If personal finance is difficult for you, carefully hire a good financial and investment adviser
A previous financial article, “The Solution – ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that investors are much better off with a well-considered financial plan. A stable set of financial beliefs can help you to keep focused and on track throughout your life. This follow-up article discusses how important it is for people to be careful when they select a financial advisor.
If you realize that you need help with your personal financial planning, get a good financial advisor.
However, be very, very careful with your financial advisor selection process. A good financial advisor could make things much better. A poor one could make things much worse. (See: Financial advisor costs and the value of their investment strategies determine your return on investment from these investment advisor services)
Competent, self-directed investors may have less need for a financial advisor, when they adhere to financial planning strategies and investment funds purchasing practices that are similar to those summarized in The Skilled Investor’s “Financial Decision Rules” articles category. By already following more optimal investment returns strategies, they may find it more difficult to justify the cost of a financial planning and investment advisor.
In contrast, individual investors may repeatedly cost themselves substantial sums by making behavioral errors, and these investors could benefit from the assistance of a good financial advisor. For them, the cost of an advisor may be easier to justify, because of their personal finance inefficiencies. Investors with investment behavior problems might pay the advisor’s costs and still come out substantially ahead relative to having done more poorly on their own. (See: Value-added and value-diminishing investor activities and What is the cost to individual investors of sub-optimal portfolio diversification?)
If behavioral control is difficult or implementation is confusing for you, then you should carefully select and hire a good advisor. You will still be the ultimate decision maker, but you can empower your financial advisor to try to keep you in bounds, while you listen seriously to his or her advice. However, if you do decide to hire a financial planning advisor and/or investment advisor, do not take this advisor selection process lightly. The financial advisor you choose could help you to make or break you lifetime financial plan. The Skilled Investor has written expensively on financial advisors to suggest ways that individuals can improve their advisor selection process. (See these articles on Selecting an Advisor and these articles on Regulation of Advisors)
Selecting a financial advisor just because your relative, friend, or neighbor trusts the financial advisor they are using could be a disastrous way to choose an advisor. How do you know that this person did their homework when they selected the advisor that they trust? Many of the advisory scandals reported in the media show that one person trusted the recommendation of another person and on and on. Unfortunately, nobody along this chain of referrals did their homework to check the advisor’s background, competence, and ethics. In the end, they all get taken for a ride on the dead end train of financial greed.
Unfortunately, many people have thrown up their hands at the seeming complexity of doing personal financial planning and investing. They use slipshod methods to quickly pick a financial advisor and hope that this advisor will do what is right for them. Unfortunately, advisor selection is a minefield and lack of knowledge among financial advisors and financial conflicts of interest are major culprits. (See these articles on Payment of Advisors and these articles on Advisor Fraud)
Tags: investment advisor services
Personal Financial Planning
- Factors Favoring Roth IRA and Roth 401k Plan Contributions (Factors that tend to favor Roth IRA and Roth 401k tax-advantaged plan contributions
In a recent article, "Traditional versus Roth tax-advantaged plan contributions," The Skilled Investor discussed why the average taxpayer would tend to benefit more by contributing to traditional rather than to tax-advantaged Roth IRA and Roth 401(k) retirement plans. This follow-up article in two-parts [...])
- Efficient Market Pricing in the Investment Securities Markets (
Efficient market pricing is the theory that all known information is already reflected in current securities prices.
Efficient securities market pricing has become very widely accepted within the investment community. The preponderance of evidence is that securities markets are efficient and tend to reflect available information. Whether you believe markets are efficient is very important to [...])
- Learning about personal finance and investing (Learning about personal finance and investing
The investment strategy that I always suggest is a “completely passive, globally diversified, always invested, never switch to beat the market” investment strategy. This kind of investment strategy is a very low maintenance investment strategy. From many respects, you set it, and you forget it. Except for:
the need to pay [...])
- Default under the Citibank Credit Card Contract (PIRATES OF THE CREDIT SEA - Part 6: Default under the Citibank credit card contract
This final article in this series discusses the seven conditions of default under the Citibank / ATT Universal card agreement.
