Let’s get this out of the way first: this is a post targeted more towards advisors and was inspired partly by a conversation on Twitter. Nerdy terms and opinions will follow. What this ISN’T, is an attempt to offend anyone at Riskalyze, or its users – both groups are trying to do what they think is best for clients (just like I am). Assessing risk tolerance is an absolutely vital, and legally required, task among RIAs, but how we get there is a point up for debate. Risk tolerance software is all the rage right now, but I’m not sold on its advertised use case. From my view, the software is treated more as a means to generate “sales” and also …
Note to a Young Professional
“Simplicity is the ultimate sophistication,” da Vinci told us. I agree. I was inspired to write this post as a sort of open letter to younger professionals, but it’s applicable to any investor with important financial choices coming up soon. — By chance, I ended up playing golf with a well-known, younger guy from Seattle as the course was backed up by slow play yesterday (shocker!). He’s in a profession where he’s just starting to make a very large salary and his financial future is bright. You might ask: “you’re an investment advisor, you gave him a business card, right???” I didn’t. Not even one of my cheesy custom tees. I treated it like he was just another golfer. I figured he was …
Pick Two (401k Edition)
…you can’t have the other. Sadly, and even with the recent proliferation of indexing, most workplace retirement plans are just not very good. Combo 1: For most people it’s very possible to get a diversified portfolio at work, BUT, it’ll likely have elevated fees because the custodian of the plan has pumped the plan full of mutual funds that either give them a kickback on fees for the pleasure of being on the menu, or they’re proprietary funds so they keep ALL the expenses. Lovely, eh? Combo 2: For those with some low-fee options, I’ve noticed that these choices are usually limited to a single US large-cap equity index fund and a cousin for international equities, so these folks are stuck …
Nowhere to Hide
Let’s say you’re a big football fan. Earlier this year, in May, you picked a Sunday this month to see your favorite NFL team play. There’s only 8 home games every year so you decided to pick a September game and shelled out a fortune to see your team play. You figured it would be the best chance for good weather and a good experience. Well, guess what? – it’s now a soggy Sunday morning on gameday and the forecast shows a 99% chance of the torrential downpour to continue through the evening. What do you do? Option A – You could try to sell your tickets on the secondary market (at a big loss) while also risking the possibility of both the forecast being …
Pick Two
…you can’t have the other.