The last post got me thinking about my “financial advisor” and how his knowledge, and my lack of knowledge, got me in the position I was in. Looking back, here the problems that I had:
- Load, which I explained earlier, and have since learned that you should not pay it.
- Account fees, in addition to the load, I was charged an account maintenance fee or something like that. These were flat fees, and combined with the relatively low amounts in the accounts, came out to about 1% on each of the accounts.
- Fund fees, which were over 1% for each of the funds that my wife and I owned.
- Finally, poor performance. None of the funds performed well during the last few years. In fact, one fund I was in even lost value during 2006 (on top of all the fees). Did I mention that there’s been a bull market for the past few years?
My situation, of course, can be applied to many people that deal with the financial industry. At first, I felt uncomfortable “asking questions,” like I was disputing the advice I was given. But then that made me angry. First of all, I shouldn’t have to deal with the fees and the poor returns. The financial industry is a competitive market. If I didn’t like the service I was receiving, I could vote with my wallet, and take my business to another company that could provide me with better options for my money. Secondly, I worked hard for that money, and I shouldn’t have to feel uncomfortable worrying about hurting someone’s feelings if I am losing money.
This brings me to my third point (and the moral of this post): the more knowledge you have, the better off you will be. The reason I was in this position was because I didn’t know any better. After seeing that my investments were not performing that well, I realized that I needed to take charge. I looked at the company that was holding my money, looked at other companies, and found out I could do better, so I switched my money out. If you are not sure about where to invest, for mutual funds there is Fidelity, or Vanguard with its extensive index funds, or other companies where you could purchase stocks individually (with low trading fees), such as Scottrade or Share Builder. The point is that doing a little homework can make life much easier.
So, the “gem of wisdom” I can impart today is to learn from my mistake, and educate yourself, learn your options, and then make your decision. You may still make mistakes, but you can learn from them. And at least now I’ve realized now that there are things I must learn, and this entire process (of saving and investing) is one of constant education and continuous improvement. So, next up, where I am now, and what I am doing to improve…
