beergut
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Post by beergut on Mar 23, 2016 17:03:25 GMT -5
I met with a client recently who started saving/investing in the year 2000. Fresh out of college and in her first job, she took the advice of an advisor at a bank, opened a Roth IRA, and began having a small amount of money withdrawn from her checking account each month to be invested in two mutual funds. No problems so far. The only issue is the two funds they put her in were bond funds, one with class A and one with class B shares. So, not only is she in funds that were completely inappropriate for her age and risk tolerance at the time, they also had heavy load fees. 16 years later, I'm wondering WTF her advisor was thinking, unless it was about his commission. I do have a question, though: Any of y'all start investing with an advisor's guidance in 1999-2000? This was when the e-commerce bubble burst, so I'm wondering if there were some advisors who were telling people to take it easy and go conservative at that time, waiting for the market to bounce back (because we all know market timing works   .
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gregintenn
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Post by gregintenn on Mar 23, 2016 17:29:50 GMT -5
I thought ALL advisors were concerned with commissions.
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TheOtherMe
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Post by TheOtherMe on Mar 23, 2016 17:36:33 GMT -5
One of the CPA firms where I prepared taxes has become an investment advisor firm only. Got rid of the tax business and all employees except family. Think he and his wife and his daughter and son-in-law are making money? He wouldn't even talk to you if you didn't have $1 million to invest.
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Peace77
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Post by Peace77 on Mar 23, 2016 17:49:58 GMT -5
Reminds me if the Suze Orman story. She sued the investment firm who churned away all her money. She sued them while she was working for them and won!
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Deleted
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Post by Deleted on Mar 23, 2016 18:32:21 GMT -5
I met with a client recently who started saving/investing in the year 2000. Fresh out of college and in her first job, she took the advice of an advisor at a bank, opened a Roth IRA, and began having a small amount of money withdrawn from her checking account each month to be invested in two mutual funds. No problems so far. The only issue is the two funds they put her in were bond funds, one with class A and one with class B shares. So, not only is she in funds that were completely inappropriate for her age and risk tolerance at the time, they also had heavy load fees. 16 years later, I'm wondering WTF her advisor was thinking, unless it was about his commission. I do have a question, though: Any of y'all start investing with an advisor's guidance in 1999-2000? This was when the e-commerce bubble burst, so I'm wondering if there were some advisors who were telling people to take it easy and go conservative at that time, waiting for the market to bounce back (because we all know market timing works . I started investing in 1999 with a bank. The guy put me in a variable annuity inside a traditional IRA. They were big commission. I didn't know any better. I was recently divorced. The variable annuity actually kept up with the ML fund that he tried to put me in. Because, of course, he wanted me to surrender the annuity only a couple of years later despite the high surrender charges. This time I knew a little better. Is what you are calling the e-commerce bubble burst the same thing as the technology bubble burst? This is when Yahoo and a host of companies dropped like a lead balloon. But that wasn't until 2000 or 2001 if I remember correctly. In 1998-1999, the market was going up, up, up. ETA: It was inside a traditional IRA, not a Roth.
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Wisconsin Beth
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Post by Wisconsin Beth on Mar 23, 2016 18:36:43 GMT -5
I started my IRA in 1997, I think it was. I think with my bank. I was given stuff to review and never did so it was basically a savings account interest rate. I still haven't hit $10K yet. I did roll it over a few years ago.
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beergut
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Post by beergut on Mar 23, 2016 19:06:48 GMT -5
I met with a client recently who started saving/investing in the year 2000. Fresh out of college and in her first job, she took the advice of an advisor at a bank, opened a Roth IRA, and began having a small amount of money withdrawn from her checking account each month to be invested in two mutual funds. No problems so far. The only issue is the two funds they put her in were bond funds, one with class A and one with class B shares. So, not only is she in funds that were completely inappropriate for her age and risk tolerance at the time, they also had heavy load fees. 16 years later, I'm wondering WTF her advisor was thinking, unless it was about his commission. I do have a question, though: Any of y'all start investing with an advisor's guidance in 1999-2000? This was when the e-commerce bubble burst, so I'm wondering if there were some advisors who were telling people to take it easy and go conservative at that time, waiting for the market to bounce back (because we all know market timing works . I started investing in 1999 with a bank. The guy put me in a variable annuity inside a Roth IRA. They were big commission. I didn't know any better. I was recently divorced. The variable annuity actually kept up with the ML fund that he tried to put me in. Because, of course, he wanted me to surrender the annuity only a couple of years later despite the high surrender charges. This time I knew a little better. Is what you are calling the e-commerce bubble burst the same thing as the technology bubble burst? This is when Yahoo and a host of companies dropped like a lead balloon. But that wasn't until 2000 or 2001 if I remember correctly. In 1998-1999, the market was going up, up, up. The high-point of the bubble is considered to be March 10, 2000, when NASDAQ his 5131.52, but wiki references the collapse taking place from 1999-2001. And we all know wiki is always right E-commerce bubble, technology bubble, and dot.com bubble are all synonymous.
