Big Box fund managers that actually make money on your investment? HELP!!

0.15% to 0.25% are not high fees for what they do. Compare to 0.5-1.0% for a manager that doesn't understand what a Monte Carlo is, and may have a vested interest in your allocations.

Add to that list Future Advisor, who does charge a bit more, but lets you keep your funds with Fidelity or Vanguard.

Also keep in mind none of these so-called robo advisors will touch your 401k, so it is only IRA money.

mtn wrote: Get into a Vanguard index fund, and leave it be. Most money managers CANNOT beat the market on a regular basis; those that do typically have costs high enough to make it not worth it.

This. Is. Truth.

mtn wrote: Didn't Betterment get the MrMoneyMustache stamp of approval?

Possibly. It may be good, but the statement are still misleading. "4.30% higher returns than a typical DIY investor." = "outperforms idiots". So does VTSMX, FSTMX, and a whole plethora of other index funds which charge well below 0.15 or 0.25%

Maybe I'm misunderstanding what they do. Is it just a portfolio that does a pretty good index fund mix then takes an extra 0.1% off the top? If so, I guess that isn't terrible.

Here in Canada, fees under 2% would be seen as a bargain. Closer to 3 if you take the time to really understand. Besides, once your $$$ is off the grid, you have tax saving options when you are retired.

ProDarwin wrote: Possibly. It may be good, but the statement are still misleading. "4.30% higher returns than a typical DIY investor." = "outperforms idiots". So does VTSMX, FSTMX, and a whole plethora of other index funds which charge well below 0.15 or 0.25% Maybe I'm misunderstanding what they do. Is it just a portfolio that does a pretty good index fund mix then takes an extra 0.1% off the top? If so, I guess that isn't *terrible*.

The OP had his funds managed by Northwestern Mutual and was asking for better options. Dropping all his holdings in a no-load index fund would have given him better returns, but it's a self-directed solution. The point of using a money manager is to have a less-risky, more balanced portfolio that (hopefully) still beats the market. That's why people pay money managers the fees, and the fees of the online money managers I listed are among the lowest in the industry.

mtn wrote: Get into a Vanguard index fund, and leave it be. Most money managers CANNOT beat the market on a regular basis; those that do typically have costs high enough to make it not worth it.

This. This. This. This.

And this again.

Ask your manager how much money they MADE on your loss. With your portfolio I bet it was close to 3k.

If I have learned one lesson that I have passed on to my daughter, it is that a person should be very cautious with advice from a person whose income depends on your doing what they tell you to do.

NOHOME wrote: If I have learned one lesson that I have passed on to my daughter, it is that a person should be very cautious with advice from a person whose income depends on your doing what they tell you to do.

Great way to look at it.

I'd feel comfortable paying an active manager for SOME of my assets IF there was a payment something like .75% if they return over 15% on the year; .5% over 12%, .25% over 8%, 0 for anything from -1% to 8%, and after that, they start paying ME if they do that poorly.

MattGent wrote: 0.15% to 0.25% are not high fees for what they do. Compare to 0.5-1.0% for a manager that doesn't understand what a Monte Carlo is, and may have a vested interest in your allocations. Add to that list Future Advisor, who does charge a bit more, but lets you keep your funds with Fidelity or Vanguard. Also keep in mind none of these so-called robo advisors will touch your 401k, so it is only IRA money.

that depends on how well you know your advisor (or in my case my broker) …. even though he / his firm had nothing to do with my 401k, he was willing to sit with me and figure out what my best choices were within the structure of my 401k ….

this with 2 caveats … he does handle my IRA's, and we've been good friends for 30+ yrs

mtn wrote:

NOHOME wrote: If I have learned one lesson that I have passed on to my daughter, it is that a person should be very cautious with advice from a person whose income depends on your doing what they tell you to do.

Great way to look at it. I'd feel comfortable paying an active manager for SOME of my assets IF there was a payment something like .75% if they return over 15% on the year; .5% over 12%, .25% over 8%, 0 for anything from -1% to 8%, and after that, they start paying ME if they do that poorly.

I would also be a fan of the 'flat fee' arrangement if I thought active management could beat indexes reliably over the long haul.

How much does your service cost? ok, 1k per year? Same price for everybody for the same service? makes sense to me.

mtn wrote:

NOHOME wrote: If I have learned one lesson that I have passed on to my daughter, it is that a person should be very cautious with advice from a person whose income depends on your doing what they tell you to do.

Great way to look at it. I'd feel comfortable paying an active manager for SOME of my assets IF there was a payment something like .75% if they return over 15% on the year; .5% over 12%, .25% over 8%, 0 for anything from -1% to 8%, and after that, they start paying ME if they do that poorly.

But then you are rewarding your manager for the market having a good year. I'd say a flat rate of .05%, with a .1% bonus for every percentage point they beat the S&P 500. Or something to that effect.

ProDarwin wrote:

mtn wrote:

NOHOME wrote: If I have learned one lesson that I have passed on to my daughter, it is that a person should be very cautious with advice from a person whose income depends on your doing what they tell you to do.

Great way to look at it. I'd feel comfortable paying an active manager for SOME of my assets IF there was a payment something like .75% if they return over 15% on the year; .5% over 12%, .25% over 8%, 0 for anything from -1% to 8%, and after that, they start paying ME if they do that poorly.

