Quote:
Originally Posted by GregWeld
Recently I've been asked a lot of questions about the Do It Yourself style versus the "Pro" managed accounts... and this got me thinking. That's usually never a good thing -- but I get asked this question A LOT. So let's see if I can put this in to an Investing 102 style thought process.
I think that most people are AFRAID of money. I have no idea why that is... we'll take apart engines with zillions of pieces - hell - we'll take apart entire cars without giving it a thought... but manage our own money?! Are you crazy?!?!
Why? Because we don't know anything about "money" except that we need it.
Okay - so we turn it over to someone that does.
How many of you have read a thread about "the shop" or "the guy" that took their money and did a crap job - or never finished it - or it was 3 times more expensive than quoted? YEP -- a nice showing of hands.
Okay --- what's the difference between that -- and handing over your retirement savings (far more important than any old car!) to a "shop" or "guy" that is supposed to do a good job for you? Never thought about it that way did ya? Every "shop" (money firm) should just be equal and make you rich without you ever having to do a thing.... Right now I wish I knew how to insert that big LOSER BUZZER!!
The "PRO" has some training... in the shop and in the money firm... how much - who taught the class - were they the A student or did they just attend and got a passing grade. The Roadster Shop is a "shop" -- so was Frank's "Prodigy" one is an epic fail. The other turns out some stellar stuff. Do you think "money shops" might just be the same way?
So -- just like building a small block chevy --- there's about a half a zillion parts and pieces you can assemble to build a motor. But if you've learned ANYTHING about motors -- you know there's "parts" and there's COMBINATIONS that make a huge difference in the outcome. INVESTING is the same way. There is a giant array of "pieces" to invest in.... Treasury bonds - CD's - Corporate bonds - stocks - properties - REITS - mREITS - Okay I could fill a page with investment grade ways to park your money. But... and here's the main idea for this post ---- there are only so many ways that ANYONE has to invest. And just like the parts for the small block build --- they're available to anyone.
So does the "Pro" money management firm have an edge up on say -- yourself -- when it comes to investing? Well.... yeah. They do this for a living. But the real difference is - how much time are they going to spend on YOUR account. I mean this really. How much time per month - per quarter - per year - are they going to spend making certain that Joe Average is going to maximize the results to they can retire in comfort? At Schwab -- you get a Senior VP level guy to personally help you out once you have an account with TEN MILLION DOLLARS in it! For that kind of money - you actually get someone that oversees your account. He doesn't do any investing -- and he doesn't give any advice - but he'll make sure that your withdrawals are handled the day you want them - and he invites me to parties - and I get good eats at the golf tournament etc... TEN MILLION MINIMUM. So what level of oversight and thought do you get for say -- ONE HUNDRED GRAND? That's a lot of money!! TO YOU.... to a money management firm that makes a percentage of your deposit... it's the equivalent of a penny in the gutter. If the firm has a staff of 100 people -- all with salaries and they have two whole floors in a downtown high-rise with rent to pay... they have to manage a LOT of money to make that all work -- given that you are going to pay them 2% if you have a million or so to invest -- and about 1% if you have 10 million and so on. So we're clear here -- we're talking about FIXED FEE management. When you have a "broker" -- you might actually get more attention if you're capable of buying 100 or 500 shares of something - because the "broker" makes a commission... and when do they get a commission? When they're buying or selling something in your account. Otherwise - they get ZIPOLA.
So here's the million dollar question. Who should have more interest in your money? You? The Broker? The "Pro" money management house?
Shouldn't it be YOU?
Now -- and here's the real reason for this long winded post.... If everyone has the same access to the same investments as listed above... what's the difference between you and the "pro"? The answer is -- he has some knowledge of all things money. I'll give him that. He's actually spent the time to learn about money. YOU -- THE GUY WHO HAS THE MOST DEPENDENCE MAKING SURE YOU HAVE ENOUGH MONEY TO RETIRE ON!!! YOU HAVE DONE NOTHING!!
Is that right?? The guy who has the most riding on making sure he's going to be okay -- has done the very least to see that happens. Pretty effing sad huh. You sure as hell wouldn't treat your small block Chevy that way would you? Would you work hard and buy all the parts -- and then just lay them around the shop and let 'em rust and never give them ANY thought at all... until what - 10 or 20 years went by? Then what? You look around and go -- wow --- all those parts I bought are old -- out of date -- don't work together -- didn't make the horsepower I thought they would.... ARE YOU EFFING KIDDING ME!!
So I don't care if you give your money to a broker -- to a big money institution - or do it yourself.... LEARN ABOUT YOUR MONEY -- read a book or some articles and ASK SOME PEOPLE ABOUT WHAT OR HOW THEY DO "X" --- no damn different than you do about your motor? Or tire size or wheel offset!!
It's only complicated if you CHOOSE to not learn and pay attention. Thank gawd some have stuck with this and actually done okay for themselves!! They'e taken charge -- and found out it's not really very complicated... it can actually be just as much fun as car parts!
When one guys Small Block Chevy makes a zillion horsepower and lasts 10 years of hard driving --- and the other guys is lame as hell and will barely chirp the tires.... Do ya suppose that one guy paid a lot more attention to his build? And while he might not have built it himself -- he might have spent some time learning who the best SBC builder in the Universe was... or what parts and pieces he wanted to make the best combo for his build... and had great discussions with the builder about all of that.
In other words -- there's a bit more that needs to be done than just pick "Risky" - "not so risky" - and "safety". Or randomly choose the answer to "what kind of investor are you".... I mean really -- how would you really know what kind of investor you are unless you knew what investments you owned and how they added up and so on. It's like racing - how would you know if you liked a road course versus the Bonneville Salt Flats if you didn't even know the difference between them?
Okay -- I've done my job -- I've got ya thinking about that. And put your best Forrest Gump impression on here --- "that's all I'm going to say about that".
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Ohhhhhh so true. LOL. Sad. But true.
I woke up the day I went into a broker (whom i had done some work personally for, so we were somewhat friends). Anywho, his base charge was like 5% of my deposits until reached some 50grand mark or something, then it went down a hair, and the more i had invested the less it got.
But, that got me thinking. He told me i can expect a 7-10% return on my cashola. But he (didnt make it quite so clear) would be skimming off 5% off the top. Regardless of how my money did. I figured out that i cant ever get ahead making 2-4% on my money! I can do THAT good myself! Thus, i started learning, paying attention etc. Then I ran across Mike, who introduced me to this thread.. and as they say, the rest is history...
Did i beat that 2-4% return since *I* took over. OH HELL YEAH I DID!
Brian Hobaugh SCCA National Tour June 2014
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