The highlight of my day – I deposited all of my coins in a CoinStar machine at the local Safeway. All together, I had approximately $185 in coins! After the service charge, I received $172. That’s a lot of money from pocket change.
Meeting with the financial advisor – So today I met with the previously mentioned financial advisor. We had a nice 30-minute conversation mostly about investing. As I mentioned earlier, I approached the meeting with a lot of trepidation since I generally think of financial advisors as just an additional and needless cost. Here’s some key points and my thoughts on todays meeting…
- He introduced his financial firm and emphasized that they provided comprehensive financial advice and were independent from any particular investing firm. Comprehensive financial advice means that they provide advice in a huge range of financial topics from real estate, to investing, to estate planning, to budgeting, etc. His emphasis on independence was meant to indicate that there was no company pulling the strings in the background.
- I asked him how exactly his firm made money. He said there were three ways – an annual fee, commissions, and recommendations. Although I didn’t ask for him to explain further, it is obvious that the majority of the money he earns comes from commissions. The annual fee was miniscule. This frightens me because there is an obvious reason for him to recommend bogus investments to obtain his commissions. This system is fundamentally flawed. But at the same time, I can’t fault the advisor. He has a life as well and will try to make money to support his family. There is an obvious incentive for him to supply recommendations that are beneficial to his well-being. I am not sure if this particular guy would do such a thing but regardless, the system is bogus and I feel that financial management on my own would be a better approach.
- I also asked about investing strategies – specifically, why should I let you manage my investments when I can just put all my money in a low-cost index fund or exchange traded fund. Specifically, we discussed the Vanguard S&P500 and the iShares S&P500 ETF (IVV). He explained that they use modern portfolio theory (MPT) to build a portfolio consisting of ETFs that closely approximate the stock market but significantly reduce the risk. To reduce this risk, my money would be distributed among different forms of assets (US stocks, bonds, money market, international stocks, etc). I know very little of MPT and can’t really validate his comments. I don’t understand how MPT is different from diversification. Is it different from diversification? I am guessing that money is moved around between different asset classes depending on how the financial advisor predicts the future economy. For example, if he predicts a bear stock market, more money would be positioned in the bond markets. To me this sounds like market timing … and, based upon what I’ve read, market timing is a hoax. Hopefully, I can actually read a little about modern portfolio theory but it is at the bottom of a very long to-read list.
- Overall, I came away from the meeting thinking that I don’t have any particular reasons to use a financial advisor in the near term although I enjoyed meeting with the advisor.
the car – the saga continues. So after spending $400 on tires, I took my car to get a tune-up today. I had a dead fuel injector, which cost me another $400, most of which is labor costs. I should really look into fixing these problems myself – I could save a lot of money.
jade – visited the vet today. Had to shell out $150 for a urinary tract infection. Once the vet told me this, I asked, “$150? Does the dog really need the urinary tract?” Unfortunately, it sounds like the urinary tract is necessary.