January 28, 2011

Biggest Commission

If you've been reading this blog or my book, you know that I was a stockbroker or what is currently referred to as a financial advisor.  You probably also know that I believe that you can invest by yourself for yourself and save a fortune over a lifetime.

If you still insist on using a financial guy to make your investment decisions, let me tell you about my biggest commissions.

There was a time, not too long ago that I was paid 8.5% for selling you a mutual fund.  Thats $8500 of your hard earned money on every 100k that I placed!  And get this, that fund was front-end loaded meaning that the 8.5% came out of your investment right away just to pay me and my firm.  Believe it or not, there are still some very popular funds and stockbrokers getting paid this way and its still as high as 5.5%! 

Times have changed and people have wised up however so did the brokerage and mutual fund industries.  They migrated to B shares or back-end loaded funds which still paid me and my firm right away but you didn't see any commission unless you tried to sell within the next five or so years then of course, you were hit with the commission then.

As an aside, preferred IPO's and bonds are a great way for your financial guy to get paid a concession which is something paid directly to the broker without you being aware of it and thats on top of commission!

These days, there is no reason whatsoever to buy into a mutual fund and pay a fee or a load.  Please check at yahoo finance which is a great unbiased website.  Just put the fund symbol where it says 'get quote'.  Then click on 'fund profile' and scroll down and you will see 'fees and expenses'.  They will compare whatever you are looking at to the average in that category.  Here is an example and you will have to scroll down to see the chart.

As always, I am available for coaching to answer any questions you may have.

January 20, 2011

Index Huggers

Don't Waste Your Money
Index huggers are all around and getting paid to do nothing!

An index hugger is a mutual fund or stockbroker or financial advisor that basically buys the same stocks and or bonds that are in a particular index, usually the S&P 500 and then charge you to 'manage' your portfolio.

They may change some stocks here or there but in the end your portfolio will end up mirroring the index except one major difference - FEES !!!

These charlatans claim to be managing your portfolio when in fact, they are doing nothing more than you could do buy buying the index yourself and save a fortune in fees and commissions.

Most brokerage firms now provide you with detailed information on your statements.  It should provide your annual and / or year to date results as well as what the indexs such as the Dow Jones or S&P 500 did over that same period.  Don't be surprised if you results are the index minus the 1-2% fee that you pay.  This means your financial guy is an index hugger. 

Time to invest your own money for yourself !!!