Financial Advisors? Why?

[matty2.0]

That's why you look at fund history and understand how they trade and don't just jump into anyone.

Madoff had a great history didn't he? Over 40 years of good stable returns ... well ... so it seemed.

 

[MRC & Co]

Madoff had a great history didn't he? Over 40 years of good stable returns ... well ... so it seemed.

lol, 1 fund. Hardly a clear representation of the industry and of 99% of money managers who have vast experience in their fields and do their best. What index has returned the gains of Soros, Tudor Jones, Druckenmiller? Finding a good money manager is where real wealth creation lies IMO.

The fund I put my money into 5 years ago whom I trust, is up 100% over that period.

How is your index tracker going over the same period?

 

[Ato]

I believe one of my original points has been clearly illustrated here (with Matty & MrC), thanks guys.

That point being that newbs, like me, see constantly differing opinions and dont know what to make of it, without either saying stuff it I'll use a fund manager or spending alot of time doing the research ourselves.

That's one of the main problems I believe: overwhelming amount of contradictory information.

 

[matty2.0]

I believe one of my original points has been clearly illustrated here (with Matty & MrC), thanks guys.
.

Bah ... MrC knows he's wrong ... he just wants to pick a fight.

If you're a normal average joe ... your way of making an income is probably not within finance ... so you should stick to what you know best. i.e. if you're a lawyer make money as a lawyer ... if you're in a different profession you should focus your time and energy on that ...
With the income you make you would want to first and foremost, KEEP it and not lose it ... and only then would you want to grow the capital base. But YOUR financial advantage comes not from investing or trading, but your own profession. I think that's where I would spend my time and energy, and not trying to be a financial advisor.

There's no point in losing the money ... doesn't matter how good the financial advisor or money manager "seems" to be. they'll take you to the cleaners if you give them enough rope.

Because after all ... 1 x 1 x 1 x 1 = 1
And ... 1x 1x 1 x 0 = 0 ... or 1 x 1 x 0.5 = 0.5

If a hedge fund manager loses money, it is extremely hard to claw their way back up.

Whatever you do, you don't want to lose money. You won't lose money with a tried and tested index fund over the long term. But then again you probably won't be rich either. But that's not your concern because you have your own career and profession through which you can make an income ... don't you? lol ...

Now, I may come across as a silly old index hugger. I assure you I am not. Quite the opposite. I don't own any index funds at all.
However, when I see sh*t like Storm Financial and Madoff ... It just drives me nuts and makes me mad. Don't be stupid.

 

[Mr J]

Big call.

There are exceptions, which is why I said most, not all. Hedge funds will have more exceptions than the others (such as banks, brokers and FAs), since they operate on performance fees and not commissions, so their interests are usually somewhat aligned with the investors.

It is time consuming for us newbs though, that's the thing.

I shouldn't suggest that it isn't. You sound far more committed than most people out there, and I think you're spenting relatively little time on something that can really pay off in the longrun. It may seem like a lot of time to you, and certainly to many others, but you work hard for your money and it makes sense that you spend time working out how to make the most of it.

Most people are pretty ignorant about the financial markets, and no doubt that is partly due to it being in the best interests of the salesmen to keep it that way.

lol, 1 fund. Hardly a clear representation of the industry and of 99% of money managers who have vast experience in their fields and do their best.

I'm sure most of them do have a lot of experience, but that doesn't guarantee good results. I don't believe very many are outright scams, but I would guess that many won't significantly outperform the market.

The fund I put my money into 5 years ago whom I trust, is up 100% over that period.

That's about 16-17%pa. Does that including management and performance fees? I don't think I can give an unbiased opinion on this return. I'm sure many would be very happy with it.

Finding a good money manager is where real wealth creation lies IMO.

For a trader it should be trading is where the real wealth creation lies!

That's one of the main problems I believe: overwhelming amount of contradictory information.

You'll have to choose what you consider as helpful and what is rubbish. It's partly why I enjoy this - it isn't neatly laid out for us and we have to form our own opinions.

 

[MRC & Co]

Ato, only advice I can give, is find someone with a track record.

To be a professional football player, you have to proove you are great on the pitch.

To be a professional financial planner or stockbroker, you only need a piece of paper from a regulatory authority. Where is the track record of past performance?

It blows my mind investors would listen to someone without a prooven track record.

Certain funds, will have histories of outperformance. If you like the way they have achieved it (i.e. low risk and consistent returns), then I would think that is simple logic.

