Do you use a broker or other financial professional to manage your investments? If so you need to know how they are being paid. Some charge a percentage of your assets to manage your money, others get paid in commissions and mutual fund fees. Some take the mutual fund fees and a percent of assets. This is neither right or wrong, but a cost of investing, but you should know how he is paid, because you are paying him. When you first signed up with your financial advisor he or she was supposed to disclose to you how they were paid and what estimated amount they would make from your account. If you can’t find this, ask your advisor. They should be glad to discuss it with you (if not, maybe they are selling you a bridge in the desert).Tomorrow I want to talk about the dreaded brokerage managed funds.
Brian’s Financial Musings
I want to talk about another way to limit your investment risk besides position sizing and trailing stop losses (I discussed these in an earlier post): asset allocation. If you have 100,000 to invest you don’t want to put it all in gold or all in bonds; you want to allocate it among stocks, bonds, real estate (REITs) commodiities precious metals, etc. The theory is that all these items don’t all go up in value at the same time (and don’t go down at the same time). A correct asset allocation will maximize return while limiting risk. The financial professionals in my website resource section https://briantstonercpa.com/Resources.html can help you with that (we have been fighting over asset allocation for years: not whether to do it, but who does it the best: I always lose for some reason.) This is another way to limit losses and that is the first step to being a successful investor.
Brian’s General Musings
As a postscript to yesterday, My father in law’s eye surgery appeared to go well and I do like my new phone better than the one I lost, so silver linings. Back to work.