Yeah, I’m being a bit harsh. If I want stock A as a part of a balanced portfolio, and my position declines due to a price shift, it may make sense to “top-up” by buying at the lower price. Same if I am convinced that the price movement is temporary and I want to buy more to take extra advantage of a rebound (but that would apply whether I already owned the stock or not). In these cases I am doing what some would call dollar-cost-averaging. Buying in according to a systematic formula can also be considered DCA as you say. That’s not what I’m calling out.
But the idea that I can somehow reduce an historical loss on a share by buying more of it is pure “sunk-cost” fallacy. I can reduce my average loss per share (“I was down $1.00 per share, so I doubled my position and now I’m only down 50c per share, on average”), but I own more of them now. My loss remains unchanged. I’ve seen people heatedly argue the opposite.
I’ve not got any idea how many this is, but it does bring up a good point - we are seriously lacking in educating people on sorting their own finances. Many, many people I have known who make good incomes make bad choices (not talking about like buying way too much car or whatever) that have serious implications later in life.
The fact that I have to implore younger employees to please take advantage of enough of the 401K to get matching (which my company does) is sad. They also pay all the fees - which pretty much NO company does.
I try and council to not make the same mistakes that I did in my 20’s and 30’s. Sometimes people listen, sometimes they do not.
Um, no. This is a forum. If you aren’t interested in having your posts replied to, then this is not the place for you to make those posts.
This is not Quora. We don’t decide that only posts from those with verified credentials may remain. If you have specialized knowledge about a topic, then post it along with your comments - other readers are free to take that into consideration when they read what you write.
This is also true of responses. If someone responds to a well-researched post that includes references with disbelief, that’s their prerogative - and the prerogative of other readers to judge how much weight to give to their response, and other responses in the future.
This:
…is not a weapon to silence criticism, but instead common-sense policy for when a user has specific issues with others, and is a stopgap until Discourse has an ignore feature. Do not repurpose a policy that exists to avoid harassment into one that stifles discussion, please.
I consider myself an intelligent person but I find financial topics so incredibly boring and tedious that I have a really hard time paying much attention to them other than tracking my balances.
As a result, I am definitely a “set it and forget it” type. I have several 401(k)s and IRAs which I contribute to but I do not actively manage them. I put all my investments into no-fee mutual funds and I don’t touch them partially out of lack of interest but mostly out of fear of fucking something up. I own no individual stocks and probably never will.
I watched my father squander over $2 million of inheritance and die broke with his attempts to beat the market. I vowed to never repeat his mistakes. I don’t really care if my investments are maximized or not. Fortunately I’ve had good income over the years to build a solid foundation of savings and conservative investing which I calculate will carry me through a modest retirement hopefully in about 20 years.
Maybe if the financial services industry would try harder to simplify and demystify some of the incredibly wonky jargon meant to protect their information monopoly, lots more people would be able to take an active interest in their financial wellbeing.
So true! Unfortunately, as you realize, it is generally in their interests to mystify the subject… I have met with nothing but frustration, irritation and (sometimes) misinformation from folks in the finance industry interested in “helping” me manage my money.
In the end I turned to the “for dummies” series to figure things out for myself, and that modest investment in time was well worth it. I don’t know if all are equally good but the ones I read were very helpful for someone who is not actually a dummy (indeed also considers herself an intelligent person), but who finds finance terribly uninteresting and yet does not want to die a pauper.
One of the big takeaways was not to pay much attention to the business news.
I find it incredibly interesting that you in the previous paragraphs admit your own personal experience has led you to be a passive and disengaged saver; pointing out you have ample opportunity and resources to save but then drop this excuse as if it is the industry’s fault that you aren’t engaged.
Have you spoken to a financial advisor? Have you reached out to the DC recordkeeper for your current or former DC plans? Have you sat down with someone in a personal brokerage position or with an intermediate institutional rep to discuss options with your assets and how you might better manage them with whatever level of personal active engagement you are comfortable with?
If you have done all those things and are still turned off by the industry, that’s fair. But saying you can’t be bothered and then laying at an entire industry’s feet because [insert corporate conspiracy here]…seems a bit disingenuous.
That sounds like a sensible approach to me. You took a lesson from your father’s bad experience (which I assume involved at least one bad or incompetent broker) but didn’t overcorrect and put everything in your mattress.
As long as your portfolio allocation is where you want it to be for your age and risk-friendliness/aversion and it’s reasonably diversified you can get away with peeking at your investments once per quarter (or if you really trust the fund managers once per year). Best not to touch it unless something’s seriously and consistently off in terms of performance and appreciation.
Beyond that, do a re-assessment about allocation with someone knowledgeable and trustworthy every 8-10 years and always listen to your accountant when he notices something about your portfolio while doing your taxes.
There are lots of reputable, free resources on the Internet, too. For anyone who’s new to this and intimidated by it but wants to learn the essentials, tutorials aimed at adolescents can be a great starting point [that goes for other topics that aren’t intuitive to most people].
Good observation, especially for someone who’s more active in managing her portfolio – a lot of the day-to-day stuff can reduce a person to tears, even without people like Cramer playing games.
But by the same token do pay attention to news about domestic and international politics, including the economic news (which can stand apart from business news). Trade wars, shooting wars, interest rate hikes, tax cuts, election results, new technologies: all have long- or medium-term consequences for a portfolio.
