best little direction I was ever given for the long haul.

    Essentially, stuff money into a low cost index like a Vanguard S&P500 fund and just let time do what it does. Very hard to beat it because of the low costs involved. Obviously as you get towards retirement, choices may adjust that advice. That’s my struggle now… early retirement.

    David Anderson
    Dayton, MN
    Posts: 506
    #1962797

    Dutch, Lots of good advice here. My experience is that most financial planners and investment companies use larger investment services to manage money. When I give money to my financial firm I write the check to someone else and not them. I have found that there is a script to follow based on a number of things such as your assets, age, when you want to retire, how much do you need to live on, just answer the questions and they input it into “Their” financial planning software and voila, out spits your plan, and it’s pretty good for the most part as few guys have the magic ball. I pay a yearly fee to manage my money. I do not have the time, interest, or knowledge to manage my own money, like my brother. Of course I keep track of trends but realize that maintaining a retirement income is worth every penny, what do I care if I pay them 0.5%/year as long as my portfolio keeps increasing. I review my situation 2 times a year. My last meeting the guys congratulated me on keeping my cool in March. Many of their clients demanded converting their investments to cash and to date have lost millions. Although I am getting old enough where my long term strategy is happening now, my firm does a good job, enough to justify their fee. They do sell life insurance as when I owned a business we had our buy/sell whole life insurance through them and the returns on that have been very good. I would say avoid anyone who is trying to sell you stuff to augment your investment strategy, like annuity’s which are good for some people but not all, yet they can make a lot of money selling these.

    David Anderson
    Dayton, MN
    Posts: 506
    #1962798

    Yes! The house of cards is a’comin down eventually. 1929 will be nothing compared to this next one. Keep some more cash in your freezers disguised as food! I like orange juice concentrate containers…

    Eye, Interesting you mention this. I was on the board of our National Trade Association and each year we had a company called ITR give an economic outlook on things for our members. They are a very respectable company and have been predicting a depression in 2030. They have a website and a recent blog posting discusses this. Enjoy https://blog.itreconomics.com/blog/faq-future-great-depression

    Dutchboy
    Central Mn.
    Posts: 16650
    #1962802

    Thank you for all the reply’s. I’ll take some time & digest the info.
    Last question…..should the coffee can be buried 3′ deep or 6′ deep?

    hnd
    Posts: 1579
    #1962803

    The thing i’ve learned over the years is that noone knows anything about what the market is going to do from one day to the next let alone years from now. my advice is to build a plan and stay the course.

    i listen to a lot of podcasts and its always interesting hearing guys talk about how certain they are the economy or the market will do XY and Z and you check the funds they manage and most have them haven’t beat the market 3 years in a row let a lone for the entirety of the fund.

    39degrees
    Posts: 158
    #1962810

    My choice is Vanguard mutual funds. I go with their suggested mix based on the number of years before you plan to retire. I have been very pleased with the results.

    patk
    Nisswa, MN
    Posts: 1997
    #1962830

    My choice is Vanguard mutual funds. I go with their suggested mix based on the number of years before you plan to retire. I have been very pleased with the results.

    Check out their expense ratio. These “lifestyle” funds used to be noted for higher costs, can’t say if they still are. The good news is that they take care of your diversification say ratio of stocks to bonds as you hit different years. The bad news is that you pay them for that.

    If you have a plan from a planner it usually reads something like at age 30 be 80/20 stocks to bonds and by age 65 that’s 20/80. If you do a stock index fund and a bond index fund then every couple years find your ratio and cross it against your age. Adjust as necessary.

    If you didn’t watch the video I posted I’ll recommend it again. Eye opening how an expense ratio can impact your returns when over decades.

    Brad Dimond
    Posts: 1460
    #1962831

    Thank you for all the reply’s. I’ll take some time & digest the info.
    Last question…..should the coffee can be buried 3′ deep or 6′ deep?

    Same as footings, at least 42″ to be below the frost line.

    Dutchboy
    Central Mn.
    Posts: 16650
    #1962840

    Thanks Brad, thats what my guy B. Madoff said also.

    greg christiansen
    Posts: 19
    #1962879

    Cash is sometimes King. 3 feet or 6 feet down is irrelevant. More important is remembering where they are buried. At least under the mattress is relatively easy to remember.

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