I’m hoping to get my sister-in-law, nieces and nephews into investing. They are interested and luckily don’t have a ton of debt, BUT, they’re starting with basically zero knowledge.
So I’d have to explain mutual funds, index funds, the S&P 500, the difference between traditional and Roth IRA, etc. I just don’t know if I’m up to it.
I’m tempted to tell them to just go with a financial advisor. I had one years ago and I hated it. I’m a hands-on type of guy, and this guy had me invested in a lot of stuff I didn’t want (bond funds, fixed income). I finally got rid of him after he trailed the S&P two years in a row.
But for someone who works a 9-5 job and doesn’t have time to learn all this stuff, maybe a financial advisor is a decent option. I don’t know.
Would they be interested in learning about those things from someone other than you? JL Collins’s stock series was enormously helpful for my understanding of investing when I started out. You could give them the book the “Simple Path to Wealth” (the edited/published version of the series) and it would be zero effort on your part. Bonus: he started writing it to teach his teenage daughter about investing, so the target audience would be perfect for your nieces (making some assumptions re: ages).
Thanks. That looks really good.
I know this wasn’t your direct question and I’ve got no idea if your advisor was any good, but it sounds like you were comparing apples and oranges (a diversified portfolio vs the sp500) and the issue was probably more that you weren’t on the same page with risk appetite or allocations. A fiduciary is likely going to advise you against an all sp500 portfolio, and if all you want is to buy an sp500 etf or mutual fund, then paying an advisor to manage it seems silly. My dad lives across the country and I set him up with a fiduciary through NAPFA and he still occasionally grumbles when the advisor adds friction to some of the (frankly bad) investment decisions he makes like chasing weed or gold stocks. He’s the perfect example of someone who should be hands off and has a negative expected value making financial decisions. But enough of what you didn’t ask for. 😂
One of the challenges with helping people with financial advise is not projecting your own goals or tolerances, you need to know the full picture and their behavior. Do they have debt? Are they saving for a house? College? Will they chase meme stocks? Panic sell in a down turn?
And if it goes badly — like a recession popping up right after you help them, you can end up the target of frustrations and strain a relationship.
So I try to give general guidance if it’s sought, and push people to a fiduciary if they really want to get their house in order. I’m happy to provide them self help resources if they want to get into it (bogleheads wikis, a random walk down wallstreet, etc). This puts them in the driver’s seat instead of you.
I don’t think he was a bad advisor, but his typical client would be someone in their 50s or later; someone who needs to start shifting to fixed income or bond funds. For me, in my 20s, I saw no need for that stuff; I wanted to be all in on stock.
And if it goes badly — like a recession popping up right after you help them, you can end up the target of frustrations and strain a relationship.
That’s one of my biggest worries. Stock valuations are pretty high right now, so it’s possible they could fall … a lot. For someone just starting out, a 10-20% drop is a big deal.
Then, there’s the fact that what worked for me might not work for them. When I entered the workforce in the early 90’s, all I knew was “buy stocks” and “buy real estate”. Both those markets have gotten really frothy over the years and I don’t think they’re going to continue giving the same gains that my generation got. Young folks today might be better off with their Hawk Tuah coins or Skibidi bonds or whatever. 🙂
Had dinner at my parents house last night. My dad asked if I sold all my stocks to invest in bonds. No dad, why would I do that? -_-
I haven’t sold anything, but looking at today’s after-hours, I kind of wish I did. I have a feeling this is going to be a long summer.
I did about 2.5 months ago. Not all but most. It’s treated me very well so far.
