Wall Street needs your money!

They want to keep your money in motion, they want you to trade, they want you to use their layers and layers of services.  Wall Street wants you to have as many middlemen in the process as humanly possible.  Each of these middlemen takes a cut or small percentage of your portfolio.

Here is the bottom line:  if you want to retire early or with significant money to maintain your lifestyle, you need to eliminate as many middlemen as possible from your investments.  This will enable you to get your “fair share” of returns over time. I encourage you to turn off CNBC, Bloomberg or Fox and watch this 54 minute video.  Your retirement will thank you in 10, 20 or 30 years. Keep in mind:

1. The #1 avoidable problem for most investors is “bad investing behavior”.  This includes trying to time the market and active management.  Often times, investors are their own worst enemy.
2. The #2 avoidable problem for most investors is “less than optimal strategy for asset allocation and too many fees”.  Even if you have low fees, you may have a less than optimal strategy.
   • Many investors don’t know how to calculate their total cost of investing.  If you use a broker like Merrill Lynch, UBS, Fidelity, Morgan Stanley, Wells Fargo, Ameriprise, Edward Jones or others they don’t make it easy to identify your fees.
   • The above firms typically don’t make it easy to monitor your performance on a quarterly or yearly basis against industry benchmarks.
3. If you have the passion for investing, significant discipline in tough times and are willing to learn about the science of investing/ asset allocation, you might be a good do-it-yourself investor.  Most people need a coach and 90% of people think they are an above average driver!
4. If you need help, in my opinion, you should only hire a fee-only advisor (not fee-based, not a broker or not an insurance rep) and this person should agree to be a fiduciary for you 100% of the time.  They should be low-cost and have a solid approach for asset allocation using low-cost index funds/ ETF’s or factor investing with a company like Dimensional Funds (DFA).
5. Passive investing doesn’t just mean indexing or buying the S&P 500 or a total market portfolio.  In my opinion, there are more optimal ways to build a long term portfolio.  Check out some books by Larry Swedroe, William Bernstein, David Swenson and others.

Don’t take my word for it!  Watch this great video from Sensible Investing and you can learn from John Bogle (Vanguard), Charles Ellis (Yale), Ken French (Dartmouth), Eugene Fama (Nobel Prize – University of Chicago), Bill Sharpe (Noble Prize- Stanford), Rick Ferri, William Bernstein, David Booth (Dimensional Funds) and many others.

Good luck.  Click here to subscribe to my blog

Passive Investing: The Evidence the Fund Management Industry Would Prefer You Not to See — copyright Sensible Investing

Photo credit: Lendingmemo

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