Investment Help

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.

Thursday, February 16, 2012

Best-Selling Author Commends RW Investment Strategies' Approach

Andrew Hallam, author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, says "If the average American Fund salesperson saw what Wasilewski charges, they would hide their pink heads under the covers of shame."  Nobody can ever say that Hallam doesn't have a way with words!

My conviction has long been that the financial services industry overcharges by charging sales fees, marketing fees, outrageous management fees, and  numerous additional hidden costs to individuals who are led to believe that market timing and stock picking are superior approaches.

I, of course, am not the only one practicing along the low-cost index approach.  Hallam mentions Assetbuilder as well, and there are others.  In fact, my sense is that the movement is growing - helped along by the works of Hallam et al. .

Although I work with all age groups, I am especially interested in getting the message across to young people.  Too many procrastinate with their investment program because they won't take a bit of time to learn how it works.  They convince themselves they are right whenever they see markets drop, when, in fact, they should see declining markets as a great opportunity.

10 comments:

  1. He definitely does have a way with words!

    Do you have any ideas on how to get the message across to young people? I'm having trouble getting the message to even to my friends, who are in their early 30s! I've even gotten to the point where I'm offering to get them started for free and I'll do everything for them, but there's always something more urgent in their life. Have you had any luck with your clients or seminars?

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    Replies
    1. Show them what retirement is going to look like if they do nothing (assuming social security still exists by then).

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    2. Most of my clients are older - at least in their 40s. I ask about their children (or grandchildren if appropriate) in a light-hearted/ information gathering way. I then turn serious for a moment and ask if the children (who are typically in their 20s or 30s) participate in a 401(k). As you would guess many people don't know. Money is a taboo subject in America. I then recommend that clients get "I Will Teach You to be Rich" by Sethi and "Millionaire Teacher" by Hallam and beg their children to read them.
      Other than that I work with high school students. This is not easy because high school teachers don't know how to invest. They think it's all about timing the market and stock picking etc.
      I'm hoping I get thru to a few people.
      I looked at your blog - liked it.

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    3. I think the problem here is this: for the young people to give up the idea of stock picking or fund picking is like to tell a passionate entrepreneur that he can never succeed to start a new business.

      and the fact is that, some entrepreneurs do succeed. so it is always fascinating to try.

      Most of the people have to learn the hard truth in a hard way.

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  2. When it comes to investing, time can be your best friend and your best enemy! If you are in your 20s and keep thinking it is too early to think about retirement, time has a sneaky habit of catching up with you - but by then you would've missed out on some good opportunities to grow your wealth.

    I agree, it isn't easy to get the young 'uns to think about savings and retirement!

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    Replies
    1. I agree with you and the Grouch. I was thinking of borrowing a couple of million from you two for my next presentation and wheeling it in on a wheelbarrow. The young 'uns aren't all that interested in the mathematics of it!

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  3. I forgot a book I read 10 years ago. It was written by a professor from Wharton. He claimed that his daughter did a better job of picking stocks randomly from the list professor compiled. He compiled a list of companies that paid dividend and were in business for over 100 years -- GE, JNJ, Caterpiller, Wrigley etc.

    I think you are right on the money with your approach to invest in index fund. Most managers perform worst than an index fund in a long haul anyway.

    Shilpan

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  4. I'm currently teaching three personal finance classes to teens, and there are a few things that really get them excited about money and investing.

    First, I don't tell them much, ironically. I just ask a few socratic-like questions and allow them to figure them out. As a teacher, I've had more luck guiding from behind.

    Here's what I do. I show students a compound interest calculator, and give two scenarios:

    1. A person invests $1000 a month from age 40-60

    And

    2. A person invests $300 per month from age 25-60.

    I assume that each person has the same salary, and I ask this:

    Over their lifetime, who gets to spend more of their salary and who is saving more of their salary? In other words, who gets to blow more money over their lifetime? (kids like the idea of blowing money)

    They figure out that the first person is "saving" a total of $126,000 and the second person is "saving" a total of $240,000.

    They would rather spend more of their money, and they agree that the first person can spend more over their lifetime.

