One Size Does Not Fit All For Financial Advice

Many years ago someone came into my office as a perspective client.

"I want to buy stocks" they told me "but I don't know what stocks to buy or how to buy them. Also, could you please explain how you know when to sell them?"

I suggested to this person that they were probably a much better candidate for mutual funds as opposed to building a stock portfolio, but I told them that if they demanded that kind of help they should seek out a stock broker.

Their reply just floored me. "I don't want to have to pay anyone. I can do it myself!"

Obviously not.

All too often I read financial blogs written by non-professionals who advise their readers to forgo paying for professional financial advice. They tout mantra's such as Buy No-Load Funds and Invest in Indexes. I can not argue with them; they are right – as long as you know how to do it yourself.

The other day I came across an article by the Russel Kinnel , Director of Mutual Fund Research at Morningstar (perhaps the most well known investment research group) titled Meet the 10 Most Redeemed Funds: Should You Stay or Go? It is a great look inside ten funds which are currently experiencing net redemptions. That is, more money is coming out of the funds than is going in. Like rats leaving a sinking ship, that can be a bad sign. Mr. Kinnel shows us a few cases where he sees this as a warning to flee but others where he thinks opportunity lies ahead.

Reading the narrative helps you realize that there is a lot more to building an investment portfolio than just buying no-load indexed funds or scanning performance and expense charts. Some of the funds he discusses are no-load indexed funds. Others are not.

Like custom tailored clothing a well designed investment portfolio is designed to fit your needs, not an off-the-shelf model. If you are not comfortable doing it yourself, then there is no reason not to get professional support.

tailor-2 by Jin Aili

Comments

[dimes]

That title looks strangely familiar. ;-) Seriously though, you know where I stand on this issue. Would you rebuild your car's transmission by itself? Rewire/add a bathroom to/renovate your house on your own to avoid paying someone else to do it? How about removing your own spleen? How many men perform successful C-sections on their wives?

[Art Dinkin]

Dimes, I know you have written on the topic and that we agree with one another. Did I unintentionally copy your title?? Apologies if I did!

[Compliance Nazi]

Well boys, it would seem that you postualte "do it yourselfer's" are doomed without your wisdom. Are you stipulating that you have devine insight that isn't avaiable to the masses? If so what happened to the Random Walk Theory? What is it that you can invest in that provides better results than what an individual can? Tell me what will the market look like on _____ date? If you can't tell me, what professional insight do you have that others can't? Speaking of wiring, isn't Art an engineer by trade? Let me guess they taught Fundamental Analysis in the engineering college...or is Art self taught?

[Art Dinkin]

Compliance,

Do it yourselfers are not doomed. Many, many people take the time to learn how to invest on their own and do a great job. The very fact that you know what the Random Walk theory is tells me that you know more about investing than most.

I offer no crystal ball. My service is to develop and implement a sound financial plan. I wrote just last week that I am a financial planner, not a money manager. I am not trying to beat any particular standard or benchmark. My goal is to design a program which provides the financial resources for my clients when they need them.

My only point is that if you are not comfortable doing this on your own, or just don't want to do it on your own, then there is no reason not to pay for assistance.

Oh, and yes, my undergrad work is in engineering. The business education came later. :)

Thanks for your comment. I proud to provide a forum for discussion.