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 Post subject: So, you think you can manage your own money?
PostPosted: Mon Apr 30, 2007 10:38 am 

Joined: Thu Apr 05, 2007 8:01 am
Posts: 243
Yes, I know that's a bit of a provocative subject line. I came across this concise, but well-thought posting regarding managing our own money. This posting is concerning investing and generating returns from our money. GRS was started more to address the spending (debt) side of the personal finance equation. However, for those who are well on their way to overcoming any debt issues, here are some thoughts to add to your perspective, before making investment decisions:

http://www.loschmanagement.com/Company%20History/Performance%20History/professional_management.htm

I wonder if I have what it takes to manage my own money? Looking back at my own performance, I'd have to say I've made a hash of most of it. The only thing that has saved me is I live below my means. On the investment side, I'm definitely no Warren Buffett. I might not even be a Jim Cramer. :o

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PostPosted: Tue Jun 12, 2007 10:30 am 

Joined: Mon Jun 11, 2007 8:13 am
Posts: 211
I think 'managing your money' is a very misleading description of what these Losch Management people do.

Managing money is more about fiscal responsibility, analysis of personal revenue and expenditures, finding a balance for spending and saving, etc...

Their site seems to equate managing money with 'stock picking'. I got as far as #3 before I laughed out loud, but they went off track very early.

Quote:
3. Mutual funds are not good vehicles for managing money.
They buy too many companies, they have too much money, and the money is always flowing the wrong way ("in" when stocks are going up and therefore expensive, "out" when stocks are going down). The short-term nature of most media attention encourages the movement of money and gives managers an incentive to gamble with their customers' money.
There are a lot of people running money that do not work for mutual funds. Yet any time someone does a study on money managers, all they look at is mutual funds.


This is just basically wrong. The scary thing is that this quote might actually influence someone who doesn't know any of the following:

1. What an index fund is.
2. What an ETF is.
3. How turnover rates are calculated.
4. All the heavy analysis that sites like morningstar pour into differentiating funds.
5. What portfolio management is all about.
6. The role of a fund manager.

So basically, if you're a retarded gorilla who just popped out of the birth canal with fat inheritance check, then Losch Management might get your money with this argument.

Really, I'm no Oracle of Omaha or championship stock picker like Buffet or his followers. In fact, I know that I have no business examining companies and looking for investment opportunities. But I am perfectly fit to manage my money, just not to the nth degree. I realize my core competencies and stick to them. When it comes to determining what to spend and save, I'll take some advice, but I'm the shot-caller. When it comes to which specific stocks to buy and how much, I'll let a fund manager determine that for me, but I'll be sure to pick that fund manager as well as the fund myself.

I really don't care who uses Losch Management and I wouldn't try to persuade anyone to choose a particular investment style or strategy or investment firm. I do think it's crucial to understand that there is a full spectrum of money awareness that transcends my limited mental capacity at times.

FWIW, I've read articles which describe that stock picking is infinitely more difficult than most people in the industry would ever like anyone to know. Maybe there are some cowboys on here who are action junkies though and unlike me, they dream in terms of hedge funds. If that's you, then giddy-up and best of luck!


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PostPosted: Tue Jun 12, 2007 11:02 am 
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Joined: Wed May 30, 2007 11:23 am
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Location: Portland, OR
It's funny that they use Buffet as an example when he says that most people should just put their money in an index fund and forget about it for 30 years.

These people sound clueless to me. First, their site is unprofessional which makes me question them as a company...if they don't put the effort into a first impression, what are they going to do once I'm a client? Second, of course they want to scare people from invesing on their own. If people invest on their own they don't get paid. 144mph nailed the mutual fund thing which was just freaking idiotic...

Ugh. Things like that are what made me start my business. It makes me kind of ill.


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PostPosted: Wed Jun 13, 2007 2:11 pm 

Joined: Fri May 18, 2007 8:25 am
Posts: 520
Location: Santa Barbara
It's true. You guys know way more on the topic than I do, but it seems like that a lot of companies can easily capitalize on fear. I mean, it's really easy to do. No one wants to lose money and it's hard for a lot of people to stomach the losses on the way to a long-term goal. Personally, I have no problem investing retirement money because it's (a) so long-term, and (b) automatically quasi dollar cost averaged. I have some money in a CD maturing this summer. After I max out this year's Roth, I want to invest for a house or car in 5-10 years. Situations like these are when I understand people's fears!

In any case, if I did want financial advice, I wouldn't ask those fear mongers what they thought.


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PostPosted: Wed Jun 13, 2007 2:42 pm 
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Location: Portland, OR
Ryuns wrote:
It's true. You guys know way more on the topic than I do, but it seems like that a lot of companies can easily capitalize on fear. I mean, it's really easy to do. No one wants to lose money and it's hard for a lot of people to stomach the losses on the way to a long-term goal. Personally, I have no problem investing retirement money because it's (a) so long-term, and (b) automatically quasi dollar cost averaged. I have some money in a CD maturing this summer. After I max out this year's Roth, I want to invest for a house or car in 5-10 years. Situations like these are when I understand people's fears!