Why not an index fund? Because the global credit expansion phase looks to be coming into decline. This alone, is probably the single biggest reason for the bull market is so many asset classes. Trading will become the name of the game for superior returns from here on in (by buying index funds, you are effectively becoming the trader, without any track record). Unfortunately, the only way to achieve that is from someone who actually knows how to do it! Check past performance and look into how they achieved it.

Hope that is not too conflicting and is pretty logical and straightforward.

 

[MRC & Co]

money manager "seems" to be. they'll take you to the cleaners if you give them enough rope.

If a hedge fund manager loses money, it is extremely hard to claw their way back up.

Whatever you do, you don't want to lose money. You won't lose money with a tried and tested index fund over the long term. But then again you probably won't be rich either. But that's not your concern because you have your own career and profession through which you can make an income ... don't you? lol ...

First point, wrong. As MrJ stated, use one that has payment aligned with performance AND has a prooven track record. They are not there to take you to the cleaners, far from it. This is not the financial planning industry or stockbroking industry, funds HAVE track records. If your that worried about a Ponzi scheme, perhaps you should just buy gold and put it in a vault.

Second point. Depends what index fund you invest in? If you used the US equity market over the first few decades of the 1900s what would you have returned? Probably, close to...........ZERO (or negative real returns)!

How about someone who enjoyed the boom Japan was experiencing? Of course, over-valued, but at the time, it was Japan, and not China, that was going to over-take the world as the leading superpower. You would now, over 2 decades, be far in the red, even if you bought the dip.

MrJ, the returns I stated are after management/performance fees.

 

[theasxgorilla]

To be a professional football player, you have to proove you are great on the pitch.

To be a professional financial planner or stockbroker, you only need a piece of paper from a regulatory authority. Where is the track record of past performance?

What is worse is that most of them have a rather broad range of funds that they can recommend from, and they're as likely to throw them in front of you with the benefit of full hindsight, to convince you those returns are what their clients have been achieving and that you can also achieve.

Track record of the advisor and the fund is of course two different things.

 

[matty2.0]

Mr C ... look there will be some managers who beat the index. Just like anything in life you have your small outliers.

But if you're knowledeable at all about the industry you'll know that there have been clear studies done that show that 90% of fund managers as a whole ... do not outperform the indicies, especially if you take into account all the fees.
You can go and read Bogle or whatever ... I'm not here to point you in the right direction ... you have to find your own information.
But as a whole the industry does not outperform, especially if you take into account all the "helpers" who have gone bust, or lost money and closed up the funds that were in serious negative territory ... and if you think otherwise you either have an agenda to push, or are ill informed.

 

[MRC & Co]

But if you're knowledeable at all about the industry you'll know that there have been clear studies done that show that 90% of fund managers as a whole ... do not outperform the indicies, especially if you take into account all the fees.

I guess that's why your an analyst and I'm a trader.

I look for outperformance against a market that CAN EASILY be beaten. It is simply beating the average view + cost.

90%. What about the other 10%? Find them.

 

[Mr J]

MrJ, the returns I stated are after management/performance fees.

I assumed so. I know the figures are good, I think it's just hard for me to appreciate the performance of funds when a small day trader can achieve a far better return, even though it's not a fair comparison (really apples to oranges).

To be a professional financial planner or stockbroker, you only need a piece of paper from a regulatory authority. Where is the track record of past performance?

Exactly. If they were so great, why are they not managing other people's money and grabbing the lucrative performance fees? I'm sure some brokers and FPs are great, but most shouldn't be advertsied as more than they are, that being glorified salesmen. In the end it probably doesn't make too much difference though, as I believe the majority of people are destined to part with their money, or at the portion of it they expose to the sharks.

 

[MRC & Co]

I assumed so. I know the figures are good, I think it's just hard for me to appreciate the performance of funds when a small day trader can achieve a far better return, even though it's not a fair comparison (really apples to oranges).

Yes, I can see your point.

But I think I found a way around that.

I have my money with 2 seperate hedge funds, have 1 small account for the odd punt and day trade a prop account.

Low risk, high reward, hedge funds generating my super just encase.

Works for me, for now.

 

[Mr J]

Ah, yes. Good use as a secondary investment for unused capital.

 

[tasmart]

I believe one of my original points has been clearly illustrated here (with Matty & MrC), thanks guys.

That point being that newbs, like me, see constantly differing opinions and dont know what to make of it, without either saying stuff it I'll use a fund manager or spending alot of time doing the research ourselves.

That's one of the main problems I believe: overwhelming amount of contradictory information.

