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« Comments: Principle 1: Maximize Income from All Sources | Main | Seven Hot 401k Trends, Again »

June 12, 2006


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The article cites a paper ( which analyzes the performance of brokers who sell mutual funds. Mutual funds are popular, but I wouldn't extrapolate too much about brokers over this isolated data point.

That said, if you build the same portfolio and transact it the same as you broker would, you will have more money. Personally, as I sit across the table from my broker I know that he and his team are smarter than me, so I have about zero odds of producing the same portfolio. The value proposition works and I know enough to confirm this.

How about a hybrid approach? There is nothing preventing someone from doing business with a broker while directing another investment account.

I have to agree regarding using a 'broker' alone. The entire financial plan is undermined utilizing a 'broker' alone. An advisor should be one that at least advises, but hopefully plans all aspects - even if the planner does not execute everything, it should be planned out and appropriate professionals (estate planning lawyers, CPAs, securities 'broker', insurance providers, etc.) need to be involved in the implementaion of a complete financial plan, if your advisor isn't licensed, or expert enough to do any or all the above.

I am all for people taking it upon themselves to do their own fianacial planning. However, many do not, or procrastinate at the very least - if they ever do anything -- EVER!

Many that do their own investing never consider further education and consequently understand about as much as they already did when they start. Often, they then make poor decisions (i.e. buying high and selling low) due to lack of discipline and knowledge.

Those that do their own work also need to develop the mental fortitude to learn about investing, know themselves, then develop the plan, and stick with that plan, rather than be led by any 'what's hot now' trend.

Poor performance in a relatively similar poor market is OK as long as what has been understood as goals and risk tolerance and then planned for is being done. Better performance will follow with better market performance. People must always keep in mind their journey and where they are along the way. If the end (i.e. retirement) is years away, stick with the plan that has been discussed and agreed upon. If the end is near (i.e. college funding) an appropriate investment plan will have taken that into account. The losses (and gains) will be less dramatic.

In the end, the individual is responsible. If they select a poor advisor, it is up to them to find another advisor that will get the job done. People have to be willing to dedicate more time to selecting an appropriate financial advisor than they do picking a sandwich for lunch at a restaurant, if they have neither the desire nor the willingness to proactively do it themselves, or are unable to mentally deal with day to day market noise - they wind up hurting themselves financially (by making reactionary poor decisions and suffer permanant financial damage).

Thank you for posting. I am a new reader to this blog and I appreciate what you have here.

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