Should I transfer my investments to accounts managed by a Financial Advisor?

I’m not offering financial advice here, but rather an observation. You should become very informed about the basics of investing rather than burying your head in the sand and simply handing it off to the “experts” and hoping for the best. This is the biggest lesson I’ve learned.

I’m an obsessive seeker of truth. I also tend to get straight to the point. Here’s the premise of this article. Will a financial advisor that you hire beat the S&P 500 Index? Of course this is highly dependent on the company or advisor that you choose, but since they are likely to charge you 1 to 1.25 percent, they actually have to perform even better than the S&P 500 to match a low cost index fund tracking S&P 500. I highly recommend you calculate how this fee compounds or the life of your investment.

Now here’s a huge caveat. And unfortunately a downside of being a human with emotions and adrenaline. For the self directed investor, this is highly dependent on you leaving the money put and consistently (Dollar Cost Average) add money to your brokerage account. A little added to a little ends up being a lot over time. It’s important to know yourself on this. If you have trouble controlling your emotions when stocks go up and down the roller coaster, you may actually be better off with someone else managing your money. But if you do, make sure you understand what they are doing, how they get paid, how much are the fees. Don’t hand it off blindly and hope for the best.

What is the safest way to invest?

Do the 401k Match

If you are offered a 401k Roth, do the calculations on how this will affect your investing and taxes for years to come.

Bonds are some of the safest approaches so I’ll mention them. I don’t do them personally because I put a lot of my money in s&p 500 index funds.

I encourage you to do a search S&P 500 performance over the last 100 years. If you are young, you have a lot of years to build wealth as long as you stay on course. There are no guarantees of anything here, but I find the history of performance fairly compelling. I am close to retirement and still pour most of my money in S&P 500.

As far as diversity, S&P 500 is quite diversified. It’s 500 companies across various industries.

Much higher on the risk spectrum is individual stocks. I will definitely not be recommending any individual stocks.

Options/Shorts - Not for me.

Overall there’s way too much noise out there. Getting a good pile of money is quite doable if you can earn and save on top of living costs. Do a little bit of research and be informed. This is an area of your life that you should spend some time on since the compounding aspect of investing works best the earlier you start.

By the way, a simple tool for calculating the compounding effect on your investments is to understand the rule of 72.

Divide 72 by the average annual return rate. e.g 10%.

So: 72/10 = ~7

This means your money will double in about 7 years. In other words $100 growing at 10% annually will double in 7 years to equal around $200 dollars.

Cheers!