Wednesday, August 18, 2010

Become Your Own Adviser

Mish tags one of my most near and dear topics, the conflict of interest that exists between your broker's third home and his mistresses BMW or how you are invested. Why Is Bad Advice So Common?  "Wall Street does not generally get paid on funds sitting in cash. The second money comes in it is "put to work" earning fees, regardless of the risk-reward setup for the client." READ THAT POST!

You have been warned by me many times since I started this blog. I believe a majority of the advisers don't give a shit about you or your money. It is all about generating fees for the firm and bonuses for them. Bottom line is if you own a mutual fund with the words GROWTH or EQUITY in them right now, you better be hauling ass. "Shanky, but that is part of my broker's diversification strategy." Yeah, diversified to charge you 1% on those assets regardless if you make money or not. Go get a fee based broker or learn how to put it into cash yourself.

You all know I get real emotional on this subject having first hand knowledge of it. I was taught by some of the best how to "annuitize" your assets for my benefit first and not yours. Get the hell out of mutual funds now. Never own another one. No need to. Dump your broker, like that guy on the Scotttrade commercial, I laugh like hell cause It Is REAL! The odds are you have some friend of the family you trust that is some old money kid/adult that could not work anywhere else, got a cushy job so he can play golf  three times a week and he's there to bring in assets and probably can't give you the definition of Alpha or Beta. I'll speculate that 25% of the brokers out there are worth having as an adviser (and that is being kind).

"But Shanky, I can't do this on my own." Sure you can. For the next year or two all you need to know are two things, the symbol SH and cash. You invest some in SH to make some money while the market is falling and you take the rest of your cash and put it in coffee cans and bury it in the back yard (some argue gold should be in there and if you like gold that's cool, I still think it crashes with the market and there will be a better entry if you do not own it yet or if you are looking to add to a position). You will eventually need to know the symbol TBT, but that comes in a year or two when inflation hits. See, that's not so tough.

Your broker will continue to preach staying the course, tax avoidance (if that is still an issue), that the markets have averaged X and Y forever, show you some long term chart that ends in 2007 cause he does not have an updated one and he'll also mention your retirement targets and what returns you MUST achieve to get them. You'll be so bombarded with bullshit you don't understand you'll agree with whatever he says just so you can get the hell out of his office. Staying the course is BAD advice now. Getting the hell out of the markets and any fee based asset is good advice.

Do you know where you fit in your broker's book? I'll tell you this, if you do not have seven figures invested in fee generating assets you are not an A client. Clients are rated A thru D. When the markets start crashing and your broker has 2,500 accounts to sell where do you fit in the line of priority? Will you get the call the day of the crash that you got out, will you get the call later that week that you could not get out or that "we're holding on till it recovers" or will you actually have to call your broker? I suggest that you follow the markets and your investments closer than he/she does and have them on speed dial. Don't count on them to call you.

Bottom line is to get the hell out of the markets. Two reasons: 1) they are going to crash and 2) they are rigged. Take an active role in managing your assets. Read, study, educate yourself in what's what and how to invest. The internet is full of wonderful and accurate information to assist you. I'm willing to bet you'll know more about investing than your broker whose done this for a living for many years in little time. Take the tough questions you have to your broker, know the answers you want to hear, figure out why you are not invested accordingly and watch him squirm a while before you fire him. There is no one out there with more interest in your well being than you, so take the bull by the horns. If you do have an honest adviser that is doing you right, thank him/her and refer your friends to them. They will treat you even better.

The time is now. If you do not take a vested interest in your investments you will lose.

UPDATE II: READ THIS POST AS WELL  Billionaire Ken Fisher Explains His Biases

UPDATE: Read this - get out of funds like everyone else and into the appropriate ETF's - July ETF Update See the information is right at your fingertips, you just have to learn where to look. 

Another investment resource (besides this blog and the links to the right) would be to review my calls at Shanky's Dark Side. I lay it on the line everyday for all to see. Reviewing the posts and comments is a good review of the day's actions and a primer for what condition the market ended the day in.

GL and thanks for the views.