REASONS WHY TO MAKE YOUR OWN DECISIONS
- No one cares about your money as much as you do. Why would
anyone think otherwise?
- The advice you get will always be slanted. It's human nature.
- Stockbrokers will recommend trades to generate commissions.
- Financial Planners will recommend ETF's to keep you away from brokers.
- Income Trust promoters will lie about 'return of capital' and pretend that hard cash equals true income.
- Friends won't tell you until after they sell a stock they previously recommended. They want to get their own best price first.
- Etc, etc.
- There is no way to know in advance who is trustworthy, AND
has technical training, AND has application skills.
- Accreditation measures only test-writing skills.
- Church members are scam targets because they think trust is a good personal quality. One could better argue the importance of unremitting suspicion when dealing with money.
- Inevitably, the decision to hire an advisor is based on whether you LIKE the
person. How irrelevant! As J.K. Galbraith wrote, there is a tendency to confuse good manners and good tailoring with integrity and intelligence.
- It
is human nature to accept 'as factually valid' the ideas that agree
with your own preconceptions, or the ideas that are simple to
understand and repeat. You hire advisors who agree with you and don't make you feel stupid.
- 99.9% of professional advisors are incompetent. The proof that lies in their RRSP advice. RRSPs have been (until the TFSA) the bedrock of Canadians' saving-investing-planning since the 1970s. Yet most all the advice given is either wrong in its conclusion, or wrong in its justification (leading you to wrong conclusions when you apply the same understanding in different circumstances).
The detailed argument showing their errors is on the page Nitty-Gritty of RRSP. As of March 2011, after three years of slogging, only ONE Canadian advisor (Jamie Golombec) has had the integrity to read the page with an open mind. But even his employer, CIBC, has refused to change the advice on their website, and no doubt none of CIBC's other advisors have been told to change their advice. There have been NO e-mails to the site questioning the math or pointing out errors. Advisors are simply closed-minded, self-satisfied, and don't care whether their advice is right or wrong.
- The cost.
You cannot offload your work without paying upwards of 2%. The beauty of
compounding interest (when you earn it), is how that interest gets
magnified over time. The corollary is that the 2% charge is NOT a
yearly charge you can forget about once made. It will also be magnified
over time by compounding.
Upscale services and vehicles like hedge funds carry an even higher
cost. The Banks have done a great job of marketing their advisory
services by making them available only to 'high net-worth individuals'.
Because they are restricted, we want them more. We want to 'mention'
them at cocktail parties (to brag about our wealth). These services are
no better (or worse) than those offered to poor sods at lower prices.
- You can do just as good a job
as the professionals. They must earn an excess to the 'market returns'
in order to cover their fees. Statistics show they don't do it (except
for small-cap funds). Their compensation is based on asset
values, not performance. Given the choice between a guaranteed return
equal to the market (using index ETFs), or a 50:50 chance of earning
higher (OR LOWER) mutual fund returns, which would you chose?
- False promises. Investing is not a simple process. It is not paint-by-numbers. Procedural rules cannot generate gains. Yet that is exactly the promise from advisors and the media. Always, the procedures are claimed (or at least implied) to increase your returns ... no thinking involved. These promises are challenged in various places on this website. Most often it can be shown that there is NO income gain from the process - just a reduction in risk (if even that).
- But..it's too much work. Well, no.
How much time you spend depends on how much you enjoy stock picking. If
you 'have a life' you can simply buy a few large-cap ETF's
and then walk away and forget it (see the Couch Pototo portfolio). Or you can ground your portfolio with
index ETFs for solid beta, and take a flyer with a smaller percentage
of your assets for the fun of earning some alpha.
| |
|
