Investing -- DIY or pay someone?

[djmcmath]

It seems like there's a whole range of options, from truly DIY investing -- researching your own purchases independently, to paying a subscription fee to get access to someone else's information, to paying a personal adviser, to simply putting money into a fund that seems to meet your investing goals. I'm curious to hear where this group generally finds themselves.

Personally, I've historically kept most of my money in funds of one kind or another, whatever seemed hot at the moment. I've started trying to get smart recently, however, and am realizing that pretty much all of the funds that I could get have pretty comparable performance, and that virtually all of them follow the market (or ... not quite follow the market) pretty closely over the long haul.

Thoughts from the serious part time investment crowd here? What's your long term investment strategy?

Thanks,
Dan

[RWebb]

use ValueLine - your library should have a copy

THEY have a proven track record, unlike many others.

[ChkbookMechanic]

I fall into a blend of 'completely', 'sort of', and 'not at all' and have to say it is working for me, so I'm happy... unfortunately, it took longer to get to this happy blend than I would have liked.

[einreb]

I do not pay for investing advice at this point.

I am a huge fan of what Jack Bogle of Vanguard preaches. Its incredibly difficult to beat appropriately allocated index funds over the long term.

There is a lot of good discussion here...

Bogleheads :: Index

I think of it as a bit of a hobby and enjoy it. If you want to pay for it. First consider a fixed/flat fee service. For some reason folks think that paying $1000/year flat fee for investment advice is expensive and would prefer to pay the 'smaller' 1% of their $150k 'portfolio'.

[stomachmonkey]

I've tried them all.

Frankly I have time to manage or generate revenue, not both.

The guy I have now is sharp and I sleep soundly every night. especially the nights when I open my statements.

They are not all good though, ask me how I know.

[matthew-s]

I don't fall into any one bucket. I pay, but only indirectly, in that I use the free advice from my brokerage house. I also pass this advice past my brother-in-law for a 2nd opinion as he is a fairly serious hobbyist, and has his certified financial planner ticket (although he does not practice).

I don't have much to compare my performance to. My broker offered up doing "active management" for a fee, but they could not quantify how much better that would perform over their free advice. My brother in law agreed - since I'm investing in mutual funds, he stated "why pay twice, once to the fund manager, and then to the fund seller"? Just pick a mix of good funds that meets your goals, and stay balanced.

Now, if I got a very good / collaborated recommendation for a true manager, I'd be all ears. Especially someone that opened the doors to various hedging strategies etc. How does one avoid being lunch for the next Bernie Madoff? Don't ask me . . .

[Cajundaddy]

Your approach to investing really depends a lot on your goals, time frame, and risk tolerance. I know several people who are daily traders and make a pretty good living doing just that. I know some investment counselors who have made a lot of money for their clients and themselves. I also know several people who lost everything they own in the market.

Personally I don't play the market short term. I feel my odds are better in Vegas. I tend to buy and hold long term (10 years or more) individual stocks, mutual funds and Vanguard index funds and really only make portfolio adjustments once or twice a year. I avoid "hot stocks" like the plague because those are the only ones I have been really burned on by trying to chase past performance. I make all my own choices and trades but I do pay close attention to what Buffet and Bogle are doing.

[s_wilwerding]

My advice is to setup a one-time appointment with an advisor -talk to your friends/coworkers and go to a good one.

Then, go through with them what sort of investments you should have for what you are trying to accomplish - x% in bonds, stocks, gold, etc. Don't have them give you individual stock picks, just the general asset mix they would recommend.

Then, make a decision - if you thought their advice was good and trust them to make decisions for you, you might meet with them more regularly. If not, do your own buying.

[patssle]

I research the hell out of the stocks and that helps me find obscure stocks that generate nice returns. I've always held the thought that if somebody would make for a good investment adviser...then they themselves should be rich off their own advice.

[steve911]

Dan--
I work in finance, but fall into the category of 'don't have time to do my own research'.
I've always invested in mutual funds (no-load), so effectively I'm having someone else make the investment decisions. My diversification is having 8-10 funds with varying investment parameters.

Like others have said, what you have to decide is what is your risk tolerance and what is your time horizon. You can accept higher risk if you don't need the $$ for a long time.
FYI, I don't believe you're ever going to "beat the market", at least by much.

And NEVER, EVER invest all of your 401(k) solely in your company's own stock. In fact, I'd say not more than 10-20% tops. Do you want to put your livelihood AND your retirement all in one basket? I don't.

[Erakad]

I've lost money using all of those

[trader220]

Depends .... if you're just picking stocks or picking funds and you have the time and patience there are enough tools out there for you to do it yourself if you like. If you need a financial plan for the future including tax planning and estate planning then you might want to talk to someone. My 2 cents is that if your portfolio is substantial enough and you really want to be diversified and plan for your future there are pretty good people out there for that. If you're just talking about an account you have some capital in and thats not your future retirement or estate gig then do it yourself

[TheMentat]

I will second the "no-load"/"low fee" index fund approach for those that don't have the time or inclination to research for themselves. I spent my past life as an investment manager, and can tell you with certainty that most "money managers" cannot consistently out-perform these index funds, even if you ignore the fees they charge.