One of the problems that I see - and it is partly because of the clientele of these forums - is the narrow focus on making money as being the prime focus of Financial Planners! Ofen the focus seems to be more on making money for the Financial Planner than the client!

There is a lot more to it - and it really is the balance of individual financial situations (current and future) that should be basis of a financial planning relationship.

I personally don't use a FP but am undergoing education at a Masters level in FP from Deakin Uni. The broader focus, to me, is the important part. As an example this semester I am doing MAF709 (nicely summarised by ASIC). Investments are only one topic of 10.

http://www.asic.gov.au/etraining/etrain.nsf/LUDocID/3C5E417ECD95B1C74A256C7D0009A6F0?opendocument

I actually don't plan to work in the industry, but the dissarray of the industry, my own personal (and family) financial situation and a warped interest in the area have lead me to focus my MBA in this area. The specialisation requires 4 subjects (as well as the other 8 MBA compulsory topics. I only have 1 subject to go after this semester.

BTW I highly recommend the Deakin MBA - in my case just to formalise and build on many years of experience and as a risk minimisation strategy for my future! I have been doing it for the last 4 years basically as one subject per semester.

http://www.deakin.edu.au/current-students/courses/course.php?version=1&course=M701

 

[Krusty the Klown]

Matty2.0, I see you are tagged as an analyst, is that a financial/investment analyst by chance??

 

[Trevor_S]

Big call. May want to check out Barrons list for last financial year:

I see Buffett disagrees with you

Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.

A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors.

and put his money where his mouth is.

http://www.longbets.org/362

 

[skyQuake]

Too many funds are managed by someone with a MBA, lots of charisma and a Distinction average Finance degree.
They have absolutely no idea what they're doing, so they rely on their quant guys and their brokers. Trouble is all the quant models do similar things, and the brokers send out the same stuff to everyone...
Thats why we can have 25 sigma events in funds managed by people who don't know what they're doing.

Having said that, you gotta look a little harder to find funds run by people who DO know what they're doing.

 

[Gordon Gekko]

If you have a financial adviser and you not sure if you are getting good service. Try to remember that first meeting when he seemed so interested in you, even had some pictures of his wife and kids on the wall which he pointed out. Then remember how he said he would be in contact with you ever 6 months or so for reviews on how your going. Remember that flash pen that with the push of a little button lit up highlighting the name of the company that he said you could keep! wow!!

Then look at your statement, have a look at all the individual costs. I.e contribution fee's, MER fee's, Maybe margin loan fees, fund manager fee's. And then think about if these fees go down when you are not getting good performance on your portfolio.(they don't)

Has he been in contact with you ever? Or maybe he sends you an email during periods of high volitility to say hold hold hold.
Then think about how much money he would make if you sold, paid off some of your margin loan,(no conflict of interest there, do you think they will say go to gold? How would they make there commissions)
Where would he get the money for those flash pens?

Have a look at the make up of the top 10 or so companies in your recommended fund and you will most likely notice that it is an index huger, so why are you paying all the cost to track an index? Where is the added value?

Then school up and go your own way. If you don't want to spend much time at it get an index fund period!


Best

G

 

[Glen48]

Trouble is like Real estate you just assume doing what every one else does is the way to make money only when you find out the truth you then look and find out what the real figures are and do some research.. I bet there are a lot of Storm and other Scam victims who could make good advisers and now know a lot more about how our system fails the genuine Australia's
Sadly as we read this there is another scam getting under way and just like 1930 we will continue to make the same mistakes. Just like the Blokes who got caught by CSA trying to get the $900 greed will get a lot in.

 

[rossCaruso12]

It is time consuming for us newbs though, that's the thing.

Using myself as the example. I have begun to get interested in this investment stuff recently, and decided I'd like to educate myself about it before making any move. I've been doing what I can to research various things for the last 4 months, and I still had only the smallest idea of what an index fund was, and no idea how to get involved in one (hence I asked Matty above).

While it might only take an hour once you have everything setup, it's getting setup that takes the time, at least for me. I want to know exactly what is going on with what I've chosen, etc. If I dont understand it, and havent done the research first, then I end up having to follow someone's advice.

More concretely, I'm interested in ETFs, particularly gold, oil & commodities like water (or water company stocks). Thus far I've spent about one month doing research on various issues around these, and I'm still a long way off making any final decision to put money down. I want to know exactly what I'm doing. That's where the time comes into play. Once I have everything set, I'm sure the time required would be alot less.

*Caveat: I may just not be very bright

The last sentence Ato wrote in comparison to the rest definitetely got a chuckle out of me.