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beergut
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Post by beergut on Mar 23, 2016 19:09:51 GMT -5
I started my IRA in 1997, I think it was. I think with my bank. I was given stuff to review and never did so it was basically a savings account interest rate. I still haven't hit $10K yet. I did roll it over a few years ago. I hope you put it into something more aggressive than a money market account after the rollover
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gregintenn
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Post by gregintenn on Mar 23, 2016 19:23:57 GMT -5
I'd love to hear any advice you'd be willing to give about financial advisors. I ended up with the one I have now through attrition. I'm not very happy with her thus far. What should I be looking for?
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obelisk
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Post by obelisk on Mar 23, 2016 19:26:16 GMT -5
The advisors have outdated info and are only concerned with commissions.
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CCL
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Post by CCL on Mar 23, 2016 19:36:26 GMT -5
That's about when I started investing with the 401k. I don't even remember all this bubble stuff. I keep up with things much better now. Don't forget, the Internet was still kinda new and not as easy to research investment ideas as it is now. I remember I had AOL dialup at the time. I couldn't find much info, so I put all the $$$ in Fidelity Balanced Fund. I might have made more with something else, but did well enough.
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beergut
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Post by beergut on Mar 23, 2016 19:37:33 GMT -5
I'd love to hear any advice you'd be willing to give about financial advisors. I ended up with the one I have now through attrition. I'm not very happy with her thus far. What should I be looking for? Honestly, a good financial advisor only has two jobs. Job #1: Help you come up with a financial plan that fits your budget, and set up an investment strategy that is suitable to your risk tolerance. Job #2: Help you stay even-keeled as the market goes up and down, and help you stick to the plan you made in #1. Keep you from panic-selling if the market falls, and keep you from over-buying if the market rises. Find someone who does those two jobs for you, and you're set.
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Ombud
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Post by Ombud on Mar 23, 2016 19:59:02 GMT -5
Advisors charge by the trade, amount account grows, or hour. They're not all the same
Discount brokerages typically charge between $8-9 per trade irrespective of how many shares are traded and will help you figure out what your tolerance is.
Average tolerance level: 110 -age Stock index ETF with fees under 0.05%
Conservative allocation: 100 -age Stock index ETF with fees under 0.10%
Rest income invest (I tend to go all stock but don't know you personally) or 50/50 income investing / trading if more adventurous
Suggest: (PICK 1) SCHB - 0.03% SPY - 0.11% VOO - 0.05%
Reinvest all dividends & cap gains ignoring fluctuations and you'll be fine
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gregintenn
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Post by gregintenn on Mar 23, 2016 20:01:08 GMT -5
I'd love to hear any advice you'd be willing to give about financial advisors. I ended up with the one I have now through attrition. I'm not very happy with her thus far. What should I be looking for? Honestly, a good financial advisor only has two jobs. Job #1: Help you come up with a financial plan that fits your budget, and set up an investment strategy that is suitable to your risk tolerance. Job #2: Help you stay even-keeled as the market goes up and down, and help you stick to the plan you made in #1. Keep you from panic-selling if the market falls, and keep you from over-buying if the market rises. Find someone who does those two jobs for you, and you're set. Mine isn't always reliable in doing what I ask her to do.
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Ombud
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Post by Ombud on Mar 23, 2016 20:12:21 GMT -5
Honestly, a good financial advisor only has two jobs. Job #1: Help you come up with a financial plan that fits your budget, and set up an investment strategy that is suitable to your risk tolerance. Job #2: Help you stay even-keeled as the market goes up and down, and help you stick to the plan you made in #1. Keep you from panic-selling if the market falls, and keep you from over-buying if the market rises. Find someone who does those two jobs for you, and you're set. Mine isn't always reliable in doing what I ask her to do. So do it yourself! You're smart!
