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> One second - there are a few different meanings for "financial advisers". Not really. They all tell you how to invest your money, by definition. > A good ad

by lutusp 11y ago

> One second - there are a few different meanings for "financial advisers". Not really. They all tell you how to invest your money, by definition. > A good adviser can help you to diversify your investments, help you to mitigate and control tax liability, help you match your risk profile to investments, etc. These are valuable things that the average person cannot do on their own, and they are worth paying for. Yes, and the same information can be gotten from the Web for free. There are any number of advisory articles that describe personal strategies for efficient investment and financial management. The only exception I would make to this rule is tax accounting, which really is too complicated for the average person to manage on his own, and an activity fraught with risk (tax judges often refuse to accept ignorance as an excuse for tax mismanagement). But a tax accountant's costs are easy to manage, compared to the erosive overall effect of a financial adviser. > However, even if I didn't, sometimes it is worth paying for an financial trader to work on your behalf, for the same reasons as above, namely, you'd like to invest a bulk of money, but aren't sure how best to invest it and want to diversify. What? You just agreed with the uncontroversial advice to avoid financial advisers. I should add that many mainstream publications including the Wall Street Journal and others, and Warren Buffett, have given this same advice for decades, even (in Buffett's case) to his own relatives. As to "diversify," what's the point of diversifying if the point is to invest in index funds? An index fund is by definition a diversification -- that's its purpose, its reason for existing. > I'd rather someone pay some small amount of money to financial advisers and actually invest money than be too scared to do any saving. To a person with an IQ above 80, the truly scary prospect is to allow a financial adviser into your life and your portfolio. > I generally believe in a relatively efficient market, although I think you can get higher returns in some situations (e.g. some hedge funds do appear to get higher returns). Yes, I agree -- about half of funds do better than the market indexes, and half do worse (and their ranking is random and unpredictable over time). Want to know why? Because that's how the index is calculated -- based on the overall market. But once you include the adviser's fees, you lose any advantage, and compound interest does the rest -- you end up way behind the buy & hold investor, as explained in this article: http://arachnoid.com/equities_myths http://arachnoid.com/equities_myths

edanm 11y ago
What you're saying is true of typical workers in the 20s and 30s, where the best advice is to put a part of their paycheck every month into an index fund. However, there are other situations. In our field, you can have plenty of situations where people have more money, for example: 1. You're an employee (or founder!) at a startup that had an exit event, you suddenly have lots of cash. 2. You've been saving up for a long time, you're now 50 and have considerable net worth. In these kinds of situations, the conventional wisdom isn't enough, because you probably shouldn't just sink $Xmil into index funds and be done with it: 1. You might want to diversify by e.g. not buying into one index fund, tracking one country, but rather will want a few different funds in different countries. 2. You might not live in the States, but you probably do want to buy an index fund that tracks american exchanges, not just your local ones. But then, you have to deal with fx risk. 3. You might want to not only own stocks, but put money into real estate as a diversification mechanism (and because it might have other desirable properties, e.g. might be anti-correlated with the general market in some situations, might give you depednable rental income, etc). 4. Especially in the example where you're older, index funds might be too volatile for you, considering you might be needing to pay for children's educations and other things Bottom line, there are lots of situations where you have higher net worth which lots of high tech employees eventually reach! And in those situations, there really isn't a one-size-fits-all policy of how to handle your money, and you usually do need advisers.

by lutusp 11y ago

edanm 11y ago

What you're saying is true of typical workers in the 20s and 30s, where the best advice is to put a part of their paycheck every month into an index fund. However, there are other situations. In our field, you can have plenty of situations where people have more money, for example: 1. You're an employee (or founder!) at a startup that had an exit event, you suddenly have lots of cash. 2. You've been saving up for a long time, you're now 50 and have considerable net worth. In these kinds of situations, the conventional wisdom isn't enough, because you probably shouldn't just sink $Xmil into index funds and be done with it: 1. You might want to diversify by e.g. not buying into one index fund, tracking one country, but rather will want a few different funds in different countries. 2. You might not live in the States, but you probably do want to buy an index fund that tracks american exchanges, not just your local ones. But then, you have to deal with fx risk. 3. You might want to not only own stocks, but put money into real estate as a diversification mechanism (and because it might have other desirable properties, e.g. might be anti-correlated with the general market in some situations, might give you depednable rental income, etc). 4. Especially in the example where you're older, index funds might be too volatile for you, considering you might be needing to pay for children's educations and other things Bottom line, there are lots of situations where you have higher net worth which lots of high tech employees eventually reach! And in those situations, there really isn't a one-size-fits-all policy of how to handle your money, and you usually do need advisers.