Money Managers, useless criters.

TLDR - I'd rather be in the market when it's going down than out of it when it's going up.

Check out the Intelligent Asset Allocator, by William Bernstein. It's somewhat mathematical but has a good introduction to Modern Portfolio Theory. Nobel prizes have been earned from developing this theory, and it works.

One of the best money manager outfits I know about is Edelmann Financial Engines. (EFE) I've been listening to Ric Edelmann's podcasts for year. His old ones are The Truth About Money, and he has a lot of personal finance books out. His current podcasts are the Truth About Your Future. That one is pretty much an infomercial to get you to invest in blockchain technology.

EFE applies MPT to their clients' accounts and rebalance whenever they get so far out of whack. That minimizes their volatility, but for best results, never rebalance. I do my own investing. I never sell anything, just reinvest dividends into whatever is underweighted and has the worst thirty-day return. I'd guess I spent 3 - 4 hours a month managing our money.

Websites of choice are market watch - big charts and Morningstar.
 
Mahneuvers said:
I believe that number is for any given year. One that consistently beats the market year after year doesn't exist.
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While that is very largely true, there are some exceptions. Firms like RenTech, Citadel, 2sigma, DE Shaw,... plus some private equity firms consistently beat the market for you (using the miracle of leverage). But, to get access to these firms you need to show up with a very large pile of money. Unlike fidelity/schwab/etc you're not getting in with a typical 401k. The buy in is showing up with tens or hundreds of millions of dollars. And you're not going to pay a 1% fee, you're going to pay a 2% (or higher) plus they'll take 20%+ of the profits made with your capital. Select firms even charge an upward of 40% of profits made with your money. But in return it's rare for them to let you down.
 
After reading some of the vitriol about asset managers I thought I'd share this...

The reason these FA's and allocators (excluding HFs/PE/VCs) exist is best summarized by a George Carlin (RIP) quote: think about how dumb the average American is, now just think, half the country is dumber than that.

My career is in financial services, and the several friends I have who went into wealth management and financial advisory roles usually describe their core job function as "ensuring their clients don't commit financial suicide."

They're not kidding. If I had a dollar for every time one of them told me about having to talk someone off the ledge from doing something catastrophically stupid, I'd be able to buy a TBM 960 without a loan. When given discretion over a big bag of money accrued over their career the average American will instinctively want to:
1) Cash it out, tax penalties be damned, they want to use that to buy a nice new truck*
2) Find a way to put their balance in bitcoin *sigh*
3) Cash out the entirety of their stock index fund that makes them money to pay off their 2.5% mortgage note
4) Find a way to use the self directed trading accounts to buy some obscure, low/no market cap company from advice they got from their cousins uncles brothers dad
5) Buy some options on GME - of which they have zero understanding of how they work
*yes, per the FA's I've heard from it's always a truck.

This half of America are not the people who are going to invest the time to read (and properly understand) how low expense rate index funds/target date funds work. That's like reading Greek to them. They still walk away with no confidence that they understand how it works (yet they will somehow be swept off their feet by the random internet advertisement claiming to give them 15% a year if they invest in some obscure gold product).

And so without FA's a lot of these people would make catastrophic financial mistakes far worse than their fee. That said, I would encourage anyone who is paying an asset fee that isn't to a name brand PE/hedge fund to sincerely consider investing the time in managing their own finances, b/c even 50bps+ per year over the course of your life deducted in fees for average performance is a hell of a HUGE price to pay for ignorance.
 
Tom Wells said:
After reading some of the vitriol about asset managers I thought I'd share this...

The reason these FA's and allocators (excluding HFs/PE/VCs) exist is best summarized by a George Carlin (RIP) quote: think about how dumb the average American is, now just think, half the country is dumber than that.

My career is in financial services, and the several friends I have who went into wealth management and financial advisory roles usually describe their core job function as "ensuring their clients don't commit financial suicide."

They're not kidding. If I had a dollar for every time one of them told me about having to talk someone off the ledge from doing something catastrophically stupid, I'd be able to buy a TBM 960 without a loan. When given discretion over a big bag of money accrued over their career the average American will instinctively want to:
1) Cash it out, tax penalties be damned, they want to use that to buy a nice new truck*
2) Find a way to put their balance in bitcoin *sigh*
3) Cash out the entirety of their stock index fund that makes them money to pay off their 2.5% mortgage note
4) Find a way to use the self directed trading accounts to buy some obscure, low/no market cap company from advice they got from their cousins uncles brothers dad
5) Buy some options on GME - of which they have zero understanding of how they work
*yes, per the FA's I've heard from it's always a truck.

