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)
Personal Financial Planning
- 2006 and 2007 Personal Income Tax Rates for the 50 States and DC (
2006 and 2007 personal income tax rates for the 50 states and D.C.
The Skilled Investor has made available for downloading a spreadsheet that contains graduated personal income tax rates and other personal income tax rate information for the 50 states and the District of Columbia.
If you want to know about specific U.S. state personal graduated [...])
- What is a Well-Diversified Investment Portfolio? (A well-diversified portfolio contains a very large number of individual stocks and/or bonds that are selected without bias toward particular economic segments.
A fully diversified portfolio will approximate the global publicly traded securities markets.
The question about diversification most frequently asked by individual investors is “how many stocks or bonds do I need to be well-diversified?” While [...])
- Fund Authority Scores for Stock ETFs and Mutual Funds – Fund maturity and operating efficiency (
Fund Authority Scores rate mutual funds and ETFs on the most important economic factors affecting long term diversified stock or equity investment fund performance. This article explains the investment fund maturity and operating efficiency factors.
<<-- Go to Part 2
Parts 1 and 2 of this article discussed the first three, most heavily weighted factors used in [...])
- Assess your personal investment return and risk preferences – Step 3 of 10 Financial Planning Steps in the Right Direction (CLICK HERE TO READ THE SKILLED INVESTOR's OTHER ARTICLES ABOUT THESE "10 FINANCIAL PLANNING STEPS IN THE RIGHT DIRECTION."
Investors with different levels of risk tolerance are more satisfied with investment strategies that are better aligned with their risk preferences.
Differences in investors' personal risk tolerances mean that more risk-averse investors are personally more satisfied with a [...])
- Pay Lower Investment Expenses To Get Higher Investment Returns (
Pay Lower Investment Expenses To Get Higher Investment Returns - Part 1
Excessive investment costs are a plague on your personal financial planning.
Excessive investment expenses are one of the most significant barriers to lifelong family financial security. While financial services industry sales people tell you that you need to pay more to get more, the correct [...])
- 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 [...])
- 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 [...])
- Build Investment Asset Buffers to Protect Yourself from Market Volatility (
Build Investment Asset Buffers to Protect Yourself from Market Volatility
You may be just as nervous as the next person is about investment risk. However, the coverage of your future expenses by your accumulated assets will determine whether you can actually manage, when risk really happens.
A previous article, "The Solution - ONLY follow financial strategies that [...])
- California Investment S & P 500 Index Direct (SPFIX) pulls in a +8 Fund Authority Score (
The Standard & Poors 500 stock index is the most common equity index fund benchmark in the U.S. The S and P 500 tracks about 75% of publicly traded U.S. equity market asset value. The dominant issue in choosing among passively managed index mutual funds and ETF funds benchmarked against the S & P 500 [...])
- Understand Your Lifetime Personal Savings Requirements (VeriPlan helps you to understand your lifetime personal savings requirements and whether your current savings rate is sufficient
How much you earn, spend, and save are by far the most dominant determinants of your long-term financial well-being.
You need a means to evaluate your current sustainable lifecycle consumption rate. VeriPlan provides such a means. VeriPlan projects your [...])
- 10 Lower Cost S and P 500 Index Mutual Funds (10 Lower Cost S&P 500 Index Mutual Funds
Regular readers know that The Skilled Investor advocates a very boring, low cost, broad market, passive index investment strategy. Costs less. Gets the broad market return -- whatever that will be. Narrows the range of outcomes and therefore the risk to your long-term personal financial plan. Takes far [...])
- Schwab S&P 500 Index Fund – Select Shares (SWPPX) capture the Best +10 Fund Authority Score (
Fund Authority Scores rate mutual funds and exchange traded funds (ETFs) on the most important economic factors that influence individual investors' net long term diversified investment fund performance. The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise, objective, and realistic summaries of mutual funds and ETFs for comparisons within [...])
- Hitting the Citibank Stone Wall in Polite Conversation (PIRATES OF THE CREDIT SEA - Part 4: Hitting the Citibank Stone Wall in Polite Conversation
This article continues my personal saga of trying to get Citibank to fix problems with their management of my credit card account with them.
For a summary of the overall situation, go to Part #1: My Treasure Is Taken!
For an article [...])
- Choose objective and competent financial advisers and investment counselors – Step 10 of 10 Financial Planning Steps in the Right Direction (CLICK HERE TO READ THE SKILLED INVESTOR's OTHER ARTICLES ABOUT THESE "10 FINANCIAL PLANNING STEPS IN THE RIGHT DIRECTION
Pick financial and investment advisers solely to obtain objective and high quality advice. Specific financial and investment advice is potentially of high quality, if it is carefully customized to your particular needs and is given by an [...])
- 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 [...])