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gregintenn
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Post by gregintenn on Mar 23, 2016 20:22:53 GMT -5
Mine isn't always reliable in doing what I ask her to do. So do it yourself! You're smart! LOL! That isn't the common consensus here.
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Peace77
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Post by Peace77 on Mar 23, 2016 21:20:38 GMT -5
Honestly, a good financial advisor only has two jobs. Job #1: Help you come up with a financial plan that fits your budget, and set up an investment strategy that is suitable to your risk tolerance. Job #2: Help you stay even-keeled as the market goes up and down, and help you stick to the plan you made in #1. Keep you from panic-selling if the market falls, and keep you from over-buying if the market rises. Find someone who does those two jobs for you, and you're set. Mine isn't always reliable in doing what I ask her to do. Then, fire her and hire someone else.
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tskeeter
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Post by tskeeter on Mar 23, 2016 21:45:58 GMT -5
I met with a client recently who started saving/investing in the year 2000. Fresh out of college and in her first job, she took the advice of an advisor at a bank, opened a Roth IRA, and began having a small amount of money withdrawn from her checking account each month to be invested in two mutual funds. No problems so far. The only issue is the two funds they put her in were bond funds, one with class A and one with class B shares. So, not only is she in funds that were completely inappropriate for her age and risk tolerance at the time, they also had heavy load fees. 16 years later, I'm wondering WTF her advisor was thinking, unless it was about his commission. I do have a question, though: Any of y'all start investing with an advisor's guidance in 1999-2000? This was when the e-commerce bubble burst, so I'm wondering if there were some advisors who were telling people to take it easy and go conservative at that time, waiting for the market to bounce back (because we all know market timing works . This is exactly why additional regulation of investment advisors is being considered. Today, for the most part, their only obligation is to recommend "suitable" investments. If they can meet that very small hurdle, it's OK if they are more concerned with how they benefit than if you will benefit at all.
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haapai
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Post by haapai on Mar 23, 2016 21:54:13 GMT -5
1999 was the year when my grandmother started planning for entering an assisted living community. When my father and my uncle started looking at her portfolio, they were somewhat horrified to find that she had been talked into tech funds. (She was about 85 at the time.)
The tech funds got gifted to the grandkids in part of her medicaid spend-down. I seem to remember one quarter of growth and then a rapid loss in value. It was not a nice introduction to investing, but since the whole thing was a gift, I can hardly complain. I cashed out most of the funds to keep afloat during a period of unemployment. My brother claims that he used the funds as a down payment on his first house but I've never pressed him for the date on which he cashed out or how much he gained or lost. My cousins received similar amounts and don't talk about it at all but that might be because they cashed out immediately to pay for college, pay off student loans, or pay off the lawyer who specialized in fighting possession charges.
Basically, grandma's gift cleaned up a whole lot of stupid and made us all low-fee index fund geeks.
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beergut
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Post by beergut on Mar 24, 2016 0:21:52 GMT -5
I met with a client recently who started saving/investing in the year 2000. Fresh out of college and in her first job, she took the advice of an advisor at a bank, opened a Roth IRA, and began having a small amount of money withdrawn from her checking account each month to be invested in two mutual funds. No problems so far. The only issue is the two funds they put her in were bond funds, one with class A and one with class B shares. So, not only is she in funds that were completely inappropriate for her age and risk tolerance at the time, they also had heavy load fees. 16 years later, I'm wondering WTF her advisor was thinking, unless it was about his commission. I do have a question, though: Any of y'all start investing with an advisor's guidance in 1999-2000? This was when the e-commerce bubble burst, so I'm wondering if there were some advisors who were telling people to take it easy and go conservative at that time, waiting for the market to bounce back (because we all know market timing works . This is exactly why additional regulation of investment advisors is being considered. Today, for the most part, their only obligation is to recommend "suitable" investments. If they can meet that very small hurdle, it's OK if they are more concerned with how they benefit than if you will benefit at all. Are you referring to the current Dept of Labor/Elizabeth Warren crusade? Her issue is with non-cash compensation, like trips for top sellers. If you're concerned about an advisor having a conflict of interest in the products they sell, use a fee-only advisor, so you're only paying for their advice, and not the products they have.
