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 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.

Monday, July 18, 2011

Why Manage Your Own Money?

A recent 3-part post showed how I open a new account with the objective of a client taking over management within a 12-month period.  The bottom line of the posts was to show that it is easier for people to manage their own assets than they realize and that it takes very little time.  There are other benefits as well.

Often I hear people complain that their advisor doesn't contact them or they aren't sure of their advisor's strategy.  This ratchets up in difficult markets.  They complain they don't get reports on time and aren't sure how to read the reports once they get them.  These concerns can be eliminated by learning to take control of your assets.  Nobody knows your objectives, risk tolerance, and how you react to the ups and downs of the market better than you do.

Managing your own assets is also a way to keep your investment advisor honest.  As many people know, the financial services industry is adept at hiding fees and obfuscating sub-par performance. By managing a portion of your assets, you will automatically have a benchmark with which to assess your advisor's performance.  To be fair, the performance should be over a sufficient period of time - typically at least three years.

This brings to mind my experience early in my career as an advisor to the trustees of the United Mine Workers Health & Retirement Funds - a multiemployer pension fund in Washington D.C.  As an advisor, I and other staff members wrote and delivered reports on some of the top equity and bond managers in the country.  It became evident to the staff that, to be able to fairly evaluate managers and assess whether they were adding value, it would be extremely useful to manage portfolios in-house.

So, imagine going in after 3 years and your advisor claiming they did a good job and saying the account is up 15% and you showing that you achieved a return of 18% using the same asset allocation and low-cost index funds!

There, obviously, is no guarantee on future performance; but considerable data shows that, after fees, active managers underperform market sectors over the long run. Furthermore, considerable data reveals that the low-cost index approach has historically outperformed upwards of 80% of active managers after fees over the long run.

Another significant plus in managing your own assets is, of course, the savings in management fees.  At 1% to 2%/year that the typical manager charges, the fees mount up and take a significant chunk of the typical nest egg.

There is a caveat.  If you are overly emotional, you will want a professional manager.  Still, there are some low-cost alternatives to consider.

Look at

Disclosure:  This post is for educational purposes.  Investors should do their own research and/or consult an investment professional before making investment decisions.


  1. Once you are set on your asset allocations, saving the management fees can be a big deal over the long run.

  2. Here's a question for you Robert. If the market exhibits irrational exuberance, but you as a cautious adviser, do not wish to participate in it and believe in long term gains, how do you explain this to your clients?

    Think dotcom boom times and fantastic returns and Warren Buffett's ho-hum returns who refused to take part in the rally and stood by his beliefs.

    Buffett was ridiculed no less by Barron's! How as an adviser do you keep your cool?

  3. re: MoneyCone What Buffett did is key. For many clients a good advisor is almost like a coach on the sidelines. You have to keep clients from getting carried away.Today for example, clients want to put everything in gold and it is difficult holding them back. It is not unusual to lose clients in some instances.

  4. Robert, I don't know how you do it. I get mad when I can't get my brother to save a dime, and you have to fight with people who want to put half their money into gold! You must have some patience.

    Personally, I see money management as something as important, if not more so, than my job. If other people looked at it the same way, maybe they would focus less on a bigger paycheck and more on getting the most from every dollar.

  5. re: Dividend Pig The problem as you know isn't just gold. It's that fine line when greed takes over. People act really funny when the idea pops into their head that there is easy money to be made. It's a battle because they are convinced the advisor doesn't know what he or she is doing. It's almost like a person telling their mechanic that they don't really need a brake job or new tires. The end result many times can get ugly.