If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.
Sunday, November 28, 2010
Yesterday I presented reasons for becoming a DIY Investor. The bottom line, IMHO, is that becoming a DIY Investor is the best chance for most people to reach their retirement goals. It saves a lot of money over time, and it gives them the best chance of getting and even exceeding market returns.
But...how does one become a DIY Investor? It's easy... get an MBA from Wharton! Ha! Ha! That's a joke.
Seriously, it is fairly easy and it doesn't take much time to carry out once implemented. You do need, however, the interest and the willingness to make a commitment. This is what I recommend :
1. Pay attention in the human resources meeting at work where the 401k provider talks investments. I know-some of the presentations can cause the eyes to glaze over. Try to stay awake and understand the fees of the funds and the choices offered. Don't rely on co-workers for getting ideas on how to allocate your balances and contributions. There is a lot to learn in these meetings and in meeting with the reps. Typically, 401k providers (think Schwab, Fidelity, Vanguard) have online technology available to participants that can provide in-depth info on asset allocation etc. Learn and use this to come up with an allocation you can be comfortable with in stormy seas because that's where you are headed.
2. Get an investment philosophy. Too many people approach investing as a seat-of-the pants operation. It is almost a given tha,t if you do, you will end up buying high and selling low. Don't take my word for it - google "Dalbar Study." My philosophy is based primarily on using low-cost, low-turnover, index funds within the framework of an acceptable asset allocation model based on my risk tolerance. I refer to this as "evidence based investing" simply because there are innumerable studies supporting this approach. This leads to point 3 - the best way to develop a philosophy is to read the masters.
3. Read "The Four Pillars of Investing" by William Bernstein, "The Elements of Investing" by Charles Ellis and Burton Malkiel. Watch the Google authors presentation by Dan Solin on YouTube.
4. Find an experienced fee-only registered investment advisor who charges by the hour. Go over with him or her the differences between taxable investments and qualified accounts such as 401ks. Talk about opening up an account at a discount broker and the mechanics of making trades, if necessary. If you are planning on rolling over 401k funds etc., go over how to do that. There are actually nuances (sometimes it pays to rollover company stock to a taxable account) that can avoid adverse tax events.
In carrying out point 3 above, you will find that the approach outlined here has, over long periods in the past, outperformed 8 to 9 investment professionals who claim they can "pick stocks" and/or "time the market." The reward for making the effort to becoming a DIY Investor could well put you on the road to retiring a couple of years early.
Picture: Burton Malkiel, author "A Random Walk Down Wall Street."