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Wisconsin Beth
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Post by Wisconsin Beth on Mar 24, 2016 7:34:03 GMT -5
I started my IRA in 1997, I think it was. I think with my bank. I was given stuff to review and never did so it was basically a savings account interest rate. I still haven't hit $10K yet. I did roll it over a few years ago. I hope you put it into something more aggressive than a money market account after the rollover yep. Most of my retirement money is in my 457b aka deferred comp. And the pension fund was fully funded as of the 2015 actuary report so I don't do much with the IRA.
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nogooddeed
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Post by nogooddeed on Mar 24, 2016 8:01:08 GMT -5
I'd love to hear any advice you'd be willing to give about financial advisors. I ended up with the one I have now through attrition. I'm not very happy with her thus far. What should I be looking for? You don't really need an advisor. Keep it simple. Go with two funds - an S&P 500 stock index fund and a total bond market index fund. You can get both at Vanguard (no I don't work there). I just like Vanguard because they have steady performance with low fees. Since you would invest in index funds, fees had better be low due to the index nature of the funds.
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zibazinski
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Post by zibazinski on Mar 24, 2016 8:42:12 GMT -5
I like my Schwab guy, a lot. He moved me into other things before the last issue because he said he knew it was coming. He's not brilliant so if he knew, so did the others but sold their clients down the river.
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Deleted
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Post by Deleted on Mar 24, 2016 9:17:16 GMT -5
I like my Schwab guy, a lot. He moved me into other things before the last issue because he said he knew it was coming. He's not brilliant so if he knew, so did the others but sold their clients down the river. He may have had good insights but it was a bit of a lucky guess. It always is, no matter how good they are. I really doubt any advisor said to himself/herself, "The market's gonna go onto a nosedive but I'm gonna keep telling the widows and orphans who trust me to buy, buy, buy".
I always hesitate to post in these discussions because I have an advisor. There. I said it. I do have $400K in Fidelity that I manage on my own but the bulk of it is at UBS with and advisor I followed from Morgan Stanley (and followed from Edward Jones to Morgan Stanley). I love investing- I've been doing it since I was 19. I understand compound interest. I follow financial news. I've dealt with bozo "advisors" who knew less about investing than I did, but this guy is a good sounding board, has good insights and I'm going to keep him.
Having said that, I am gradually simplifying the investments. The portfolio at UBS is over $2 million and I don't want to make sudden changes, but I'm getting out of mutual funds as they start underperforming simple indices and into ETFs. I play with a few individual stocks, most of which have done well, and have some such as Apple and BRK that I'm in for the long run.
There's a place for advisors. Plenty of people don't understand investments, don't want to deal with them, and it doesn't help that advertising by brokerages and "wealth managers" make it look too hard. My parents now have a managed account at Fidelity. Dad has been investing even longer than I have but he and Mom are in their mid-80s and Mom would be totally unequipped to deal with investments if Dad were gone, even though she's smart and still has all her marbles. Dad keeps an eye on things regularly but even he has handed over the reins to someone else. In my case, I like a second opinion and I can afford to pay for it without jeopardizing my finances.
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ArchietheDragon
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Post by ArchietheDragon on Mar 24, 2016 9:26:34 GMT -5
she took the advice of an advisor at a bank This is all you need to know.
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Post by The Walk of the Penguin Mich on Mar 24, 2016 10:21:15 GMT -5
When I left TX, I had 0 investment knowledge. Up until then, my retirement plan was a pension, which was not under my control. When I left that job, it was not to my benefit to keep the money there as I would not have even gotten back MY investment as a pension (it really was a minimal amount, about $400/mo). It was a pretty good chunk of change, more than I had ever had control over in my life. However, I knew that I couldn't go into this blind. If you do ANY reading in the least, there are a few investment firms that rise to the top and the one piece of advice that you hear over and over is to NOT put your investments in a bank. So I parked my rolled over pension in TIAA's money market fund while I researched what my options were. I figured that the minimal amount of interest that I was making there (I think at the time it was about 3-4%) was better than losing the whole damn thing to bad investments or fees. It took almost a year for me to figure out what to do with it, and I lost about 8% (difference between what I could have earned on this vs what I actually earned). What I've done with it is not too bad - it's worth roughly 4x what I deposited back in 2000 (or it was the last time I looked.....I've not looked in awhile. )
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Tiny
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Post by Tiny on Mar 24, 2016 10:33:02 GMT -5
she took the advice of an advisor at a bank This is all you need to know. I suspect the advisor at the bank probably asked about risk tolerance - maybe even had them do a little 'quiz' to give it some sort of definition. I bet the young women in the example was very risk adverse (due to lack of knowledge/experience) so the 'script' the advisor was following indicated the choice of the bond funds. The advisor may or may not have been inclined to try assuage the fears of the young woman about 'risk'. After all you can lead a horse to water but you can't make them drink.