But then you are rewarding your manager for the market having a good year. I'd say a flat rate of .05%, with a .1% bonus for every percentage point they beat the S&P 500. Or something to that effect.

Something like that, yeah. Same idea's.

Watch this:

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

Should help.....especially around the 20 min mark.

I'm curious. If indexes were a sure fire way to make money without doing much, why would financial groups offer them? Seems counter productive to the goals of making big profit.

There's nothing wrong with going it on your own. But if you've been a wise, diligent investor for a long period and amassed a sizeable nest egg, you tend to be concerned about your financial future once you get past 55. Index funds are low load and track the market. I liked having some money in them when I was doing my own thing. But I didn't have everything in index funds. I wanted more diversity. When you're younger and there's a market downturn you have time to weather the storm and wait until the market comes back. When you get older you can't do that. A good professional advisor and manager will look at the big picture and act accordingly. For example, is it a good time to be invested in domestic stocks, European, Asian, third world? When's the best time to get back into Treasuries? What's going to provide the best bang for the buck when you switch over from growth to income-paying investments ... corporate dividends, muni's, Treasuries, and what combination of each to provide a steady income stream in retirement? And even when retired, you still need to keep a portion in growth. Yes a private individual can certainly do it. I did it. But as you get older it gets even more complicated. I believe (now) that if you're around 50 years old and have a sizeable nest egg you need to at least start thinking about a retirement strategy. By 55-60 it should be in place. I personally made the decision that a good pro was the best way to go in retirement.

PHeller wrote: I'm curious. If indexes were a sure fire way to make money without doing much, why would financial groups offer them? Seems counter productive to the goals of making big profit.

They still manage the funds and make money off them. If they didn't offer them, many people would just take their money somewhere that did, so they would lose a lot of business.

I'm sure there are other reasons too.

My retirement strategy is to work till I die. Seriously, what else am I going to do, sit around and drink all day? The old lady would kill me after a month. (You gotta be careful around ICU Nurses, they know stuff )

The good bit is that after getting used to the concept, its liberating; I realized that I don't have to work very hard. Or at anything that I hate.

So I stopped working for my broker.

Another consideration for a younger investor with 30-35 years or more to go before retirement is a dividend reinvestment plan (DRIP) with a company that has a reasonably high dividend and a long history of increasing dividends. A lot of companies administer these directly (check investor relations on their web site), or may work through a third party. The key is to do the research to find the right company or companies. I hate to give specific examples, but what the heck ... power utilities such as Southern Company, Dominion Resources, and Duke have good histories in consistently increasing dividends, as well as telecom companies like Verizon and AT&T. Those are not recommendations, just examples. So you make an initial investment through the DRIP administrator and let it ride. You can add additional funds whenever you like, but it's not required. They will reinvest quarterly dividends and purchase additional shares. It is amazing how that will grow over 30 years. More shares, more dividends reinvested and on and on. You'd want to do it inside a Roth so you're not taxed on dividends reinvested. I couldn't when I started because Roths weren't available in the old days. At some point in old age you can turn the switch and take the dividends as income. And market downturns can be your friend because when the share price is down you're getting more shares with the dividend reinvestment. If you don't want to use a DRIP, most mutual fund companies have utility funds that will work the same way, and you have the diversity of many companies. (Utilities tend to pay consistently higher dividends than other groups). At least check it out. It worked very well for my wife and me, and it provided another element of diversity in our portfolio.

PHeller wrote: I'm curious. If indexes were a sure fire way to make money without doing much, why would financial groups offer them? Seems counter productive to the goals of making big profit.

Because they make their money on doing it for you.

Its like an oil change on a car; everybody can do it, even in the street. But some don't want to take the time to educate themselves on how.

This is why there are places to get your cars oil changed. Just like there are places that will put your money into index funds for you and charge you for it.

I've been following investment news and strategies since I was 16. All points indicate that over a 30 year period, following the S&P 500 will get you a reasonable return. Sure, you won't make big bucks, but it will allow you to retire with very low risk.

Article that shows what everyone here is saying: http://news.yahoo.com/buffett-way-ahead-1-mn-wager-against-hedge-193649849.html

And that Siedes guy in there is making excuses about the economic climate and everything else--but that is the point. If it were predictible, we'd all be rich.

mtn wrote: Article that shows what everyone here is saying: http://news.yahoo.com/buffett-way-ahead-1-mn-wager-against-hedge-193649849.html And that Siedes guy in there is making excuses about the economic climate and everything else--but that is the point. If it were predictible, we'd all be rich.

Nice - love it. It also shows that MORE THAN HALF of the Siedes returns are netted out by fees.

I avoided hedge funds. Too much black magic. Don't judge all money managers by the performance of hedge fund managers.

Gary wrote: I avoided hedge funds. Too much black magic. Don't judge all money managers by the performance of hedge fund managers.

I agree fully. I'm also not sure how a 1% ish annual expense ratio would turn into more than 20% total over 7 or 8 years... that must be more hedge fund black magic.

rcutclif wrote: I agree fully. I'm also not sure how a 1% ish annual expense ratio would turn into more than 20% total over 7 or 8 years... that must be more hedge fund black magic.

1.1% compounded over 10 years is 12%. That's a lot o' change, if I understand what you are saying correctly.

That's certainly a good testament to Vanguard's performance.

Holy E36 M3, what are Zero Coupon Bonds?