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Feb 19, 2009 8:18 pm

No load, no-expense, no wrap index funds are down 50 percent from their peaks, too; and this market has exposed the concept of non-correlated assets as academic fiction that only works when you jigger the assets after the fact.



Feb 19, 2009 8:36 pm

I don't believe he was asserting that no-loads and ETFs are immune from a downturn.

His issue is with fees and expenses that provide no value.
Feb 20, 2009 3:06 pm

I ran some numbers comparing Vanguard/annual fee vs. American Funds A shares using those guidelines and got this:

Vanguard Total Return Bond 70 pct, 500 Index 30 pct, 100k, since 12/01/1986. Auto rebalance. 1 percent annual fee. Grows to 395,644. .42 10-year beta. Total fees to broker dealer: 59,451.

Bond Fund of American 70 pct, Washington Mutual 30 pct, same. 3.5 pct initial charge, no annual fee. Grows to 452,010. .33 10-year beta. Total fees to broker, 3500 initially, plus trails (probably a quarter of 59451.)

Lessons: 1. We put too much stock in our portfolios. 2. I gotta get to a fee based platform!    
Feb 21, 2009 3:16 am

this one is kinda boring but pretty darn solid... pimco total return fund, 4.33 POSITIVE return in 2008. positive so far for 2009

Feb 21, 2009 5:26 am

[quote=iceco1d]Buy & hold isn’t the problem.  Buying the wrong shit, paying the wrong people for non-value added services…and then holding the crap you bought forever, is the problem. 

  I'm not going into another b&h or passive vs active debate...but here's another way to look at it.  If you waste 100 bps a year paying a management fee to some a-hole @ putnam to manage mutual funds (yes, I'm being nice to them here), then waste another 50 bps in turnover costs within the fund, then pay your "broker" another 150 bps to wrap you into some shit allocation of funds, guess what you have to do to reach your goals?  Take a shit load more risk because you are paying a shit load of people to provide largely non-value added services.   Shit, in the above example, your expenses are 3% before you even get started!  Well no shit you have to take a bunch of extra risk (read: more equity exposure) to achieve your 7 or 8% return to reach your goals.   What if you largely bought index funds or ETFs (total expenses maybe 40 bps?), and then only paid your "broker" a 1% wrap fee...aww hell, give'm 1.1%.  Cut out 1.5% worth of non-value added "our industry bullshit" and all of a sudden you can trim down your equity exposure 15 or 20% to reach the same return over the long haul.    Yes, this does require you to pull your head out of your ass and realize American Funds isn't providing you any real value with their "we go wherever we need to go to achieve our goal of Growth & Income" - and this may require you to actually realize you need to control the duration, maturities, credit quality, etc. of your fixed income (since, it IS fixed income to provide stability to your portfolio, why would you want large pieces of it in highly sensitive fixed income securities...omg to squeeze a few extra bps in yield?  gimme a break).    And of course, if you have access to some negatively correlated assets, you could take 12 minutes and learn about them too.   But wait...if you STILL think all of this bullshit, you could take the extra $$$ you saved by NOT paying douchebag companies like Putnam or American, and buy yourself some puts as a hedge.    No no no Ice.  You are a moron.  I leave the money management to the CFAs.  I bring on WORLD CLASS money managers for my clients that are well worth their fee.  Oops.  Nevermind.  They are down 35%+ too.    Buy & hold isn't broken.  The people selling it are.    If you aren't going to take the time to figure out wtf you are doing wrong, and are in love with pre-printed nonsense sales literature...do yourself, and your clients a favor, throw away your American Funds, Frankling Templeton, and Putnam literature, and only sell them annuities (my god I didn't just say that, did I?).  [/quote]   Ice, I can put the active v. passive debate to rest.  PM me and I wll give you info that will change your life.
Feb 23, 2009 2:58 pm

Sam,

Don't ask for a PM, put it out there so the rest of us can see this debate unfold. 

Feb 23, 2009 4:47 pm

It must have been very enlightening indeed!

Mar 13, 2009 3:21 am

[quote=Borker Boy][quote=Spaceman Spiff][quote=etj4588]Client:  41 year old male.

Investments:  mutual funds and stocks - NQ   Client of mine recently lost $40K over the last year and called today stating that he is done losing money.  Wants ideas on principal protected investments.  He is open to ideas.   Can do CDs or corporates, but does anyone have any ideas that are more attractive? [/quote]    Sell this guy out and fill out his ACAT to Mattress Federated, he is an idiot and at age 42 should be doubling down
Mar 13, 2009 11:20 pm
Originally posted by Borker Boy

[quote=Spaceman Spiff][quote=etj4588]Client:  41 year old male. Investments:  mutual funds and stocks - NQ   Client of mine recently lost $40K over the last year and called today stating that he is done losing money.  Wants ideas on principal protected investments.  He is open to ideas.   Can do CDs or corporates, but does anyone have any ideas that are more attractive?     Sell this guy out and fill out his ACAT to Mattress Federated, he is an idiot and at age 42 should be doubling down __________________________________________________________________________   Other than his age 42, what do you base this recomendation on?\   Why is he an idiot?   Norm      
Mar 16, 2009 4:57 pm

I'll ask the other question...tell us why moving to full principal protection now is a smart idea for a 41-year-old.

