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June 10, 2009


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I think a great question is "why did the last person who fired you do so?"

This is great information, stuff that I wish I had before I got involved with a commission based firm that caters to(some might say targets) the military a few years back. After a couple years of learning and a few eye opening conversations with coworkers, I realized that my wife and I had high load, high expense mutual funds and whole life insurance policies that were just not the best use of our money. I've since changed to a fee only advisor that I use as more of an instructor and mentor than anything else. Luckily, I'm still in my twenties and learned the lesson early, but not everyone has time on their side.

The problem, I think, is the high hourly wages that are charged by fee only advisors, regardless of portfolio size. I just topped 100K in investments, so before that, 4 hours at 250/hr was more than 1% of my investments...early on it was much more. I'm sure this scares many people with smaller portfolios away, since they can go to a commission based firm, where they probably pay just as much if not more in the long run, only it's hidden in fees and limited investment options. The funny thing is, fee only advisors shouldn't have to spend as much time with young adults as their problems are fairly basic and could benefit from following general rules, unlike the more established investors, so they should be able to reduce their fees and get more business in the door.

If you have good mathematical skills, are very computer literate, can either write a computer program or are very proficient with a spreadsheet, and don't mind spending the time to educate yourself about managing your own money I believe that you can be your own financial advisor. It has worked perfectly for me. I now also manage my children's accounts and am responsible for a total amount that has now reached 10 figures. I have saved a bundle in investment management fees over sixteen years and during that time have used only no-load mutual funds.

My largest investment while I was working was my 401K and for many years employees could only select one of three allocations. Consequently the great majority of my investment decisions have been made during the sixteen years I have been retired. Upon retirement I subscribed to a database service that originally came with only mutual funds plus some charting and analysis software. The database now also contains end of day prices for many stocks and is kept up-to-date by a daily download. This particular database has prices that are fully adjusted for all distributions - this is particularly essential when ranking income funds.

There are plenty of good books on technical analysis and most of the analyses are fairly simple to program. I was also fortunate that my data provider was willing to make the database formats available so that I was able to write a comprehensive program with which I could do my own analysis. I also was able to sell my software to a lot of other users of the same database.

What I have found is that if you want to obtain excellent returns you cannot use Buy and Hold. It is essential to only ride an investment UP, when it is in a downtrend you have to get out. I am not talking about short term trading, rather just avoiding Bear markets. It isn't that hard to do if you have the time to study what is happening and share my aversion for losing money. I call myself a "Momentum" investor and in whatever sector I am looking to invest I search for funds with good returns but low volatility and low drawdowns. High volatility investments are a lot harder to work with.

I think the nest question to ask, is if your most beloved aunt asked you to invest her nest-egg - would you put it with this advisor and in the investments he recommended?

Another important item is to find a financial advisor who has experience working with other people who are in your same financial situation. Did you realize there are advisors who focus on doctors, airline pilots, business owners, teachers, socially responsible investing and hundreds of other specialties? You will get better advice if the advisor is an expert in your situation.

1% is fair price for advice. If you don't want advice invest in Vanguard indexes and under perform the market by half a point,or do a little research and build yourself a blended index strategy hoping to capture a little momentum. Research during your work instead of building your business, when you get home at night or instead of playing golf on the weekends. You can really save money by doing your own plumbing and electrical work! As for me I leave most of my money with someone I trust. I also take vacations and don't care what the daily market does because I pay someone to lose sleep so I don't have to. Cheers! just my 2 cents which over time should return about 8% buying and holding! Sleep tight!

I found my advisor through word of mouth, which I feel is the best way. I wanted someone with a proven track record with people I already knew and trusted. Keith Steidle has handled my accounts for the past five years and I was recommended to him by a neighbor. I am so happy to have an advisor that I work well with and trust with my nest egg.

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