A lot of us are using the information available online when we manage our money. Some have student debts that limit the amount of money they can invest. Others don’t want to pay someone to “advice” them on how to take care of their money. They believe they can do it better, or they ask their spouse, a parent, or another trusted person for help.
Do you think you need a financial advisor?
Phil Town wrote an article for Rule 1 Investing where he shared his thoughts on why you don’t need a financial advisor. He debunks the idea of investors only being successful if they work with an advisor. He also makes some key points to sway you into believing you don’t need a financial advisor. Some of his points are outlined below.
Financial Advisors Rarely Beat the Market
Town quotes the head of portfolio construction at the Vanguard Investment Strategy Group as saying “that beating the market was ‘Really hard to do’ for financial advisors.”
Town seems to think financial advisors serve more as coaches and counselors than helping you beat the market. You have to decide if the fees you pay are worth having someone there to “talk you through the tough times and persuade you not to make emotion-based decisions.”
Financial Advisors Charge You Regardless of Whether or Not They Make You Money
Because your financial advisor will charge you fees based on how much money you invest, you’ll get a bill even if you lose money. They have no incentive to help you win or for them to perform well.
Writes Town, “While they will earn more if they are able to grow your wealth, at the end of the day, they get paid regardless.”
Putting Your Money in the S&P 500 Will Make You More Money
In the article, Town explains if you simply put your money into the S&P 500 and forget about it, you will almost always earn more than if you put your money with a financial advisor.
It’s been shown that the S&P 500 beats large-cap mutual funds 92.2% of the time. How? Because of the percentage-based fees charged by fund managers and financial advisors.
See more information from MarketWatch.
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