Q: Should I pay a professional to manage my money for me?

A: No!

Here's why:

1. Your guess is as good as theirs. Few people know which stock market investments are going to deliver results above and beyond broad market returns. The successful few who work out a winning system will always find that that their system deteriorates over time; this is because the stock market is "level 2" chaotic system and this is a mathematical certainty. They are clearly motivated to keep it to themselves until they try to sell it for an unreasonable premium once the returns have diminished. Think critically about the claims made by fund managers and stock pickers: It's easy to mistake luck for skill, charm for competence, and intellect for trustworthiness.
   
   TL;DR: A broad-based investment in the stock market which you manage yourself over the long-term has proven to be safer and more rewarding.



2. After fees, none of them consistently outperform the market over the long-term. There are no fund managers who consistently pick market-beating investments and pass the proceeds on to you. Yep, none. The data shows that the majority of actively-managed funds perform worse than low-cost index-tracking passive funds. The longer you hold a managed fund, the worse it's relative performance. You are merely gambling and not investing if you believe your fund manager is one of the lucky few who will beat the market year after year. Past performance is definitely not correlated with future performance.
   
   TL;DR: You can easily buy and manage your own passive index-tracking funds for peanuts using an online broker.



3. Feather your own nest. The fees for actively managed funds are an order of magnitude higher than low-cost index-tracking passive funds. Salaries and commissions in the finance industry are among the highest of all industries. They fund the luxury car market and many extravagant lifestyles. Greed in the finance industry is rampant. There are many sharks out there, and the use of cold calling and search engine optimisation algorithms are how they find their prey. If it ever feels like you're on the inside track then the "opportunity" is probably illegal or you've been completely hoodwinked.
   
   TL;DR: Own your own investment decisions and feather your own nest.



4. Investment advisors are not on your side. They may be heavily regulated, but most financial planners and wealth advisors are not truly independent. Surprisingly, it is legal for them to get paid kick-backs from the investments and insurance they recommend to you. Investing is not like brain surgery, learning how to invest your own money to look after you in your old age is safe and easy to learn - It's as easy as learning how to use Microsoft Excel.
   
   TL;DR: Invest some time on educating yourself so that you can invest for yourself. This page isn't selling you anything.



5. Investing is not speculating. Practice being consciously aware of your emotions when it comes to money. Separate the greed from winning a windfall from your desire to ensure you have a comfortable future. Don't mistake the thrill of gambling for the simplicity of investing. A small number of "thrill investors" do get lucky but you won't hear about the majority who lose their shirts. Ignore the boasts of successful gamblers: If you enjoy gambling, go to a casino or buy some lottery tickets. In the investment game, you get-rich-slow, you don't get-rich-quick. Steady of pace wins the race.
   
   TL;DR: Year after year, steadily increase your holdings in a handful of index-tracking funds to secure your financial future. It is a long-term game of regularly applying simple proven logic with very little effort and excitement along the way.

Some ideas for your journey towards financial independence and self-determination:

• Equities deliver the highest returns. This will differ slightly from country to country, but stock markets give the highest rate of annual return over the long-term. Yep, better than real estate, government bonds, fixed income, and gold. If you invest broadly in the stock market using low-cost instruments for 10+ years, history has shown that you will make an 8-10% return on average per year. The US equities market outperformed all other equities markets between 1990 and 2019 and delivered a 12.9% annualised return. If you invest in equities through an actively managed fund, the return will very probably be less.


• Drip feed your nest egg. Stock markets can be volatile from year to year but they always bounce back higher over time. Consider adding to your portfolio after a major downswing if you have the means. Learn about dollar cost averaging. Drip feed at least 5% of your income into your investments every year and choose a broker with low transaction fees. Ignore fixed-income products until you're ten years out from retirement. Don't give up your day job. Don't raid your cookie jar.


• Let compounding do the heavy lifting. Get the most out of the power of compound interest by squeezing every percentage point of return that you possibly can from your portfolio. Reinvest your dividends. Regularly shop around for the lowest fees and transaction costs. Make intelligent use of any tax shelters the tax man may offer, but don't let tax planning unduly influence your fundamental investment strategy. The tax rules can (and do) change overnight, and you're in this game for the long-term. Your tax accountant is primarily there to help you minimise your tax obligations, not maximise your long-term investment returns.


