INVESTING WISDOM

I am not a stock market professional but I have been around the block a few times as an investor and this is something I personally believe.  If you are going to turn your hard earned money over to a financial planner, wealth manager, or some other licensed individual, you have to hold them to a high standard.  They will be charging you, somehow, for their services.  These expensive services should be of value to you.  That value could be a feeling that someone is watching over your money (though they will never care as much as you do) and they will get a return on your investment that exceeds what you could do by yourself by investing in a Total Market Index fund.  Any number of companies have products like Vanguard's  ETF or fund (VTI) that are suitable. Those index funds you buy directly have very low expenses as compared to your manager who will charge somewhere around 1% of the total value of your portfolio whether they are losing your money or making you more.  

The return you get on your money is called Total Market Return because using a complicated formula they buy shares in the the whole market and yield an average that reflects the performance of all stocks traded in the U.S.  (more of less).  This would be the benchmark of performance that you should expect out of the person managing your money.  If he or she does not do as well and yields LESS than this number, they are not worth their cost (remember to figure in their fees when comparing their performance to the index).  If they do the SAME they are still not worth the trouble of all that buying and selling, commissions, management fees, tax consequences of short and long term capital gains, and the meetings about sectors, strategy, etc.  Remember to include the dividends you get over the year, which are additional to the market yield.  For the Total Market Index, dividends are currently about 1.7%.  You expect them to make your stocks yield MORE in total for the year than the index and by at least a percentage point or two.  This is referred to as Alpha (the amount by which you beat the benchmark).  What's the point if they don't?

At least after a year, maybe sooner, of working with your chosen and trusted manager (January to December works best for an easy comparison) see if they are doing the job you are paying them for.  It is easy. Insist that they don't dazzle you with smoke and mirrors or B.S.  Just compare the % yield of the entire pile of money you gave them to manage (unless you set aside a portion for bonds because you were nervous then don't count this part) to the yield in the same time period of the Total Market Index. Their number will either be LESS, the SAME. or MORE.  Like they say about a forward pass in football, of these three things that can happen, two of them are bad.  Accept no excuses even if the manager is the nicest guy in the world,  holds your hand, and buys you flowers.  Many really smart wealthy people put the equity (Stock) portion of their wealth in these index funds and don't touch it for years.  If you are a long term investor, this could be right for you.  In the short term, or if you will need the money right away, maybe the whole STOCK investing thing isn't right for you at all. That is the subject for another day.  

Don't use this advice for anything but its entertainment value and remember, the Oracle is an amateur investor who has made all the mistakes one can make and is just telling you this after learning many lessons the hard way.  Oh, and I am a surgeon, so take that into account.