Thank you for your comments and questions on my posts. I’ve gathered the most frequently asked questions and provided my answers below.
Q1: Will you recommend an investment book for young adults in my family?
A1: Certainly! “The Psychology of Money” by Morgan Housel is perfect for those with minimal knowledge of money and investing. For those with some prior exposure, consider “A Random Walk Down Wall Street” by Burton Malkiel. Ensure you get the latest edition (2020) as the book is regularly updated.
Q2: Is a 1% fee for an adviser reasonable? Why shouldn’t I save money by not hiring an adviser?
A2: These two questions are crucial and merit their own post. I’ll address them in detail tomorrow.
Q3. Where can we find all of your posts, all in one place.
A3: I am working on a solution to that. Please stay tuned.
Q4: We are eager to delve deeper into this logic and human biases journey with you.
A4: I’ll certainly revisit this topic soon. In the meantime, if you want to explore it on your own, I recommend the book “Misbehaving” by Nobel Laureate Richard Thaler.
Q5: For effective diversification, the pattern of return of assets needs to be complementary (a negative correlation), right?
A5: Absolutely, diversification requires complementary assets. But, negative correlation is challenging to find at low costs, with most assets having positive correlations. One asset class that marches to its own tune and is available at low cost is intermediate-term Inflation-Linked Bonds, a unique asset with a distinct payoff pattern. I’ll discuss it in a future post.
Q6: Can you recommend an investment adviser for me?
A6: Unfortunately, I can’t recommend one-size-fits-all advisers due to varying client situations. Instead, check out my 12-part series on how to evaluate investment advisers here.
https://lnkd.in/g6BibRnk
Q7: Is a 1% fee for an adviser reasonable? Why shouldn’t I save money by investing myself and not using an adviser?
A7: 1% is fairly typical for accounts under $1 million but I think investors can do a bit better by shopping around. Shopping around does not mean looking for the lowest cost. Instead it means looking for a combination of high quality, “reasonable” costs and a good match with your needs.
This article below has some data on typical advisory fee for a $750,000 account.
https://lnkd.in/gQcStpKq
Main factors that impact adviser fees are outlined in my post below which also encourages investors to understand Total Costs, not just Adviser fees.
https://lnkd.in/gbpTjgtH
It is possible to manage your portfolio by going the DIY route and many investors take pride in it. However, it’s crucial to ask yourself if you have the time and inclination to learn enough to do it well. It you do, all the power to you.
The analogy I offered on this matter was that you can save money by brewing coffee at home; why go to Starbucks? You do it because it gives you satisfaction that is worth the $4 that Starbucks charges. The same way, instead of just deciding to save money by doing it yourself, do an evaluation of the costs and benefits. I provided a comprehensive framework for evaluating advisers that you can check out here.
https://lnkd.in/g6BibRnk
Lastly, remember that financial advisers can offer more than just investing help. Explore my post on the broader ways you can leverage your adviser.
https://lnkd.in/gm6ywxwA