I imagine that's what happened because a very cautious, risk adverse friend confided she opened an IRA at the local bank and that her money was 'invested in' long term CDs... because she felt it was better to NOT ever loose money. She couldn't deal with the idea that if she invested 2K someday she might have a balance of less than 2K - she'd rather just have the 2K. I mentioned that 2K 10 years from now wasn't worth as much as 2K today (inflation) and she looked at me like I had two heads.
It's all about knowledge and one's level of risk tolerance - which changes over time.
Back in the late 90's I was already contributing to a 401(k) (and had been for some time) I was aware of "diversification" but didn't really bother to learn much about what that meant... so I opted for a 'shot gun' approach and had some money in one fund in each of the "categories" of funds available. I know in the 2000's I got way more interested in how my money was being invested and started trying to make more informed decisions about where the money was invested.
I wasn't really cognizant of the "tech bubble" or any of the other "bubbles" - as I didn't really check my investment balances more than once a year back then. there were some years when my balances only went up alittle and other years when they went up a lot. Since I didn't see my balance plummeting it didn't inspire me to change/learn more.
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Post by Deleted on Mar 24, 2016 14:07:22 GMT -5
I suspect the advisor at the bank probably asked about risk tolerance - maybe even had them do a little 'quiz' to give it some sort of definition. I bet the young woman in the example was very risk adverse (due to lack of knowledge/experience) so the 'script' the advisor was following indicated the choice of the bond funds. The advisor may or may not have been inclined to try assuage the fears of the young woman about 'risk'. After all you can lead a horse to water but you can't make them drink. Not only that, they can get into deep trouble if they encourage a risk-averse person to be more aggressive and get into stocks. The first market downturn, the client will be back screaming, "What happened to my money?" I agree with Arch, though- a bank is not a place to go for investment advice. My Dad tried REALLY hard to start up a second career as a financial advisor for a reputable brokerage. An older couple walked in one day asking about various types of investments and Dad led them through the features of each type. When he called to follow up, they said they were keeping the money at their bank. When their CDs expired and they wanted to take the $$ out to invest, the nice lady at the bank told them to go to a brokerage and talk with someone about investment alternatives, then when they knew what they wanted she could sell it to them.
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beergut
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Post by beergut on Mar 24, 2016 14:49:00 GMT -5
This is all you need to know. I suspect the advisor at the bank probably asked about risk tolerance - maybe even had them do a little 'quiz' to give it some sort of definition. I bet the young women in the example was very risk adverse (due to lack of knowledge/experience) so the 'script' the advisor was following indicated the choice of the bond funds. The advisor may or may not have been inclined to try assuage the fears of the young woman about 'risk'. After all you can lead a horse to water but you can't make them drink.
I imagine that's what happened because a very cautious, risk adverse friend confided she opened an IRA at the local bank and that her money was 'invested in' long term CDs... because she felt it was better to NOT ever loose money. She couldn't deal with the idea that if she invested 2K someday she might have a balance of less than 2K - she'd rather just have the 2K. I mentioned that 2K 10 years from now wasn't worth as much as 2K today (inflation) and she looked at me like I had two heads.
It's all about knowledge and one's level of risk tolerance - which changes over time.
Back in the late 90's I was already contributing to a 401(k) (and had been for some time) I was aware of "diversification" but didn't really bother to learn much about what that meant... so I opted for a 'shot gun' approach and had some money in one fund in each of the "categories" of funds available. I know in the 2000's I got way more interested in how my money was being invested and started trying to make more informed decisions about where the money was invested.
I wasn't really cognizant of the "tech bubble" or any of the other "bubbles" - as I didn't really check my investment balances more than once a year back then. there were some years when my balances only went up alittle and other years when they went up a lot. Since I didn't see my balance plummeting it didn't inspire me to change/learn more.
We had already had a discussion about risk tolerance. She has no problem with risk, and understands that the market fluctuates. This advisor didn't ask about risk tolerance, and put her into an improper investment for her age and tolerance.
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Wisconsin Beth
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Post by Wisconsin Beth on Mar 24, 2016 16:32:45 GMT -5
This thread did spur me into digging into my pension fund health, etc and to play with the pension estimate function.
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