Disorganized Investors
The good news - you are not alone
It’s no crime to be disorganized – but it will cost you money. Fortunately you can straighten out without earning a degree in finance, and you’ll get the immediate benefit of higher returns, lower fees, and a brighter financial future.
If your nest egg is scattered across half a dozen different accounts, then you are not alone. Many people own a hodgepodge of open accounts generating fees for their custodians. You now have a golden opportunity to fix this situation and start reaping the benefits – this is good news!
The typical Disorganized Investor has some or all of the following:
- One or more 401K plans from ex-employers with $10-100K in each of them
- An IRA of some kind, but little idea what investments are suitable for IRAs vs taxable accounts
- More money in the bank then you should have. Note that if you have over $250K in any account, you need to take corrective action as your money is not FDIC insured and our banks are on shaky ground.
- Confusion about what to do with cash reserves: savings accounts, CDs, money markets, etc.
- Some kind of life insurance product other than term-insurance that is an investment vehicle. Unfortunately, high fees means that these are almost never good investments.
- Financial advice from someone who is earning commissions on what they sell you.
The truth about free advice from anyone earning commissions
If you do receive advice from someone who earns commissions, then you have a problem. No matter how long a relationship you have had with your advisor, the unfortunate truth is that anyone who receives commissions simply cannot be counted on to focus on your financial future. This isn’t to suggest that you’re dealing with a bad or unethical person, just that the proof is in the pudding. No client of Ross Asset Advisors would consider themselves disorganized – part of our job is to get and keep our clients organized.
Cutting out active management fees
Remember that every investment carries risk, and risk is the source of returns. If you are taking on risk, then you should be getting the maximum long term returns possible for your risk. Any fees you pay to mutual fund managers are sapping your returns. You need to cut these players out and keep the returns for yourself.
Some of the ways that being disorganized causes problems
- Losing money from high-fee funds in 401Ks, IRAs, and elsewhere. You are almost certain to be sharing 1-2% of your money with fund managers every year, while doing no better (and possibly worse) than the overall stock market. You can usually get rid of these fees.
- Losing money from improperly investing your cash reserves. Inflation is pain, and we’re experiencing a lot of it. Your cash needs to keep up with inflation, or you’re falling behind.
- Taking unnecessary risks by not being properly diversified. The US stock market is undeniably down, but properly diversified investors have only a portion of their assets in US markets. There are a large number of other places, including developed and emerging markets, that sound exotic, but really aren’t. They are just normal parts of a properly structured portfolio.
- Losing money from having the wrong investments in taxable vs non-taxable accounts. Investments that generate cash will generate taxes. Fixing this is complicated for most laypeople, but an important part of how an advisor earns their keep.
- Having difficulty answering basic questions about your finances, such as how much you have in stock versus bonds, which affects your ability to sensibly transition towards retirement.
Fixing it will be easier than you think
Time is money, and you probably wouldn’t be disorganized if you were retired. Fortunately, laws protect your ability to consolidate your finances, and getting things squared away will probably be less burdensome than you imagine.
At Ross Asset Advisors, we have helped many people join the ranks of the organized. You’ll find that it is a very profitable and satisfying trip.