Essentially, index funds are what should be nationalized IMO. Along with credit agencies. Capital shouldn’t be owned by private hands and since all capital more or less flows from financial capital then it makes logical sense to wrest control of financial capital from the capitalists. >:)
I blame the industry for purposefully confusing investors with complex and hard to understand “products” in order to protect their information advantage. This leads to people becoming less interested in managing their money and leaving it up to “professionals” who often do not have their client’s best interests in mind. My gripe is that the industry makes it very hard to be a passive investor.
My personal experience is one of not having the time nor inclination to wade thru this mountain of bullshit in order to “optimize” my portfolio for the highest yields and instead choose take a more passive approach to my investments. I recognize this is my personal choice and that I may be sacrificing optimal profits as a result.
I have consulted with a financial advisor who helped set me up with my initial portfolio of mutual funds. Of course he then wanted to continually fleece me for an annual 2% fee to “actively” manage my money to which I wisely passed on. This is the kind of crap that turns off most people which then in turn leads to wider financial illiteracy.
My father was a stock broker in the 70’s and felt he was smarter than everyone else when it came to investing. He bought into his own bullshit and hubris caused him to make very poor decisions.
I remember we used to argue about the purpose of the stock market with his position being it was the foundation of capitalism and mine being it was nothing but institutional gambling. I guess you could say I “won” that argument.
Two points…first because you experience something does not mean everyone does. Because you are turned off by something, does not mean everyone else is too.
Second and more important…you are stating you do not have the expertise nor the desire to actively manage your investment portfolio; but the person who does is deemed to be a con artist and attempting to snooker you. When you break an arm, do you choose to set it yourself and avoid that “sketchy” doctor who is just trying to stiff you for more money? How about when your car has engine trouble…is every mechanic just trying to take all your money so therefore you can’t trust any of them and choose to do your own maintenance?
Yes…there are certainly some financial industry individuals and companies out there who care not for you and only for their own profits. There are people and entities like that in all industries. But a blanket statement and attitude you are displaying is absolute bullshit.
Would you do whatever you are best at for free? No. You wouldn’t. And I am sure you would be pretty pissed if someone told you that because you want to be compensated for your time and services that you are therefore a crook out to fleece the sheep.
Based on your replies I think there is more to it than not trusting the financial services industry. Good luck with that issue. Your missing out on plenty of resources and experience that want to help.
I hope this is sarcasm. Because if you had active account management that made you $100,000 in net gains a year and only wanted $2,000 for their services on said gains…I’d be signing up for that in a heartbeat.
As I said directly to him…Do you do the things you’re good at for free?
I have no doubt that many of the middle-class property-owning people who show up looking for financial advice have more in the way of assets than they expect. Plenty of 'em are probably technical millionaires without realising it.
But middle-class property-owning people are severely unrepresentative of the nation as a whole.
It isn’t. He was asking 2% a year to actively manage a small portfolio of consumer-brand set-it-and-forget-it long-term-hold mutual funds, which (judging from @anon81034786’s conservative approach) are very likely either low- or no-fee passive funds or are actively managed themselves by someone charging much less than 2%. That’s some con-artist BS right there.
Not only that, but if he was offering him high yields he wasn’t listening to his client about his comfort levels regarding risk.
That’s not saying that all financial advisers are crooks or don’t earn their fees. But that guy? Come on. If you’re in the business he’s the kind of person who gives you a bad name.
The current average is around 1.5%. 2% is not way out there in left field nor is it a sign of a huckster. I love how the first sentiment is “I don’t understand this stuff” is followed by “these assholes are all out to rip us off”
It just doesn’t even matter. This is a thread of bash the capitalist financial services bastards out to rip our hard earned pennies from us. Because ya know…all financial services folks are 1%er assholes who look down on the common people.
Yup. Send grab them pitch forks. You all enjoy your fucking day.
That’s not at all what I’m saying. I’m stating that in my case, I did feel snookered and that it’s wise for others to be skeptical about anyone looking to manage your money on your behalf. The industry also purposefully makes it difficult to gain knowledge and information in order to counter the bad apples.
A 2% fee over time is huge and would blow a serious hole in my long term gains - especially when countless studies have shown that actively managed funds perform no better or even worse than index funds. Had I not known this, I probably would have fallen victim to his sales pitch. I may not be the wisest of investors but I wasn’t born last night either.
Interesting you use this analogy because I do happen to be very knowledgeable on auto mechanics and I do most of my own repairs and maintenance. Not only do I NOT trust most mechanics, I know most of their shady tactics (like passing off used parts as new, overcharging against standard book times, and padding shop supplies) and it’s only this knowledge that prevents me from being taken advantage of when I do need a mechanic.
You seem to be taking a lot of personal offense here when none is intended.
I know what the current average is. I also know that a half point difference is a huge one in these circumstances. And that’s before we get to the real reason he’s a huckster, which I explained above.
Rubbish. A lot of my own business depends on capitalist financial services, including some ruthless 1%ers. But I (and most of my clients) have no tolerance for irresponsible speculators or crooks who take advantage of information/knowledge asymmetries or mindless greedpigs, and the industry at this late-stage capitalist moment is chock full of them. Pitchforks are too good for them.
i) 60% of households ≠ 60% of people. Percentage of homes that are owner-occupied is very different from the percentage of people that own homes. One or two owners, multiple occupiers.
ii) Average home equity is about 50%
iii) Average home value is about $200,000
The average American is a working class woman who either rents or has a small equity stake in a cheap house.
