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How (NOT) to Buy Mutual Funds
When it comes to mutual funds, there is a lot more to success than just finding a good one. Sad investment stories like the following are all too common. I hope my sharing it with you will help you avoid making the same devastating financial...
How to Evaluate Load vs. No Load Mutual Funds
If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, "load" simply refers to the commission paid to the broker...
Investing In Son's Business Could Cause A Real Family Feud
Q: My youngest son wants to borrow $5,000 to start his own business. My wife is afraid to tell him no. She thinks we should just give him the money and not expect anything in return. I disagree. He doesn't have a very good track record with money,...
Investing Psychology - Know Thyself
America will continue to be the land of opportunity and regardless of what course our economy takes over the next few years, it's likely that investment opportunities will be numerous and attractive. Companies driven by the ever increasing...
Twelve Principles of 21st-Century Retirement Investing
(ARA) - In his new book, "The Grangaard Strategy -- Invest Right During Retirement," author and teacher Paul Grangaard uses the Twelve Principles of 21st-Century Retirement Investing to offer readers an important new way to look at their financial...
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How to pay less and get more: Discount broker vs professional
How do you invest? What do you really pay? At the end of the day, what are your real results? These are questions smart investors should be asking themselves (but usually don't). In this era of more fees, misc. charges, holding periods and back end redemptions, even at discount brokers, how are you really making out?
Working with a new client brought this all to my attention. I know what I found may not apply to everyone; however it will apply to many and very likely apply to you.
I need to preface this by saying that, unlike the majority of registered investment advisors, I have built my practice over the past 15 years by dealing with “small” investors. Many of them are first timers because my minimum account size is only $5,000.
I targeted this group because I enjoy the educational part of my business. A happy side benefit has been that by providing million dollar service to these so called “small” investors, they naturally refer me to parents, relatives, friends and business associates, often with considerably more assets than the original client. What a happy consequence.
Having set the stage, here's what happened with my new client who we will call John. John was 26, newly married with a one year old son. His wife was taking care of the child and John had a good full time job. After selling his house in California and moving to Florida he had $6,000 left for starting a long-term investment program.
Though he had been reading my newsletter for about a year, John decided to manage his 401k on his own. It was a noble effort but provided less than desirable results.
He then attempted to set up a brokerage account at a major discount broker. With his $6,000 he was told that the quarterly fee would be $45, and, of course, if he sold any mutual fund within the first 180 days, there would be an early redemption fee.
$45 per quarter would be equal to an annual fee of 3% of his starting balance. John called me somewhat frustrated and said that he'd be willing
to set up an account with me, but how would it make sense if in addition he'd have to pay my advisory management fee?
That was a good question because it certainly doesn't make sense to have an account in any type of market environment and pay about 6% in fixed annual fees.
However, what John didn't know was that if you have an account with a registered investment advisor who is affiliated with custodial broker, the fee structure changes.
What did that mean to him? It meant that I opened the account for him as a new client. He now has no annual fees, other than my management fee, and his 180 day holding period for mutual funds is reduced to 90 days, minimizing, if not eliminating, the likelihood of an early redemption fee.
The net result was that he would receive the benefit of my experience-which he already trusted based on my track record of pulling clients out of the market in October 2000-and it would cost him no more, and likely less, than his discount brokerage account.
Needless to say, John was very relieved. In essence, he traded broker garbage fees for professional management at no additional cost to him.
And, since he itemizes his deductions on his tax return, all fees paid are tax deductible, which is just an added bonus to factor into the equation.
It turned out to be an all around win-win situation for John. I encourage you to review your situation and see if what looks like a discount in fees is actually costing you a premium.
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: http://www.successful-investment.com
ulli@successful-investment.com
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