• Do not leverage into equity investments. Do not borrow or use margin to leverage into the stock market. The portfolio drawdown from stock market volatility is not worth the risk of blowing your account from a margin call. Avoid seeking market exposure through derivatives, they will magnify your losses more than your your gains.


• Keep it simple. Use an online "discount broker" based in your country or jurisdiction which gives you access to a decent spread passively-managed funds which are exposed to domestic and international markets. These are typically Exchange Traded Funds (ETFs) but the actual vehicle may differ depending on where you are domiciled. If you don't understand an investment product, don't invest in it. Avoid complex asset ownership structures like trusts and holding companies, they make good money for your accountant, not you. Paying tax is a sign of success - not failure - it means you are making money.


• Ride out the storm. The prevailing direction of the stock market over the long-term is upwards, not downwards. Only experience can teach you how to keep a cool head when market commentators are giving you the impression that everybody else is losing theirs. In fact, bear markets are when the smart money snaps up the bargains. Hedging downside risk with shorts, gold, or derivatives helps shore up your short-term returns at the far greater expense of hurting your long-term returns. It's hard to "time the market" but it's easy to "spend time in the market". It's also worth remembering that if the worst comes to the worst, and all stock markets implode, then all traditional wealth will have near-zero value during the ensuing apocalypse. It is therefore simply logical to keep a cool head and maintain your long positions during periods of short-term market turmoil.


• Diversify. There are many stock markets around the world and there are many market indices you can passively track with your investments. Articulate a simple investment strategy for yourself to seek broad-based market exposure across two to four stock market indexes. e.g. One-third S&P500 (US), one-third FTSE100 (UK), and one-third ASX200 (AU). Then set yourself a Google Calendar reminder to rebalance your portfolio every 3-6 months in line with your simple asset allocation strategy. For right-sizing your exposure to international markets, keep an eye on long-term foreign exchange rates relative to your domestic currency.


• Well-run businesses are behind the majority of equity market returns. As a very general mental model, a well-run public company will grow large over time and then start paying dividends to shareholders. Eventually, through the unpredictable interplay of competing interests, it will either enter terminal decline and go bankrupt, or it will become acquired by another business. The occasional business will rise from the ashes and go through the same lifecycle a second time, but very rarely a third time. It is folly to strive to pick a portfolio of well-run businesses and hold them forever. Rather, a passive investor can obtain optimum exposure to the returns from well-run businesses by avoiding "whole market" indexes (which inevitably includes some poorly-run listed businesses and late-cycle businesses in terminal decline) and buying into a number of "Top XXX" index-tracking funds instead. i.e. A poor performing S&P500 company will not remain in the index for very long and the ETF will automatically divest you out of it. Similarly, investing via a thematic index does not necessarily expose you to well-run businesses, even if you get the "theme" right.


• Commit to lifelong learning. Many people have a mental block when it comes to becoming financially literate. They freely outsource the planning of their future happiness to so-called professionals when it is so easy to learn how to do it themselves. If you can learn to bake a cake, you can learn to prepare for your financial future. Get unstuck, start small, learn something, experiment, learn some more, and own the outcome.


• Only go it alone if it's a labour of love. By all means, do your own research, pick the "right" stocks, and construct your own diversified portfolio. You may or may not beat the market, but know that your portfolio's performance will be more greatly influenced by chance than skill. Generating "alpha" is a team sport and cannot be achieved alone.


• There's more to life. Building a healthy investment portfolio is just one part of living a long and happy life so don't spend too much time in the financial markets. Cultivate real skills which are in demand, be useful to society and take pride in what you do. Things you can do to help ensure that you have a happy future include: Build a modest investment property portfolio, own your own home outright, cultivate a healthy mind and body, travel and gain world-perspective, exercise a creative outlet, pursue intellectual accomplishments, contribute to charity, propel others, connect with nature, use our Earth's resources sparingly, and build enduring low-conflict relationships with people you love. Be open to life's rich pageant and don't obsess about wealth.

This page is just a pet project and the information and links provided are for general information only and should not be taken as constituting professional advice. COVID-safe. 2021.