This half of America are not the people who are going to invest the time to read (and properly understand) how low expense rate index funds/target date funds work. That's like reading Greek to them. They still walk away with no confidence that they understand how it works (yet they will somehow be swept off their feet by the random internet advertisement claiming to give them 15% a year if they invest in some obscure gold product).

And so without FA's a lot of these people would make catastrophic financial mistakes far worse than their fee. That said, I would encourage anyone who is paying an asset fee that isn't to a name brand PE/hedge fund to sincerely consider investing the time in managing their own finances, b/c even 50bps+ per year over the course of your life deducted in fees for average performance is a hell of a HUGE price to pay for ignorance.
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I agree with you about 99.99%. If you have the time, ability, and desire to manage your own money, it's not rocket science. Lately, I don't have the time, but I have an immediate ongoing need for cash, and a lack of time, so I'm letting my investments ride and letting the cash dividends accumulate.

Last March, because my wife is totally incapacitated, on Hospice, and receiving 24/7 long term care with no end in sight, I converted both of her IRAs into cash. I haven't touched it yet, but will soon, as I've burned through almost all of my inheritance taking care of her.
 
I'm truly sorry to hear that :(. Optimizing finances always take a back seat to real priorities like this.

There are def unique situations like this where absolutely it makes sense. Either because you want to know the principal is protected because you might need the cash, or because you don't have the time or energy to manage it.
 
Tom Wells said:
I'm truly sorry to hear that :(. Optimizing finances always take a back seat to real priorities like this.

There are def unique situations like this where absolutely it makes sense. Either because you want to know the principal is protected because you might need the cash, or because you don't have the time or energy to manage it.
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Thank you. In my case, both.
 
Tom Wells said:
3) Cash out the entirety of their stock index fund that makes them money to pay off their 2.5% mortgage note
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I did that right before the dotcom bust, and came out way way way ahead.
 
EdFred said:
I did that right before the dotcom bust, and came out way way way ahead.
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I learned a lot about market timing from the dotcom bust. I worked for a dotcom. I thought I was being clever exercising options, selling enough to pay taxes and principal, retaining the share balance, then selling covered calls. The strategy worked really, really well for about a year as stock was going up like a rocket ship. I even got aggressive with my call prices essentially begging for the stock to be purchased from me. The crash happened about three months before the shares would have otherwise been assigned out of my account. I took a bath riding the stock back down. The fact I was playing w/ house money did not dull the pain. I kick myself for not more aggressively liquidating. Since that experience, I use a middle of the road strategy when I come into money. The majority goes to in the market but I'm conservative with the balance (paying down mortgages etc.).
 
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Tom Wells said:
I'm truly sorry to hear that :(. Optimizing finances always take a back seat to real priorities like this.

There are def unique situations like this where absolutely it makes sense. Either because you want to know the principal is protected because you might need the cash, or because you don't have the time or energy to manage it.
Click to expand...
Thank you. In my case, both.
 
EdFred said:
I did that right before the dotcom bust, and came out way way way ahead.
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If it was a mortgage from the 90s then cashing out pre dot-com bust to pay it off makes sense, as average mtg rates back then we’re pretty high. Your annual interest expense was probably more than you’d expect to make in the S&P in an average year.

But in our last 10 year era of super ridiculously low rates coupled with home price appreciation and inflation, paying off the 2.5% mortgage is a poor financial decision.

Also kudos to your market timing. Usually it doesn’t work out but it sounds like it did for you :)
 
Tom Wells said:
If it was a mortgage from the 90s then cashing out pre dot-com bust to pay it off makes sense, as average mtg rates back then we’re pretty high. Your annual interest expense was probably more than you’d expect to make in the S&P in an average year.

But in our last 10 year era of super ridiculously low rates coupled with home price appreciation and inflation, paying off the 2.5% mortgage is a poor financial decision.

Also kudos to your market timing. Usually it doesn’t work out but it sounds like it did for you :)
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Oh, I'm no expert on timing that was luck. Although maybe the market just follows my lead. I dumped my stocks and the dot com happened. I sold a Cherokee in Jan of 08, and we saw what happened after that.
 
EdFred said:
Oh, I'm no expert on timing that was luck. Although maybe the market just follows my lead. I dumped my stocks and the dot com happened. I sold a Cherokee in Jan of 08, and we saw what happened after that.
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So... what'cha thinking now? .. asking for a friend ;)
 
There used to be an old joke " If when we do better, you do better, where are all your customers yachts? "

There's a pretty good tongue in cheek book about the investment business with that title.
 
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