Financial Question

[preach4bass]

I currently have a financial representative (nice guy) who handles my Roth IRA.  Currently, I am putting everything into Dodge & Cox mutual funds (50% in their International Fund, 50% in their Stock Fund).  My financial rep. (and the company he works for) get .9% of everything I invest.  Dodge & Cox makes it possible to have my IRA with them.  They handle everything from a monthly drawl, to sending out statements, to answering questions about future planning.  What are the advantages/disadvantages of bypassing the middle man (my current financial representative) and just dealing with Dodge & Cox directly?

[Root beer]

You're just paying someone else. How much? I don't know. You will have to look up their fees. I bypass a middle man as well. I pay my brokerage account whenever I make a trade. Otherwise I pay nothing. I have been trading stocks, options, and some bonds on my own since the age of 19. Of course my accounting education made it useless to hire someone to handle my money since I can interpret the same stuff as them. They definitely have more time to research, but I do fine without. It not for everyone. Sometimes it just worth the fees of an advisor. I just don't feel the need to have one. It's one of the benefits of having friends in the industry who passes information regularly. Lol

[Quillback]

You definitely don't need the financial advisor if you're going to buy the funds direct.  You can also buy directly from other mutual fund companies, so you don't need to limit yourself to Dodge and Cox.  You should also be aware (if you don't know this), Mutual fund companies like Dodge and Cox will also charge you an annual maintenance fee, so you're paying the middle man, and you're paying Dodge and Cox.  Fees can vary according to what fund you invest in, usually if you do a search on a specific fund you can find out what the fee is.  It's also in the prospectus which you should be able to see online.

 

Money magazine is a great source for basic info on investing in mutual funds.  So is Smart Money magazine.  If you don't mind doing a bit of research you'll quickly find out that you don't need the financial advisor. 

[Marty]

I know nothing about the Dodge and Cox fund family, but it wouldn't hurt to compare their fund performance and management fees to those of other fund families. Fees compounded over the years can add up to big $$$.

 

As to the advisor: consider this silly hypothetical situation: suppose you had $100,000 and for 30 years it never made or lost a penny. Each year you're paying the advisor $900 so over the course of 30 years you'd have paid $27,000. You'd have to examine if it's worth it, i.e., what value did you get for that payout?

 

I see three options offhand:

 

1) Stick with the advisor

2) Drop him and be your own financial advisor if you have confidence in your financial literacy

3) Drop him and see a fee-only advisor once or twice a year to review your portfolio for proper asset allocation and other matters

[flyfisher]

It also wouldn't hurt to take a class or seminar on the basics of investing. There are a lot of nuances and data that you can use to make informed decisions.

[SirSnookalot]

I've been an investor for 40 years and I've done it both ways.  I've made some good investments on my own, but some bad ones too.  To do the research on your own takes a lot of time and knowledge, blind squirrels do fine a nut once in awhile.  I personally no longer manage my own portfolio, I'm in my brokerage's managed accounts, at times I do resent the performance and fees, but in the long run I'm probably right about the same.  I'm for letting the professionals do it, my broker eats sleeps investing 7 days week 12 hours a day, he may not always be right, but more right than wrong.

[tyrius.]

If your advisor is only putting you into two funds that he doesn't manage then you're better off directly investing into the Dodge & Cox funds.  Your advisor should be telling you why your only invested in those two funds and should be looking for better options for you.  That's what he's getting paid to do.  It sounds like he's just taking your money and giving you nothing in return for it.

I currently have a financial representative (nice guy) who handles my Roth IRA.  Currently, I am putting everything into Dodge & Cox mutual funds (50% in their International Fund, 50% in their Stock Fund). 

[Root beer]

It also wouldn't hurt to take a class or seminar on the basics of investing. There are a lot of nuances and data that you can use to make informed decisions.

 

Flyfisher, I don't think you meant technical data, so I'm just going point out something interesting about data. I believe nothing beats a good ol' fashion financial statements and its explanation. I scoff at the idea of technical traders using fancy math formulas to predict the price of the stock. As long as the company is operating in green and its services/products are looking good in the future, and you have patience everything will work out. The market is flooded with irrational investors. Apple has no long-term debt, pays dividend and yet its stock has been in steady decline in recent weeks. It could be there simply not enough investors to buy the sales order and Apple is too hubris to do a stock split. Or maybe they believe the competition is getting better and the cheaper alternative is starting to beat Apple. My point is, data isn't everything.  Basic investing just teaches you the terms, but it takes some experience and some in-depth knowledge to develop a criteria (to picking investment) and understanding of information.

 

So many people out there have no clue what they're doing and that draining a lot of prices, and there a lot of day traders who just wants to make daily profits by buying and selling in the same day. It's just stupid. No one cares about fundamental anymore, well, they do but the irrational investors are the majority and rational investors are the minority, in my opinion. I call the technical traders irrational.. Using math formulas to predict where stock will be rather than using fundamental is irrational. Because fundamental data will come out of nowhere and make your math formula useless, math doesn't account for that.

