What do you do in off season?

[veritas]

I sent

Thank you for the information, vertias. I have a few questions and hopefully can get your advice.

Since they are owned by Wells Fargo, do they sell retirement products of Wells Fargo too?

If I decide to join them, do I start with filing the pre-registration application to become an advisor?

They said once you have decided to be affiliated with the H D Vest, the first step is to "Choose an affiliation and compensation option". Do you have any advice as to what I have to pay attention to when I choose an affiliation and compensation option?

you a private message.

[taxea]

Taxes

My off season consists of dealing with IRS letters, amended returns, compliance returns, IA and OIC work.

[Roberts]

I own part of a broker / dealer and basically sell investments the entire year and taxes are generally a side business that includes my investment clients. If they have $x in investments through me, taxes are included in the fees. Makes it easier to coordinate everything and we meet every year to go over everything.

One thing I've noticed, brokers who KNOW they have all the assets for their clients are very sadly misinformed. As you all know, most clients with 1 brokerage account of any worth almost always have a 2nd or 3rd someplace else.

[JohnH]

Since the topic has turned to investing, as a confirmed Boglehead I thought it would be interesting stir the pot with this link:

http://finance.yahoo.com/news/What-the-Bogleheads-Know-for-ms-1453234133.html?x=0&.v=1

[veritas]

Keeping it simple

couldn't agree more. Timing the market=failure.

So the key question is "DIY" or have someone to help.

"DIY" case in point. Invested in fidelity for years. Sold entire portfolio after 9-11. Went back into the market at a higher cost and accumulated nearly one million in assets up until 2009 and then sold entire portfolio for 500k and moved to an annuity.

[PIGLEE]

I was always trying to find something to do, so did real estate in the summer, and some other things. When I hired a girl we started doing a lot more monthly bookkeeping to keep her busy, but then she learned to do taxes, and after a while we decided not to do bookkeeping and just stick to taxes, and have more free time in the summer. Well that worked well, and we were able to do more taxes, so we did not loose any income at all. Wished we had done it years ago. We are still busy in the summer getting ready for next tax season, and answering peoples questions, but most of all we have time to spend with our family's

[Roberts]

Since the topic has turned to investing, as a confirmed Boglehead I thought it would be interesting stir the pot with this link:

http://finance.yahoo.com/news/What-t....html?x=0&.v=1

I'd agree that trading and market timing are a failed philosophy but they are only sub-categories within the investment field. How many people are overly invested in one asset class? How many and completely UNDER invested? How many have difficulty understanding retirement plan options and a best scenario for them?

I used to visit Morningstar boards to discuss CEFs. I was amazed how many people were completely over weighted in real estate and high yield muni bond funds. I tried to explain that investing in 25 different real estate funds isn't diversification but they knew better.

If an individual investor wants to invest in muni-bonds, they are 5x more likely to buy a muni FUND than an individual muni bond because it's easier. It's FAR more riskier but they don't understand it usually. As an individual working with an online brokerage firm, try and buy some 5-10 year to maturity muni bonds. It's possible but it's like shopping at the quickie mart versus the full grocery store. The options are limited and the pricing stinks.

[JohnH]

You're right - improper allocation is probably the greatest mistake most people make. I think anyone can become a competent DIY'er (maybe even an expert, depending upon the size of their portfolio) if they'll take the time to study, absorb, & apply what's available for free from the top 3 B's of sound investing:

1) Bogle (John)
2) Buffet (Warren)
3) Brinker (Bob)

[Roberts]

You're right - improper allocation is probably the greatest mistake most people make. I think anyone can become a competent DIY'er (maybe even an expert, depending upon the size of their portfolio) if they'll take the time to study, absorb, & apply what's available for free from the top 3 B's of the investment world.

1) Bogle (John)
2) Buffet (Warren)
3) Brinker (Bob)

You routinely make an argument similar to this in every thread on investing. The same is true for tax prep. Anyone can be an expert at tax preparation if they just take advantage of the free material provided to them. Anyone could be an expert plumber, carpenter or electrician if they just utilize the material at their local library. Of course most people realize there is more to being an expert than reading the facts. It's the application of those facts into the real world and that takes time and serious expense.

And I'd have to ask, how does the size of a person's portfolio have a ramification on their potential to be an expert? The greater the amount of plumbing installed in my house doesn't really increase my chances of being a better plumber. All it does is increase the chances that unforeseen gaps in my knowledge will lead to serious problems down the road.

[JohnH]

Good question. I relate size of one's portfolio to the amount of time one should spend studying what to do with it. Since you brought it up, I'll try to explain. Obviously someone with $10K to invest needs to spend more time acquiring more to invest, wheras someone with $100K or $500K to invest will earn a higher return in total dollars by making wiser investment decisions. In other words, they need to consider the time invested in earning vs the time invested in studying investing.

The person with $10K to invest should spend 15 minutes reading "The Dream of A Perfect Plan" (John Bogle - March 18, 2000) spend 1 minute subtracting their age from 100 (or maybe 105), and put the result of that calculation into The Vanguard Total Stock Market Index and the remaining portion into a Money Market Account. (This assumes they have the proper amount of life insurance and an adequate rainy-day reserve already established)

As they accumulate more money to invest, they should continue to study & absorb "The Dream of a Perfect Plan" until they can recite it by heart (or if that's too much for them, then the first paragraph of page 2 is an absolute requirement). Then they can branch out by reading more of what Bogle says & writes, as well as what Buffet says & writes. As they begin to accumulate enough to purchase CD's and other similar but simple fixed-income components for that portion of their portfolio, they can always keep in mind that by simply allocating the Equity side of their portfolo to the VTSMI, they are 100% assured to equal the performance of the entire US stock market within 1%, and 80%-95% assured that they will beat the performance of all managed funds as well. That percentage will be valid for any random given year and will gradually increase over time due to the hard, cold, irrefutable mathematical fact that everything regresses to the mean. A pretty good guarantee in my book.

