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All completely true. The average investor should probably be using a financial advisor. One of the biggest reasons that most of these funds work is the volume

All completely true. The average investor should probably be using a financial advisor. One of the biggest reasons that most of these funds work is the volume of people in the US with 401k plans that have fund-only options. Every pay period the stocks in these funds get automatically purchased without many decisions involved so you're going to continue seeing them steadily and safely increase. Ultimately, investing boils down to finding something where you're comfortable. 401k investing makes people comfortable because of all the pre-tax benefits. Even if you make bad picks, you're still making the percentage of income tax every single time. A lot of people invest directly in real estate or franchise businesses. Others in big, safe, dividend payers. Some people buy timber land. IMO it's just going to be comfort level and experience.

scarface74 5y ago
No one should be using a financial advisory unless they are a fiduciary who gets paid based on the amount of assets under management. Most people don’t need a financial advisor when they are in the accumulation phase. After paying off high interest debt, save 3-6 months in retirement, put as much as you can in an index fund or a target date fund in a 401K and call it a day. Most people can’t afford to max out their retirement plans. After you do that, then a fiduciary advisor might come in handy.
- brightball 5y ago
  The 401k funds are effectively an automated advisor. It’s tough to draw the line in a conversation like this because I completely agree with everything you said. An advisor only comes in at the point that a person is investing their money directly and consistently. Your average person doesn’t have the market knowledge or the time to learn it so an advisor is likely the best bet for the average person in that scenario. Anyone willing to do some research and learn will likely find their own comfort zone without an advisor.
  - deleted 5y ago
    [deleted]
- ryandrake 5y ago
  Extremely few people can actually max out all of their tax-advantaged opportunities, including retirement plans. Some examples, assuming a married couple: 401(k): $61,000 (under 50 years old), $67,500 (50 and older) each This is the 2022 tax year limit for all contributions, including effective deferral ($20,500 or $27,000 for 50+) plus employer matches and any post-tax contributions. IRA: $6,000 each Either Roth or traditional. Both are tax advantaged. HSA (family): $7,300 (under 55 years old), $8,300 (50 and older) These funds are triple tax advantaged when used for medical expenses. Then you can get into treasury bonds, where interest is exempt from state and local taxes. For example a Series-I bond, which are protected from inflation (current rate is 7.12%): You can purchase a maximum of $10,000 worth of these a year. So, just with a few tools, a family of two over 55 years old can invest up to $175,300 in highly tax-advantaged investments. A family of two under 50 can invest up to $161,300. How many families actually have enough money laying around to contribute even close to that? If you've exhausted all that and still have money left over to invest, then you can start thinking about opening a taxable account at a brokerage and finding a fiduciary advisor.
  - nullc 5y ago
    You can't hit those 401k numbers without employer cooperation (e.g. being self-employed)... I don't think it's reasonable to say that someone paying the $20,500 annual max isn't maxing it out. > For example a Series-I bond ... current rate is 7.12% Entirely from the variable part-- their fixed rate is 0% right now, and since the interest is taxed when you close the bond, this is an investment that is guaranteed to under-perform inflation (even if you don't believe their variable rate systematically understates real inflation).
    - ryandrake 5y ago
      Yea, I'm not saying I-bonds are great investments, but they are good if 1. your investment goals emphasize tax deferral/avoidance and 2. you need to diversify an equity heavy portfolio. I agree with OP in that you don't really need an advisor if you're just contributing to your retirement plan, and I'd add "...or to other tax-deferred accounts that don't offer much choice in securities". The types of investments I listed don't require any thinking or research. Just buy-and-forget. I would personally argue you shouldn't be touching regular taxable investments like buying individual stocks or ETFs until you've literally maxxed out every tax-deferred options, but that's a more controversial opinion over which reasonable people can disagree.
nullc 5y ago
> average investor should probably be using a financial advisor I've known more than one person with an advisor that shuffled them into opportunities that made money for the advisor or had complicated stories so that it sounded like the advisor was providing value-- and as a result massively underperformed the market. The best advice for the average investor is extremely simple... and not worth paying a lot to receive since you can get it for free from bogleheads. As a result there are a lot of free or cheap advisors that make their money from customers in other ways ... and not necessarily to the customer's benefit.

scarface74 5y ago

No one should be using a financial advisory unless they are a fiduciary who gets paid based on the amount of assets under management. Most people don’t need a financial advisor when they are in the accumulation phase. After paying off high interest debt, save 3-6 months in retirement, put as much as you can in an index fund or a target date fund in a 401K and call it a day. Most people can’t afford to max out their retirement plans. After you do that, then a fiduciary advisor might come in handy.

brightball 5y ago
The 401k funds are effectively an automated advisor. It’s tough to draw the line in a conversation like this because I completely agree with everything you said. An advisor only comes in at the point that a person is investing their money directly and consistently. Your average person doesn’t have the market knowledge or the time to learn it so an advisor is likely the best bet for the average person in that scenario. Anyone willing to do some research and learn will likely find their own comfort zone without an advisor.
- deleted 5y ago
  [deleted]
ryandrake 5y ago
Extremely few people can actually max out all of their tax-advantaged opportunities, including retirement plans. Some examples, assuming a married couple: 401(k): $61,000 (under 50 years old), $67,500 (50 and older) each This is the 2022 tax year limit for all contributions, including effective deferral ($20,500 or $27,000 for 50+) plus employer matches and any post-tax contributions. IRA: $6,000 each Either Roth or traditional. Both are tax advantaged. HSA (family): $7,300 (under 55 years old), $8,300 (50 and older) These funds are triple tax advantaged when used for medical expenses. Then you can get into treasury bonds, where interest is exempt from state and local taxes. For example a Series-I bond, which are protected from inflation (current rate is 7.12%): You can purchase a maximum of $10,000 worth of these a year. So, just with a few tools, a family of two over 55 years old can invest up to $175,300 in highly tax-advantaged investments. A family of two under 50 can invest up to $161,300. How many families actually have enough money laying around to contribute even close to that? If you've exhausted all that and still have money left over to invest, then you can start thinking about opening a taxable account at a brokerage and finding a fiduciary advisor.
- nullc 5y ago
  You can't hit those 401k numbers without employer cooperation (e.g. being self-employed)... I don't think it's reasonable to say that someone paying the $20,500 annual max isn't maxing it out. > For example a Series-I bond ... current rate is 7.12% Entirely from the variable part-- their fixed rate is 0% right now, and since the interest is taxed when you close the bond, this is an investment that is guaranteed to under-perform inflation (even if you don't believe their variable rate systematically understates real inflation).
  - ryandrake 5y ago
    Yea, I'm not saying I-bonds are great investments, but they are good if 1. your investment goals emphasize tax deferral/avoidance and 2. you need to diversify an equity heavy portfolio. I agree with OP in that you don't really need an advisor if you're just contributing to your retirement plan, and I'd add "...or to other tax-deferred accounts that don't offer much choice in securities". The types of investments I listed don't require any thinking or research. Just buy-and-forget. I would personally argue you shouldn't be touching regular taxable investments like buying individual stocks or ETFs until you've literally maxxed out every tax-deferred options, but that's a more controversial opinion over which reasonable people can disagree.

nullc 5y ago

> average investor should probably be using a financial advisor I've known more than one person with an advisor that shuffled them into opportunities that made money for the advisor or had complicated stories so that it sounded like the advisor was providing value-- and as a result massively underperformed the market. The best advice for the average investor is extremely simple... and not worth paying a lot to receive since you can get it for free from bogleheads. As a result there are a lot of free or cheap advisors that make their money from customers in other ways ... and not necessarily to the customer's benefit.