[flyfisher]

Flyfisher, I don't think you meant technical data, so I'm just going point out something interesting about data. I believe nothing beats a good ol' fashion financial statements and its explanation. I scoff at the idea of technical traders using fancy math formulas to predict the price of the stock. As long as the company is operating in green and its services/products are looking good in the future, and you have patience everything will work out. The market is flooded with irrational investors. Apple has no long-term debt, pays dividend and yet its stock has been in steady decline in recent weeks. It could be there simply not enough investors to buy the sales order and Apple is too hubris to do a stock split. Or maybe they believe the competition is getting better and the cheaper alternative is starting to beat Apple. My point is, data isn't everything.  Basic investing just teaches you the terms, but it takes some experience and some in-depth knowledge to develop a criteria (to picking investment) and understanding of information.

 

So many people out there have no clue what they're doing and that draining a lot of prices, and there a lot of day traders who just wants to make daily profits by buying and selling in the same day. It's just stupid. No one cares about fundamental anymore, well, they do but the irrational investors are the majority and rational investors are the minority, in my opinion. I call the technical traders irrational.. Using math formulas to predict where stock will be rather than using fundamental is irrational. Because fundamental data will come out of nowhere and make your math formula useless, math doesn't account for that.

I am with you on this one.  I probably should have worded it differently because there are a lot of people that you could hand a balance sheet and they would have no clue how to interpret the information.

 

One of the best pieces of advice i ever received was find a product you like and use and buy the stock associated with it.  One good example for me was USAT.  At work they installed the credit card accepting vending machines.  I said that is pretty cool stuff so i looked at the name on the device and looked them up.  I bought a couple hundred shares a few years ago just to see at a little over a dollar a share.  Today's price is $2.40.  Now i didn't make a ton of money due to the low initial investment but i don't think anyone would complain about doubling your money in 2 years.

 

I am just hoping for a split and continued growth.

[SirSnookalot]

 

 I said that is pretty cool stuff so i looked at the name on the device and looked them up.  I bought a couple hundred shares a few years ago just to see at a little over a dollar a share.  

I believe that's from the Peter Lynch philosophy of investing (Magellen Fund) buy what's popular in your everyday life, not remotely close to what he said, but that's idea.  Soon after buying my first computer in the early 90's I see 2 words plastered all over the place, Microsoft and Intel, I bought them, a few years later Apple was the name, bought that.  I won't bother with the losers.......lol.

There are a ton of technical analysts and investors with great track records, a system as bit complicated for me.  I've always done my research based on fundamentals, but that isn't perfect either.  Growth stocks can turn into value stocks, still have a great balance sheet, yet sometimes a their stock goes no where for years, case in point MFST.

[Root beer]

I believe that's from the Peter Lynch philosophy of investing (Magellen Fund) buy what's popular in your everyday life, not remotely close to what he said, but that's idea. Soon after buying my first computer in the early 90's I see 2 words plastered all over the place, Microsoft and Intel, I bought them, a few years later Apple was the name, bought that. I won't bother with the losers.......lol.

There are a ton of technical analysts and investors with great track records, a system as bit complicated for me. I've always done my research based on fundamentals, but that isn't perfect either. Growth stocks can turn into value stocks, still have a great balance sheet, yet sometimes a their stock goes no where for years, case in point MFST.

There is some truth in the fundamental flaw. I've lost nearly 60% in fundamental. It got offsetted by 109% in gain by oil.

[SirSnookalot]

There is some truth in the fundamental flaw. I've lost nearly 60% in fundamental. It got offsetted by 109% in gain by oil.

Rootbeer, I appreciate some of the knowledge you have obtained thru your schooling and have shared with us.  If I'm not mistaken you are about 19 or 20 yo, which would indicate a fairly short history of investing.  Considering the Dow has risen from 6547 to nearly 14000 in exactly 3 years a chimpanzee with a dart board would have been successful, in fact that was done in the dotcom era.  If I remember correctly the ape outperformed some out the Wall Street gurus.  Over time it ain't always this easy, why do think I'm bald, lol.

[Root beer]

Rootbeer, I appreciate some of the knowledge you have obtained thru your schooling and have shared with us.  If I'm not mistaken you are about 19 or 20 yo, which would indicate a fairly short history of investing.  Considering the Dow has risen from 6547 to nearly 14000 in exactly 3 years a chimpanzee with a dart board would have been successful, in fact that was done in the dotcom era.  If I remember correctly the ape outperformed some out the Wall Street gurus.  Over time it ain't always this easy, why do think I'm bald, lol

I never said it was easy. I spent hours reading and researching before buying stocks, then hope it paid off. I put a lot of hours and sleepless nights reading through pages and pages of information that companies I invested in released. I figured out ways to manage risks, I taught myself a lot. I taught myself so much that when I finally had to take a finance class, I was bored as crap. I made a 96 overall in that class. I spent 90% of my time in that class staring at beautiful sorority chicks. The only subject that kept my interest and were difficult were accounting classes. I was bored in finance, management, economic, and marketing classes. I'm 23 years old with 4 years of real time investing and financial analysis. There is not many kids my age that can lay claim to this.

 

I like to think people with experience has learn from their own mistakes while the wise learn from others' mistakes. I cannot remember where I heard this quote and it's not the exact word-for-word, it's real close though. I learn from others. And I guess I learned from my own mistakes as well.

[Marty]

Here's one from Winston Churchill:

 

"All men make mistakes, but only wise men learn from their mistakes."

 

And a couple of anonymous:

 

"Learning from your own mistakes is smart, learning from others mistakes is wise.Not learning from either is foolish..."

 

"Live and learn from others mistakes, you cant possibly live long enough to make them all yourself..."