Who knows, if their income continues to rise and they follow this simple, understandable investment plan, someday they may even find themselves in the position to actually consider muni bonds, real estate, and other less basic forms of investment. And as they branch out, they will have accumulated a good understanding of the risks they are taking vs the potential rewards, provided they have continued to invest the proper amount of time in studying investing. Along the way, they will probably begin to absorb a comment made by Ben Graham many years ago - "In the short run, the market is a voting machine but in the long run, it is a weighing machine".

I like your plumbing analogy and will have to give it some more thought. I can't install plumbing, but I can use a plunger and I know what a vent stack is, as well as where all the cleanouts are in my laterals. I took the time to learn these things not because I aspire to be an expert plumber, but to help insure that I don't get taken to the cleaners when I have to call the Roto Rooter guy.

[Roberts]

Just wondering

I've read Bogle and have read Buffet and Graham far more extensively. They are great at equity investing but they don't get serious into life insurance, the importance of having an emergency fund, how much debt you should have at any given moment, specifics on retirement plan options you may be able to take advantage of... etc.

Fitness memberships have absolutely exploded in the US in the last 20 years and now stands at an $18 BILLION per year industry. With all that investment, Americans are getting fatter, not skinnier.

With all the readily available information you listed, Americans have been (until the last 18 months) saving next to zero dollars.

Instead of the guys you mentioned, I think people need to start reading what these guys have to say:

http://www.gsm.ucdavis.edu/ExploreOurSchool/index.aspx?id=1702

They don't disagree with the people you quote. They agree probably on everything. It's just cold hard facts instead of anecdotal references.

[JohnH]

I'd hardly call Berkshire Hathaway "anecdotal" anything. Same for Vanguard.

You're probably right about Bogle & Buffet not getting into the issues of insurance & emergency funds, but I guess they simply concentrate on what they know best. Bob Brinker does speak to these two subjects frequently on his program. Of course, common sense would indicate that anyone should maintain an emergency fund - some people simply differ on how large it should be under various circumstances. And I don't see insurance as being all that complicated either for the great majority of people. "Buy term & invest the difference" is a strategy that works every time, provided the individual actually follows through on the concept.

BTW, I couldn't get most of the links to work (except for the wine stories, which I didn't try because they don't interest me anyhow).

[Roberts]

I'd hardly call Berkshire Hathaway "anecdotal" anything. Same for Vanguard.

Berkshire Hathaway's investment model is in directly opposing views with that of Vanguard's. Vanguard's index model is that you own small pieces of many different investments. Berkshire Hathaway's investment model is primarily to buy ALL of a small number of investments and then leverage upon those to produce excessive investment returns. To in any way link the performance of the two is anecdotal evidence. Warren Buffet and his team are active investment managers.

Claiming buying term and investing the difference will win every time is wrong and if you were licensed and made that statement, you would be in SERIOUS trouble. It will generally win if you are willing to accept a list of assumptions. You mentioned one assumption and waived it off. There are many MANY more to make that a true statement.

[JohnH]

I link the two because both focus on the long term, both are advocates of not giving up your winnings to the croupier, and because both are wildly successful. It is only in focusing on the short term that their styles appear to be different to a casual observer. Or as Warren Buffett likes to say, "Price is what you pay, value is what you get". I tell you, that word "anecdotal" sounds really cool & dismissive, but it won't fly in this conversation.

No surprise that the insurance-industry dominated regulatory agencies would get my license pulled for making the "buy term and invest the difference" statement if I were under their thumb. After all, it's antithetical to their interests - they'd be fools to let me operate under such a principle. I have this discussion with my insurance agent frequently, and for the past 25 years I've told him that when Consumer Reports changes their mind about term insurance, I'll consider changing mine. Needless to say, I don't get any referrals from him, nor would I expect any.

[Roberts]

I have this discussion with my insurance agent frequently, and for the past 25 years I've told him that when Consumer Reports changes their mind about term insurance, I'll consider changing mine. Needless to say, I don't get any referrals from him, nor would I expect any.

First of all, whole life insurance is NEVER to be considered an investment. So when people compare the two it's idiocy from the very beginning because they are separate beasts. It's like people claiming they would get a better return on their own than being in Social Security. It's not the same beast.

Secondly, there are benefits to whole life that you need to put a dollar value on. For example, what happens if you get sick? With whole life you could qualify for MORE insurance whereas with term, you may be barred from renewing your policy when you most need it. What if you file bankruptcy? What if you have a special needs children? Whole life is a FAR superior plan than term in certain situations.

Lastly, in the last 10 years, even with the run up in the market of 50% in the last year, most equity funds would have underperformed a whole life policy. If you looked at it 9 months ago, it was an absolutely HORRIBLE idea to have bought term the previous 10 years.

I don't sell whole life. Never have sold a single policy in my 20 year career but I know the facts regarding it. That's my job. Sound bites don't equal a full education on the subject.