I have absolutely zero doubt I could charge $1,000 per hour and it would be a great deal for most affluent people, like they would save/make 10x on that investment. The people that realize that…don’t need me and would never hire me.
It’s a really hard business to be ethical in.
But if you owned the component funds, there would be no rebalancing, which I assume at least some of the value comes from.
I guess you would just rebalance yourself using subsequent investments.
I’ve actually got one of these in a retirement account. I only got it because it was the best option at the time and I just never got arsed up to change it when the investment options in the account improved. I probably would have changed it to Total Market, but I picked a distant retirement date that was pretty close to all STONK anyway, so I just put it off and forgot about it.
I am sure you would. There are plenty of regs in this thread that I’d pay a decent hourly to give me financial advice even though I think I have a decent handle on it myself.
Fortunately, for a lot of things I can just post it here and you all will get me sorted.
What kind of NW are you thinking of when you say affluent? Also how many hours a year are you thinking of? I’d imagine that after the first say 10 hrs, they would run into diminishing marginal returns pretty quickly. That is, you might easily be able to make them 10x on the investment for your first X hrs, but after that there is no new advice you could give them that would allow them to save/make 10X on the extra fees.
I’m thinking about your typical doctor/dentist/corporate executive type with something like one to five million in investible assets. These people are usually getting taken to the cleaners by some Morgan Stanley / Merrill Lynch type advisor. If you have $3 million with Morgan Stanley, you’re probably paying close to $50,000 per year in AUM fees plus unnecessary fund expenses, all to almost certainly underperform the market. Someone like that paying me $5,000 per year to invest their money at Vanguard, rebalance for them and keep them from panic selling would be the deal of the century for them.
Yeah, I agree 100%.
I just don’t understand how such people can light 50K or whatever on fire and not want to vomit.
3 million isn’t that much. Punting 50K should hurt.
Finding out about Vanguard was one of the most valuable lessons from grad school. I think I was sitting in on a behavioral economics lecture and the speaker was saying something like “the literature shows that you can’t do better than investing in Vanguard, but despite that people continue to pay for active management.” Had never heard about it before then.
I’m sure you would have inevitably discovered it when you had enough money where investment decisions needed to be made.
They don’t think they’re punting it, they think they’re paying to get better financial advice than peasants like me, you, and Riverman can ever hope to get - let alone provide!
I actually made my first investment in grad school. $3k in Vanguard’s S&P 500 fund. Never touched it until the end of last year when it had grown to >$20k (with dividend reinvestment).
I have no recollection of when or how I found Bogleheads/index investing strategy. I think it was a mix of a few influences that probably had me searching the web when I finally had a job/401K/etc.:
Knew nothing of my parents investment strategies growing up (and frankly still don’t) other than recognizing they (and their parents) were frugal while still providing everything we needed, spending for vacations, etc. - classic “live below your means” type stuff like driving a Toytoa/Honda sedan for 12+ years, clipping coupons, outlet store shopping, etc.)
A relative gave me this book when I was in HS. Don’t think it was exactly pure Bogleheads type stuff, but hit on main themes of LBYM, investing early/compounding returns, etc.
Same relative would give me “stock tips” and some of my early investing was in like Motorola and some other stock. Lost of “bunch” of money. Didn’t like it.
I still think you would have figured out index fund investing on your own. What do you think you would have done if you didn’t hear that comment? Invest in the Fidelity S&P 500 fund?
Yeah, but you should be able to show them some basic arithmetic that proves it’s a complete punt. Obviously there will be a lot of denial, but a significant percentage of them have to be smart enough to realize what they have done.
What’s that you say? I’m not beating the market? Wait, let me ask my guy. OK, he says that we’re in a bit of a down cycle but that our downside risk is lower if the market crashes and that’s the type of financial security that you peasants just don’t have! I can hook you up with him if you want…
One of the smartest guys I know once made a casual remark that he put all his 401k money in the fund with the best past performance. Smart people are dumb about investing.
Also, I just flipped on CNBC (I know) and some woman says to buy Berkshire Hathaway and sell Apple lolololol Berkshire is Apple’s biggest shareholder.
Me too. I know it was before I heard of Bogleheads or Vanguard but I’m not sure where the idea came from. I guess I heard it from a lot of different sources and it just made sense and stuck.
The funny thing is that if you were to ask me, I always knew that was the correct advice. However, I didn’t always follow it. I had too much gambool in me, I guess. I lost that as I got older, and I’m now I’m just a pretty vanilla investor. I have a lot of individual STONKS from back then (and they have outperfomed the indices), but I realize that it was just rungood and I have more or less stopped doing it. Every now and then I get the urge to take a shot at something that looks good, but I haven’t pulled the trigger in a long time.
The service providers disclose the fees but a doctor doesn’t know what it means. “Your account is up $200,000 since last year! Oh and at the end of this 10 page disclose document it shows where we took 2% out of your account.” “WOW! $200,000!”
Depending on the fund, this may well be better than whatever shit Morgan Stanley would do for him.
Also, I’d seriously reconsider whether he was really as smart as you think.
There is probably a rational case to be made for that line, but I’m sure they didn’t actually make it.
And now you can put that $20k in NFTs and be a millionaire next month.
I don’t think you should beat yourself up over it, since this wasn’t really a thing that people thought could happen until it did. Going forward, it’s probably a good argument for only owning ETFs in taxable accounts since you can’t account for what a mutual fund is going to do.