PERSONAL CFO SERVICES with NO Conflicts of Interests. the way planning should be donE
INVESTMENT PHILOSOPHY...
“To make money they didn't have and didn’t need, they risked what they did have and did need, And that’s foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense.” -Warren Buffett
The principles below are the same that I have applied to my own financial planning and are the same principles and philosophies I align with when working with my clientele.
-Vinee
Why indexing makes sense...
Dalbar Study: 30 Years of Avg Equity Fund Investor vs. Indexes (1/1/92-12/31/21) Source: Dalbar QAIB
Dalbar Study: 30 Years of Avg Equity Fund Investor vs. Indexes (1/1/92-12/31/21) Source: Dalbar QAIB
Dalbar Study: 30 Years of Avg Equity Fund Investor vs. Indexes (1/1/92-12/31/21) Source: Dalbar QAIB
Here is a study done by DALBAR over a recent 30 year period comparing the returns of the S&P Index vs the Average Equity Investor
For a majority of investors, they dramatically underperform the market...
Dalbar Study: 30 Years of Avg Equity Fund Investor vs. Indexes (1/1/92-12/31/21) Source: Dalbar QAIB
Dalbar Study: 30 Years of Avg Equity Fund Investor vs. Indexes (1/1/92-12/31/21) Source: Dalbar QAIB
The results are startling when you look at the long term effects and what the difference is over the long term in real dollars due to the magic of compounding!
Active Management generally results in lower performance...the numbers don't lie....
The chart to the right was produced by Charles Schwab...
The portfolio on the left had an annual management fee of 0.15% and the portfolio on the right had an annual management fee of 1.50%....which portfolio would you prefer to have?
This chart shows how hard it is and has been for active managers to beat the indices over a variety of different asset classes...
It will be a bumpy ride but the overall trajectory is up...
March 2009-September 2021
January 1926-December 2020
Timing the Market is a Fool's Game...
The thing about the market is that there are a small set of days when you get a majority of your long term returns. Trying to time this can be a wicked and cruel way to punish yourself, not only in the present, but also in the future by trying to get too cute and ending up with much less capital in retirement to work with. I have seen this happen repeatedly during my career over the last twenty years and it is sad to see.
Fully understand how much you pay for your investments...
Both investment fees that you pay and the underperformance of your investments versus the indices compound over time as well. These amounts can grow to considerable amounts of wealth that was lost unnecessarily.
In order to keep costs low for your investment portfolio, the amount of fees you pay to an adviser should be minimized or completely eliminated. Most investment advisers out there do not know that much more than you do (see video link above :) If you decide to educate yourself on basic finance, you will likely know as much as most investment advisors. It makes no sense to pay someone an annual fee of 1%-2% per year on your investment portfolio. The long-term cost of a 1%-2% fee compounds over time to very large amounts. It makes no sense to have someone who does not know what much charge you 1%-2% a year merely for holding on to your investments and most likely underperforming the market indices.
Compounding works both ways...look at your annual investment management fee that you are currently paying and compound that over 10-20 years to see how much was spent on ‘management’ of your portfolio....that money could have gone towards the goal you were saving for!
Things to think about...
- "Where returns are concerned, time is your friend. But where costs are concerned, time is your enemy"- John Bogle, Little Book of Common Sense Investing
- "Beware of little expenses; a small leak will sink a great ship" -Benjamin Franklin
- "If returns are going to be 7 or 8 percent and you're paying 1 percent for fees, that makes an enormous difference in how much money you're going to have in retirement."- Warren Buffett
Don't forget about the importance of dividends...
January 2000-June 2020
1960-2021
“Look at the dividend and try to ignore the market. As I've often said the stock market is a giant distraction to the business of indexing, and in particular for the business of retirement investor. It’s the income flow from Social Security, pensions, whatever it might be, and dividend income, and that's what’s important. It's amazing how this dividend line [tends to increase over time] and the market [goes up and down over time], but they track each other in the long run." Bogle, Vanguard