I recognize that there are holes in the profile information...let's assume typical profile for a 41-year-old male...working full-time, average risk tolerance, 10 years investment experience, sufficient current income, sufficient emergency fund, no extraordinary anticipated expenditures on the near-term horizon.  Anything else you want to make the call?

Mar 16, 2009 7:26 pm

[quote=Indyone]

I'll ask the other question...tell us why moving to full principal protection now is a smart idea for a 41-year-old.

I recognize that there are holes in the profile information...let's assume typical profile for a 41-year-old male...working full-time, average risk tolerance, 10 years investment experience, sufficient current income, sufficient emergency fund, no extraordinary anticipated expenditures on the near-term horizon.  Anything else you want to make the call?

[/quote]   Yeah, I've tried explaining that he shouldn't be principal protected, but he doesn't wan't to hear it.  The question is now becomming, how long do I want to argue with this guy?  Or should I just do what he wants and call it a day?
Mar 17, 2009 1:20 am

[quote=etj4588][quote=Indyone]

I'll ask the other question...tell us why moving to full principal protection now is a smart idea for a 41-year-old.

I recognize that there are holes in the profile information...let's assume typical profile for a 41-year-old male...working full-time, average risk tolerance, 10 years investment experience, sufficient current income, sufficient emergency fund, no extraordinary anticipated expenditures on the near-term horizon.  Anything else you want to make the call?

[/quote]   Yeah, I've tried explaining that he shouldn't be principal protected, but he doesn't wan't to hear it.  The question is now becomming, how long do I want to argue with this guy?  Or should I just do what he wants and call it a day?[/quote]   Why would you argue with any client?  Let them do what they want.  In this market I would never think about talking anyone out of selling anything.  25% of my clients, who were about 35% in cash, wanted out of the market in October and I said OK, dont think its going anywhere for awhile anyway.  DOW was about 9500 at the time.  Some were fee based, so going to 50-75% cash cost me some production..but watching others in the office telling people "you are selling at the bottom," I feel better about letting people do what they want/wanted.  I dont know how the brokers can sleep that kept people in for the last 5000 points?  Think about 1/3 of the S&P 500 is shot, even after we stop going down sometime next year maybe, we are going to trade sideways for years.  Maybe between 5500 to 8000??  Probably going to be boring, especially for the people who rode the stuff down from 14,000.
Mar 17, 2009 2:16 am

[quote=fritz][quote=etj4588][quote=Indyone]

I'll ask the other question...tell us why moving to full principal protection now is a smart idea for a 41-year-old.

I recognize that there are holes in the profile information...let's assume typical profile for a 41-year-old male...working full-time, average risk tolerance, 10 years investment experience, sufficient current income, sufficient emergency fund, no extraordinary anticipated expenditures on the near-term horizon.  Anything else you want to make the call?

[/quote]   Yeah, I've tried explaining that he shouldn't be principal protected, but he doesn't wan't to hear it.  The question is now becomming, how long do I want to argue with this guy?  Or should I just do what he wants and call it a day?[/quote]   Why would you argue with any client?  Let them do what they want.  In this market I would never think about talking anyone out of selling anything.  25% of my clients, who were about 35% in cash, wanted out of the market in October and I said OK, dont think its going anywhere for awhile anyway.  DOW was about 9500 at the time.  Some were fee based, so going to 50-75% cash cost me some production..but watching others in the office telling people "you are selling at the bottom," I feel better about letting people do what they want/wanted.  I dont know how the brokers can sleep that kept people in for the last 5000 points?  Think about 1/3 of the S&P 500 is shot, even after we stop going down sometime next year maybe, we are going to trade sideways for years.  Maybe between 5500 to 8000??  Probably going to be boring, especially for the people who rode the stuff down from 14,000.[/quote]   I hear what you are saying Doctor, but I like smoking and wish to continue.  Also, why don't you prescribe me some codiene.
Mar 30, 2009 1:05 am

You say You have a problem booby?

  All you need is an annuity.   Seriously if he's tired of losing $$$ you need to overlay some portfrolio puts on him. Use real put contracts, not these manufactured things like the SDS. Decide if you're gonna be delta neutral, calculate his portfolio beta, and ipso facto you're done. BTW: have your BM check your math.
Mar 30, 2009 2:14 pm

Why are you an advisor if your approach is to let clients do what they want?

Mar 30, 2009 2:43 pm
squid66:

Why are you an advisor if your approach is to let clients do what they want?

  Uhh...it's their money.  Give them their options, make your case for the one you think the client should go with, and let them make the decision.  If they choose the one you didn't recommend, make a note in their file and move on.   No doctor has a 100% close rate on their recommendations, it's naive to think we as financial professionals would either.
Mar 30, 2009 3:25 pm

It isnt the close rate, it is the lack of conviction about a solution.  As they say on sports radio: Have a take and dont suck

Mar 30, 2009 4:01 pm

Reading between the lines, I can see a moral - bring your best every time you deal with a client or prospect.  That much I can agree with.

On the surface though, you sound like a OLTG (On-Line Tough Guy).  Every one of your posts so far have been abrasive, with very little value to add.   I could be wrong though - you may be a wealth of information but haven't decided to share yet. 
Mar 30, 2009 5:10 pm

I have nothing of value. After lurking this board for a while I couldnt take anymore.  Too many ppl who are clueless giving the few true professional a bad name.

Mar 30, 2009 5:13 pm

You have nothing to add, yet you’re frustrated about the lack of good advice on the boards?  Wha?