Once you factor in the fees, the vast majority of the industry has appalling results.

[lukeh]

If I'm sick I see a Doctor.

If I'm in legal trouble I get a lawyer.

If my tooth hurts I see a dentist.

If I need to accumulate 2 million over 40 years for retirement I get stock picks from guys on the Porsche boards and ask Joe the plummer for fund recommendations because I've seen Money Magazine in his truck. Sorry for the sarcasm...I just see this mentality all the time.

Actually I use a professional and we sit down every 6 months and he shows me how I'm doing compared to the averages (index). As long as over the long haul I'm beating the averages I figure he is earning his fee and I'm money ahead. I figure saving for the most important and expensive thing in my life (retirement) calls for an expert.

[patssle]

If I'm sick I see a Doctor.

Not anymore, that's what Google is for!

[Jrboulder]

Ha! Trading is a peice of cake!
I don't invest, its boring.
lets see I was in on PCX at 13.96 on wendsday morning, out this morning at 15.09
Thats 8.1% in 48 hours. Can your mutual fund do that in a year?

[djmcmath]

@RWebb -- Valueline? Tell me more. Is it the same as the web page, or is it a periodical that I should subscribe to?

@einreb -- indexing is a way to avoid underperforming at the cost of assured mediocrity. It assumes that the market really is efficient, and operates in complete ignorance of underlying fundamentals. If all information about equities really is publicly known and is instantaneously reflected in the price, then it is definitely futile to attempt to outperform the market. Warren Buffett has observed that "in any sort of a contest-financial, mental or physical-it's an enormous advantage to have opponents who have been taught that it's useless to even try."

@pattsle -- "I research the hell out of the stocks and that helps me find obscure stocks that generate nice returns."
--This sounds exactly like value investing. Can you offer any insight on how you narrow down the field? There are thousands of publicly traded companies -- how do you find the ones that are a good value?

@lukeh -- "I figure saving for the most important and expensive thing in my life (retirement) calls for an expert."
--Point well taken. How do you select a trustworthy expert? In my exposure to this industry, it seems like the "experts" I could hire are (a) no smarter than I am and (b) value their firm's interests over mine. To some great extent, financial advisers are indistinguishable from con men, persuading people to buy or sell financial products based on a perceived insider status. An adviser with a long term view of customer relations may seek to see me win more than I lose, but may also be perfectly happy advising me to lose if it means his company or another more valuable customer wins. Cynical? Perhaps.

@Jrboulder -- good play, nice work. How's the portfolio been performing for the last 5 years? I've made some excellent trades myself, but I realize in hindsight that I was really just getting lucky. If you have a long term DIY investment strategy that works, I'm interested in hearing anything that you can share about it.



So the follow-on question: for those of you who pay someone, can you recommend a service to which I could subscribe, or a group of professionals that's done you proud?

Thanks,
Dan

[Jrboulder]

I love using the RSI.
Because you asked, YTD: 66% up, Last year: 89% up , 2008: 72% up

[patssle]

@pattsle -- "I research the hell out of the stocks and that helps me find obscure stocks that generate nice returns."
--This sounds exactly like value investing. Can you offer any insight on how you narrow down the field? There are thousands of publicly traded companies -- how do you find the ones that are a good value?

Well, I read a lot about everything in general happening in the world...so whenever I see a company mentioned, I usually check to see if they are public.

But a great place to use is just Google Finance. Once I know about a company, the first thing I do is look at their financials, income, balance sheet, cash flow. Now I'm no financial expert, I don't know what all the numbers mean...but you can generally tell if a company is headed in the right direction. It's not 100%...but I've been pretty solid thus far on my stocks that wern't a gamble. And you also have to hope that the foreign companies aren't lying about their financials.

Being knowledgeable about world events and the world economy is a very big help - which requires a lot of time to read.

[RWebb]

both periodical & website
Value Line - The Most Trusted Name in Investment Research

you can read it thru for free at your local library (most of the ones where I've lived)

- I use it for stocks & esp. to assess valuation - good stories are fine but how much do you want to pay for the story?

For mutual funds I use a combo of Vanguard[1] & Fidelity[2] funds, + advice from people who follow the managers & have assest allocation models for 3-4 different timeframes.

search up prior threads - both Paul & I have discussed Vanguard before. He uses Index funds which are a fine choice and were championed by John Bogle, who uses index funds in his own taxable portfolio. I use funds from a select group of active mgrs. (see above), which are what John Bogle uses funds in his own non-taxable portfolio.

[1] Fidelity Monitor seems to have the best record, based on the Hurlburt (sp?) analysis of fund newsletters
[2] Dan Wiener, Independent Adviser for Vanguard Investors advises on Vanguard Funds

- note that several funds from both of them are closed to new investors (including some of my favorites); they all give alternate choices however

The easy & safe way is to use Vanguard Index Funds.

That said, I made the most money by investing tiny amounts of money in a few small cap stocks in a growth area (technology) and sitting on it for decades; they grew into large caps, and then came to dominate their industries, or at least the sub-sectors they operate in.

Last tidbit: NEVER use a stock broker who also gives advice. Discount brokers only & get your advice from someone with no conflicts of interest.