Investment advisors… Are they worth it??

Many people ask me are investment advisors worth what they charge.  Well, that depends.   I never used one after I learned how much they charged for their advice.  Most of their advice, if you ask me, is not worth a cent.  Basically, what they do is log in to a terminal which shows a bunch of stocks, loaded mutual funds, unit investment trusts, closed end funds and bonds with their ratings.  Some high end brokers, such as JP Morgan, Morgan Stanley and Goldman Sachs also have private CEFs, while they are nice to have, they also come with a slew of fees.

But what do you know.  Have you used them before?  How do you invest for your investments and retirement?

Well, I’ve reviewed many people’s (family and friends) brokerage statements (with their approval) and made some suggestions.  Many had Unit investment trusts and loaded funds with high fees.  Depending on one’s age really depends on where you place your $$$.  If you are in your late teens, twenties, thirties or even early forties, then I would be aggressive with your retirement account.  For me, I am 50% in Vanguard S & P 500 fund, 20% in Vanguard Total Bond Fund, 10% in Vanguard REIT fund, 10% Vanguard International Stock Fund and 10% in Vanguard Healthcare Fund.

For my regular investment account, I am a bit more conservative.  33% in Vanguard New York Muni Fund.  33% in Vanguard S & P 500 Growth Fund, 20% in Vanguard Utility Fund, 5% in Vanguard REIT fund, 9% on Vanguard Healthcare Fund.

What I recommended to others, really depended on age.  I suggested to most, depending on age a 70%/30% (70% Vanguard S & P 500 Fund / 30% Vanguard Total Bond Fund) who had 25 + years before retirement.  For ones in retirement and needed the income now, I did something completely different.  I recommended they go into 60% Vanguard Corporate Bond Fund, 20% Vanguard New York Bond Fund and 20% S & P 500 Fund.  Since they need this income to live off of, they need monthly income.  They have 80% of that income coming in monthly, while the remaining 20% is growing in the S & P 500.  This has, over the years, worked out well for all thus far.  All are performing better than before my suggestions.

I like Vanguard because of their insanely low expense fees.  When I started investing for myself in the 90’s, I really didn’t understand the loads and expense ratios.  However, anything over .40% really eats in to ones return on investment over time.  Vanguard is anywhere from .05% – .45% on average.  All of their index funds are under .10%.  Vanguard is the way to go.  Fidelity is another option, but is a bit more expensive on the fees.

So, back to the original question, should anyone pay a broker fees for their “advice”.  If they are going to charge the standard 1%, then no.  If they are fee based, and they advise NO LOAD FUNDS, then yes, you can consider their advice.  However, very few, if any can beat the S & P 500 index in the long run.  Hence, I always recommend doing it yourself with Vanguard or Fidelity funds.  Start off with a 60%/40% split in the S & P 500 and a total bond index fund and reinvest the dividends.  In the long run, it will pay you dividends beyond belief.

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