It also expresses my opinions about contractual relationships in general and about the Citibank / AT&T Universal credit card contract in particular.
- Tax-Advantaged Retirement Investing Is Good for Most People (Tax-advantaged investing is very good for most people at most times
A previous article, “The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that individuals are much better off with a well-considered financial viewpoint. A stable set of financial beliefs can help you [...])
- Taking the Snake Oil Out of Mutual Fund Evaluation (Superior mutual fund and ETF performance charts are the sales tools of modern financial snake oil salesmen
Historical performance charts allow investment fund promoters to market selectively their supposedly superior funds and to allege that their excessively high fees are worth it. Lured in by superior past performance, most often individual investors will get mediocre future [...])
- Earned Income Drives the Personal Finances of Most People (Do-It-Yourself Financial Planning - Earned income drives the personal finances of most people
The ability to project your various income sources automatically over your lifetime is one of the first steps in creating a useful do-it-yourself personal financial plan. Whether from wages and salary or from self-employment, personal earned income drives the lifetime finances of most [...])
- American Funds – EuroPacific Growth Fund – Class A Shares (AEPGX) get a +2 Fund Authority Score (The diversified investment fund strategy of American Funds' EuroPacific Growth Fund
According to American Funds' Annual Report for the EuroPacific Growth Fund, the fund "seeks long-term capital appreciation by investing primarily in the securities of companies based in Europe and the Pacific Basin." American Fund's 497 filing on the U.S. Securities and Exchange Commission EDGAR system [...])
- Stay Invested in Securities Markets to Earn Risk Premiums (You must stay invested in the securities markets to earn market return risk premiums
Securities markets pay risk premiums to risk takers
You have to have your money invested and at risk to be paid a risk premium. Attempting to avoid risk or losses by jumping in and out to "time the markets" does not work. Scientific [...])
- Do Not Get Fooled by Superior Historical Investment Performance (
Evaluate the historical investment performance of mutual funds and ETFs, BUT ONLY AFTER using other screening criteria
Choosing only from among mutual funds and ETFs that have performed very well in the past can lead to significant selection mistakes and inferior personal portfolio returns
Previous superior or average fund performance simply does not predict similar fund performance [...])
- How Many Mutual Funds are Needed for a Well-Diversified Portfolio? – Evidence (Actively-managed mutual funds are not created equally. Performance can vary significantly - even when funds pursue similar strategies or "styles."
This article addresses the impact on portfolio diversification of holding more than one actively-managed mutual fund. (For the companion article to this, see: How many mutual funds are needed for a well-diversified portfolio? – a commentary)
- My Treasure Is Taken by My Credit Card Company (
PIRATES OF THE CREDIT SEA - Part 1: My Treasure Is Taken!
Regular readers of The Skilled Investor have already been warned previously of the general dangers of consumer debt and of the risks associated with credit cards. Now, The Skilled Investor has himself become ensnared. In a series of articles, I will: A) summarize my [...])
- Passive Personal Investment Strategies are More Time Efficient with Better Returns and Risk Control (
The scientific investment literature indicates that passive investment strategies usually are more time efficient, while they also increase returns and add more value to your investment portfolio.
For example, given the diversification imperative, it is highly questionable whether the vast majority of individual investors should own any common stocks or bonds directly. Instead, they can achieve [...])
- Factors Favoring Roth IRA and Roth 401k Plan Contributions – Part 2 (Factors that tend to favor Roth tax-advantaged plan contributions - Part 2
(Continued from Part 1...)
In a recent article, "Traditional versus Roth tax-advantaged plan contributions," The Skilled Investor discussed why the average taxpayer would tend to benefit more by contributing to traditional rather than to Roth tax-advantaged IRA and 401k retirement plans. This follow-up article in [...])
- The John Bogle Blog and His Financial Article About ETFs (John C. Bogle's Blog and his article about ETFs
This article is a heads-up to people interested in investment blogs and personal finance blogs.
John C. Bogle, the founder of The Vanguard Group, Inc., has a blog called The Bogle eBlog. (If you are wondering about "eBlog," it is an anagram of Bogle.) Mr. Bogle just posted [...])