What’s the Best Investment Plan? Do It Yourself

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If you have a ton of money to invest, there are all kinds of companies that want to talk to you. On investment websites, you’ll see offers from a company that wants to give you its best investment plan if you have a portfolio of $500,000 (I’m talking about you, Ken Fisher.) And anyone who watches golf tournaments on television (hurrah for Sergio Garcia, both for turning into an adult and winning the Masters) sees investment firms battle with luxury car makers for the eyes (and portfolios) of the golf-watching demographic, which skews older and wealthier.

What you never see, either on television or online, is anyone vying for the dollars of the smaller investor. The closest you’ll come is ads for online brokers who are competing for transaction fees. But even they are always making offers and adding incentives for you to increase your portfolio balance.

Everybody wants high-ticket investors, which can leave those with more modest portfolios starved for choices about investment options and advice. And believe me, recent survey data indicates that smaller investors need all the help they can get.

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A recent poll by Princeton Survey Research Associates says that around 21% of Americans aren’t saving any of their income. Zero. And only a quarter of them are saving more than 10%, which is down from 28% in 2016.

And according to the Insured Retirement Institute, only 55% of Baby Boomers have any money saved for retirement. And even though about a quarter of Boomers can expect some kind of income from an employer-provided pension, that leaves way too many people with only Social Security to support them in retirement.

My solution to this problem is that you hire yourself a portfolio manager: yourself.

Best Investment Plan Starts with You

Think of the advantages. Unlike a financial advisor, who now has no obligation to invest your money for your benefit alone, you can probably trust yourself to look out for your interests.

Also, while mutual funds come with management fees and tie themselves to benchmarks that limit the potential upside of your investment, you are free to pursue whatever strategy you feel is consistent with your risk tolerance. And you charge yourself nothing.

Lastly, and perhaps most important, turning your money over to other people to manage is a virtual guarantee that your money will always be fully invested in the market, even during back-breaking market corrections like the one in 2008.

You, on the other hand, are free to pull your equity exposure back to zero if you want, minimizing your risk from the safety of a money market or stable value fund while the market storms and rages.

You can also, if you want, expand the range of your investments beyond the index funds that are the default setting for so many 401(k) and IRA investors.

Like the couples that you see on television in helmets and goggles, taking charge of their own home renovation, you can put sweat equity into your own portfolio. The best investment plan is one in which you call shots.

Of course, it never hurts to have a little extra help, and that’s where Cabot Wealth comes in. We specialize in recommending specific stocks and building portfolios of investments in growth, value, income stocks and small caps. No matter what your preferred investing style, we can help. But you will be making the final decisions, and nobody looks out for your own financial well-being like you do. We’re here to help.

Timothy Lutts

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Comments

  • Victor H.

    I’ve been managing my own investments ever since my dad gave me instruction in the nineteen fifties. I always look for any guidance you are willing to offer. Thanks. I was taught if one has the time, the inclination, and the ability, then it is feasible to manage your own accounts. I have read Mr. Fisher’s column in “Forbes” for many decades as he does supply investment ideas merely for the price of a subscription. His goal is to procure money management clients, and his firm has called me about fifty times over the years. One of their tactics is to compare themselves to doctors. Since you would seek out a professional for your medical, dental, and optometric care, why would you not seek out a professional for your portfolio care? How might you respond to that point of view?……….. Best, Victor

    • Paul G.

      Victor, I agree with Mr. Fisher that a professional is a good idea for some things, but not for all. I would use a professional for asset allocation, estate planning, setting up trusts and wills and that sort of thing. But when it comes to stock selection for the aggressive growth portion of your portfolio, I think you’re better off doing it yourself. My main objection to professionals for that job is that they are almost universally trained to use valuation as a major selection factor. And when you’re looking at growth stocks, those with high P/E ratios are often the most successful. That’s because a high P/E is often a trait of stocks that are attracting the most attention from investors. And momentum is an important factor is growth stock selection. If you’re have the time and discipline to manage your own growth portfolio, I’m confident that you can do very well. And I know that the fees you will charge yourself will be lower.

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