How Do You Manage Your Investments

Discussion in 'Off Topic' started by misman, Apr 26, 2012.

  1. misman
    Original Member

    misman Gold Member

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    I've been with my current Financial Advisor for close to 7-years now, and am considering a change for a multitude of reasons. I have chatted with some friends that were willing and thought I would bring my question to my MilePoint friends. First, a little background.

    I rolled an old 401(k) out of an employer several years ago so that I could have more options for the investments. If your 401(k) is anything like mine, the investments are generally HORRIBLE, and you don't have a lot of choices. It is not a lot of money, but represents about 25% of my net worth. The investments haven't done as well as I like, but I understand I'm not alone; I'm almost back to my May 2008 balance! (I could have made a few thousand Kiva loans and probably gotten a better return!)

    Anyway, my FA will call me and suggest that we sell stock X1, X2, X3, etc. and invest in Y1, Y2, Y3, etc. I'll take a look and tell him what to do. This happens about once per quarter unless there is something unusual to take advantage... for example, I've had three discussions in the past couple of months!

    Again, I'm considering a change and have interviewed a few FAs that were referred by friends. The interviews continue, but I'm beginning to understand that there are the following investment management styles.
    1. Self-managed
    2. Managed with an FAs advice
    3. Solely managed by an FA; the "hands-off" approach.
    I currently self-manage my non-retirement portfolio, and my IRA is managed with an FAs advice. One of my wealthier friends has connected me with an FA that would fall into #3... and seems willing to take on little 'ole me as a client. To be honest, #3 is completely new territory for me. I've talked to a few friends that use that style, and they are happy overall.
    The feedback I'd like to get is
    1. Which investment management style do you use?
    2. What do you like about it?
    3. What do you dislike about it?
    4. Any related discussion
    tondoleo, jbcarioca and MissBurrill like this.
  2. jbcarioca
    Original Member

    jbcarioca Gold Member

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    FWIW, I have tried all the options. I have never consistently matched the overall market, much less bettered it, with either pooled investments (Mutual Funds or Hedge Fund, both of which I have used). The fund managers have done very, very nicely indeed.
    Using a dedicated single manager has produced the worst returns of all for me. IMO it is because they gain compensation for volume, whether that is admitted or not, so it is quite hard to overcome the costs implicit in their decisions.

    I continued with these options until about 2005, when i compared the 20 year history of each option and realized I have beat the amrkets only with my own choices, and actually had lost money on all the others.

    I then closed all the other accounts and entirely have self managed my portfolios ever since, with the exception of a relatively small amount I hold in a Brazil index fund. Since taking everything myself I have consistently beat inflation and the markets. This is not an option for the faint-of-heart nor for people who are not inclined to do a lot of work. I average about 30 hours a week working on this, somewhat compensated by the fact that I know run portfolios for several other people. Those people, however, have the same problem I did; it is not easy to make money after you deduct the management fees. I have told each of my investors that in very, very explicit terms but they still give me their money to run. So far they are not losing money and are net gaining vs inflation, but not always with the market on the upside.

    So, I think most people are best off doing it themselves if they're well disciplined and if they ignore the self-serving risk profiles investment managers make, and decide for themselves how much volatility they will accept. The Benjamin graham approaches have rarely lost anybody money, but they also don't let you gain in booms. I am not fond of booms.
    tondoleo likes this.

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