In any case, if I did want financial advice, I wouldn't ask those fear mongers what they thought.


They absolutely capitalize on fear and ignorance. Most people just don't know any better. That's why education is key and that's why I started my company so that people could get educated instead of getting hosed by companies like this.


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PostPosted: Thu Jun 14, 2007 9:23 am 

Joined: Tue Apr 17, 2007 9:34 am
Posts: 124
Location: Deep in the heart'a
I'm a complete neophyte on investing, but my portfolio still grew 23% last year. I make about 6 trades a year. I have about half of my money in individual stocks, and half in funds (different types -- both stock, index, and bond), and a little "forget about it" money in a variable annuity.

While I'd like to hire an independent financial advisor for some guidance on how I should structure my budget, spending & portfolio, there's no way I'd ever let someone "manage" my money for me. Other than a license and a few finance classes, they don't know which stocks will perform well any better than I do.

In the Bogleheads Guide to Investing, they have some interesting numbers regarding the performance of money in an index fund for X years, vs. actively traded money. The Index fund won handily in every scenario.

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PostPosted: Thu Jun 14, 2007 9:39 am 
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Location: Portland, OR
Gnashchick wrote:
I'm a complete neophyte on investing, but my portfolio still grew 23% last year. I make about 6 trades a year. I have about half of my money in individual stocks, and half in funds (different types -- both stock, index, and bond), and a little "forget about it" money in a variable annuity.

While I'd like to hire an independent financial advisor for some guidance on how I should structure my budget, spending & portfolio, there's no way I'd ever let someone "manage" my money for me. Other than a license and a few finance classes, they don't know which stocks will perform well any better than I do.

In the Bogleheads Guide to Investing, they have some interesting numbers regarding the performance of money in an index fund for X years, vs. actively traded money. The Index fund won handily in every scenario.


I agree that a FA is rarely needed to pick investments, particularly if you want to stick to funds. That's why I don't offer that service. I teach people the basics about the different types of investments and some pitfalls to avoid and then give them resources for if they want to ignore my "stick to funds" suggestion. :-) Investing is my least-favorite topic. I much prefer to sit down with a pile of receipts and develop a budget and debt plan with someone.

Besides, you can get free (and often better than many advisors) advice from the folks on the phone at Vanguard and Fidelity. Most people who actively trade lose in the long run if for no other reason than they get eaten up by taxes and fees.

Sounds like you're doing something right, just don't count on those returns. It's easy to be up in an up market. Also be careful that you don't have more than 10% of your portfolio in any single stock and that you're not picking funds that already own the stocks you own otherwise you're just duplicating effort and expense.


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PostPosted: Thu Jun 14, 2007 10:18 am 

Joined: Tue Apr 17, 2007 9:34 am
Posts: 124
Location: Deep in the heart'a
Oh last years return was a total fluke - I don't expect to repeat it any time soon. I sold two companies who were getting very heavy media attention that drove their stock price way up, and took the opportunity to sell for a high profit. It was a fantastically good move, as one company's good media news turned sour (after I sold) and they were snapped up by a private firm shortly thereafter. The other company peaked during the media blitz, when I sold it, and is now back down to "normal" business. In my lifetime, I will probably only recognize one or two other opportunities like that, or be lucky enough to hold the stock of a company in that same situation.

As to your other question, I recently sold off a mutual fund that was duplicating some of my individual stocks (that Boglehead book is gold) and purchased a different fund. It's definately something I'm paying attention to.

pf101, keep an eye on your private message box, incoming! :)

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PostPosted: Thu Jun 14, 2007 10:20 am 
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Gnashchick wrote:
Oh last years return was a total fluke - I don't expect to repeat it any time soon. I sold two companies who were getting very heavy media attention that drove their stock price way up, and took the opportunity to sell for a high profit. It was a fantastically good move, as one company's good media news turned sour (after I sold) and they were snapped up by a private firm shortly thereafter. The other company peaked during the media blitz, when I sold it, and is now back down to "normal" business. In my lifetime, I will probably only recognize one or two other opportunities like that, or be lucky enough to hold the stock of a company in that same situation.

As to your other question, I recently sold off a mutual fund that was duplicating some of my individual stocks (that Boglehead book is gold) and purchased a different fund. It's definately something I'm paying attention to.

pf101, keep an eye on your private message box, incoming! :)


Yay! Someone who is realistic! :D

You have no idea how many investment Gods I run into who have gotten good returns in the last couple years and now think they're Warren Buffet! Cracks me up.

It sounds like you timed those two trades perfectly! Good job!


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