[XutvJet]

Originally Posted by qba335i

That is NOT a good financial advice.

I'm not surprised by your responses considering it's your line of work. Can't blame you; just differing opinions.

1) you should max out 401k contribution. Currently 18,500.

Why max your 401K and be stuck with the limited investment options often associated with company plans? Why not just invest to the company match (free money) and then take the remainder and fund your own Roth IRA, pay down debt, buy an affordable house in a good area? Sure, there are some tax advantages to funding a 401K to it's max, but I'd argue you're better taking the investment risk by widening your portfolio elsewhere and having more investment options.

2) you should have a diversified portfolio - that includes equities (stocks/mutual funds/ETFs), bonds, alternatives (real estate and commodities) and cash. Once you have more assets you can start adding private equity and hedge funds. Management fee vs product fee - know the difference and know what you get.

The point to this thread is focused on people just starting out, not people with large multi-million dollar portfolios that can be buying into REITs/real estate, and the like. That's what my recommendations are generally based in. Yes, you should diversify, but let's be realistic here. Just how diverse is someone going to get when they are just starting out and/or only have $500K or less investments? So you can only spread it so thin before it becomes a management problem and you lose control/focus?

My recommendation was index funds (check to your recommendation), bonds (check to your recommendation), and stocks (check to your recommendation). Cash should be implied as everyone should have a rainy day fund. First shoot for $1,000, then 3 months take home, and then 6 months take home. For "real estate", for most of us, that is buying a home. Yes, you can make an absolute killing real estate with rental properties, well thought out flips, REITs, etc., but you can also lose your a$$. I wouldn't recommend to anyone to look into real estate until they have a few million in assets AND are knowledgeable of real estate and the risks/headaches. Real estate is high on my list at the moment but I'm still feeling it out.

As someone in the investment field, I can totally see your resistance to S&P 500 index funds because they are so simple and take people like yourself completely out of the equation because there is no deep or complex investment strategy to index funds. Thing is, the data strongly supports things like the S&P 500 index fund as the way to go for the common investor (i.e., someone with sub $2M in assets). They are cheap to manage, ultra low fee, effective, simple, and wealth building in the long term (not even the best investor can beat them in the 10+ year term).

3) there is a benefit of having a portfolio manager (don't confuse with a sales oriented financial advisor who used to sell cars) as he will be able to design an optimal portfolio, monitor it and do tactical shifts. Most people don't have the skill, knowledge and time to manage money plus they make irrational decisions.

My guy at Morgan Stanley was a portfolio manager/adviser/VP. He only manages portfolios for clients with $750K+. We spent a lot of time over the years designing my portfolio to fit my age and risk tolerance. I was in all sorts of "tactical" investment tracts with much of that being actively managed. This was all based on various research and input from the Morgan Stanley investment gurus. What I learned was that tactical and actively managed means high fees. I was charged 1% annually by him plus all sorts of other little fees buried deep in the documents. After wising up and actually learning a few things on my own about how much I was really spending, I figured out I was paying about 1.5-1.75% annually Morgan Stanley which was very significant, especially over the course of 15 years and how that money could have been put to use in my investments rather than fees. I probably wouldn't have been upset by paying this if my portfolio had done better. Thing is, even after the massive market upswing after the 2008 crash, my portfolio wasn't even coming close to matching the market growth. I was getting left in the dust even as Morgan Stanley was trying to tweek things in an attempt to right the ship. In the end, I spent deep into the 6 figures for Morgan Stanley to manage my money and really got nothing in return.

Another thing I hated was that I had to go through him to make investment changes, look at things in real time, pull out cash from my money market with them, etc. Now that I manage things myself, I'm in total control and see everything in real time and can transfer cash within 24 hours.

4) everyone is a star/professional investor in a bull market. The true investing starts when the market starts moving in the opposite direction.

True, but I'll take my chances. After my personnel experience and the research I've done, I'll take my chances that my investment choices are the best for me and will work out more effectively how it did prior to me managing my own money and no middleman involved.

You're right, most people don't know squat about investing or where to start. Many are irrational and will panic at the slightest market slide. With that said, my recommendations for anyone starting out is simple as this:

READ Warren Buffet's 15 minute retirement plan, follow it, and build off of it as your wealth grows. Read his research behind it. It's all very simple to understand and is founded in REAL data.