    The kids aren't jumping up and down with astonishment until they figure out the answer to the next question:

    If they each invest their respective amounts of money over time, who will end up richer, the biggest spender or the smaller spender?

    It turns out that the bigger spender (who starts investing earlier) ends up with almost twice as much money as the smaller spender.

    This seems to get their attention.

    We also did a really cool activity with cars, where the kids figured out that purchasing a three year old BMW would actually cost them more than half a million dollars in opportunity costs, versus buying a three year old Mazda, after factoring in depreciation, maintenance costs, fuel costs, initial purchase costs, insurance costs, loan interest costs. They concluded that if the Mazda savings were invested over 35 years at 9% annually, they would have more than half a million dollars. This activity really opened their eyes. Again, telling kids things doesn't really work, but letting them take ownership of what they learn and calculate it for themselves, I think, gives more powerful (and hopefully more permanant) levels of impact.

    And to stir the pot a little, I even had them calculate the opportunity costs of Ivy league colleges, assuming that they would have to pay their own fees. We checked out median salary expectations for graduates of respective colleges (Ivy versus non Ivy) and I have to say....the results shocked me. I just asked the questions, and they came up with the answers themselves after doing their calculations and reporting them in a presentation.

    Doing so, they mastered opportunity costs, relative income taxes and compound interest. It was pretty cool.

    ReplyDelete
  5. Oops, I made a mistake on the first comment Robert. Here's the correction:

    I'm currently teaching three personal finance classes to teens, and there are a few things that really get them excited about money and investing.

    First, I don't tell them much, ironically. I just ask a few socratic-like questions and allow them to figure them out. As a teacher, I've had more luck guiding from behind.

    Here's what I do. I show students a compound interest calculator, and give two scenarios:

    1. A person invests $300 a month from age 25-60

    And

    2. A person invests $1000 per month from age 40-60.

    I assume that each person has the same salary, and I ask this:

    Over their lifetime, who gets to spend more of their salary and who is saving more of their salary? In other words, who gets to blow more money over their lifetime? (kids like the idea of blowing money)

    They figure out that the first person is "saving" a total of $126,000 and the second person is "saving" a total of $240,000.

    They would rather spend more of their money, and they agree that the first person can spend more over their lifetime.

    The kids aren't jumping up and down with astonishment until they figure out the answer to the next question:

    If they each invest their respective amounts of money over time, who will end up richer, the biggest spender or the smaller spender?

    It turns out that the bigger spender (who starts investing earlier) ends up with almost twice as much money as the smaller spender.

    This seems to get their attention.

    We also did a really cool activity with cars, where the kids figured out that purchasing a three year old BMW would actually cost them more than half a million dollars in opportunity costs, versus buying a three year old Mazda, after factoring in depreciation, maintenance costs, fuel costs, initial purchase costs, insurance costs, loan interest costs. They concluded that if the Mazda savings were invested over 35 years at 9% annually, they would have more than half a million dollars. This activity really opened their eyes. Again, telling kids things doesn't really work, but letting them take ownership of what they learn and calculate it for themselves, I think, gives more powerful (and hopefully more permanant) levels of impact.

    And to stir the pot a little, I even had them calculate the opportunity costs of Ivy league colleges, assuming that they would have to pay their own fees. We checked out median salary expectations for graduates of respective colleges (Ivy versus non Ivy) and I have to say....the results shocked me. I just asked the questions, and they came up with the answers themselves after doing their calculations and reporting them in a presentation. From a purely economic standpoint, they determined that paying $240,000 for a 4 year Harvard degree (median expected starting salary for new grads = $54,000 per year)was a bad deal, compared to a cheaper technical college with similar salary expectations, but at half the cost. The opportunity cost of a Harvard degree easily exceeded $1 million, they determined. They had some great points and their calculations were solid.

    Doing so, they mastered opportunity costs, relative income taxes and compound interest. It was pretty cool.

    ReplyDelete
    Replies
    1. These are really good examples. I agree that getting students to participate, teach each other etc. makes for valuable lessons. Now we need to teach the parents! Sadly many parents put kids in the most prestigious schools as a sort of "keep up with the Joneses" effect. Then they complain because the kids have a degree in a field that isn't marketable and a 6 figure loan to pay off!

      Delete