Warren Buffett once famously said in a BusinessWeek interview that he could return 50% a year if he was managing less than $10 million. Moreover, he guaranteed he could do it.
So if you are not returning at least half of what Buffett said he could do on average, then you are failing as an investor – or your financial advisor/broker is failing you.
With that in mind, here’s my rant/advice. Make 2014 different …
First, fire your financial advisor, stock broker, financial planner or whatever they call themselves nowadays! Yes, I know it’s your golfing buddy, your neighbor, the dad of your kid’s friend, etc…
But let’s be honest, he lost you 40% to 50% of your money in 2008. And even more offensive, in one of the best bull market runs in decades from 2009-2013, I’m willing to bet he only returned you single digit annual returns. Consider this: Even the most basic low cost stock market index funds returned 14% a year annualized over the past five years.
How about 2013? A low cost stock market index fund returned more than 25% in 2013. Your account returned only 9% to 10%, right? Why? Because your broker/advisor diversified you into bonds and gold, which both produced negative returns last year. Worse, they had you in cash, all of which substantially ate away at your portfolios returns.
So quit paying thousands of dollars every year in fees on your account to someone who has failed you.
You paid this so called financial expert to help you beat the market and instead he just siphoned huge fees and commissions out of your pocket, while exposing you to above average risk.
Bottom line, no one deserves to get paid if they can’t perform. I don’t care what industry or profession you are in, when you don’t perform, you get fired. It’s that simple. I’ll let you in on a little secret. It’s not even their fault. It’s a business model that has been set up to use and abuse you. He is just there to sign up accounts. It’s highly likely he knows nothing more about investing than anyone else you pass on the street everyday. So get rid of your financial advisor and save yourself $3,000-$6,000 every year per $100k in assets.
Okay, so what do you do? Take control of your money. Open up an online brokerage account. You will pay cheap commissions — $5 a trade or less. Folks, it’s 2014! No one who has a computer, smartphone, iPad or laptop needs a guy down the street or a guy sitting in some call center milking them for fees and huge commissions on their investable assets. It’s not 1980, where you have to call your broker for a stock quote. Now you can watch your portfolio, get all of the information possible, and even buy or sell a stock right from your phone. Wake up and use modern day technology. Save yourself a bunch of money.
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor