Are investment managers cost effective? Vanguard says they are.
Vanguard is often associated with DIY (do it yourself) investors. However, Vanguard doesn’t seem to think that DIY is the best solution.
Vanguard’s research indicates that hiring an investment manager can potentially add 3% per year in net returns. “Net” means after taking fees and taxes into account. The extra 3% return is added through the following:
- Creating an appropriate allocation between stocks and bonds
- Keeping clients from buying and selling investments at the wrong times
- Rebalancing the portfolio
- Cost effective implementation
- Tax efficiency (“asset location”)
- Better withdrawal strategies
- Suitable asset allocation
If you'd like a copy of Vanguard's whitepaper called "Advisor Alpha" to learn more, please email me directly at art@arthursteinfinancial.com.
Each point, mentioned above, are areas where I help my investment clients. Other ways include:
- Making portfolios easier to understand, manage and coordinate by consolidating investment accounts and reducing overlap among investments
- Providing advice on issues not related to investments. I have worked with my clients to help them make decisions about readiness for retirement, umbrella liability insurance, beneficiary designations, long-term care insurance, whether to buy or lease a car, refinancing a mortgage and loaning money to a child.
Vanguard indicates that investment advice does justify the price.
Notes:
This is for educational purposes only. To learn more about the topics mentioned and if they are suitable for you, consult an appropriate professional. Tax laws can change at any time.
Any information provided in this presentation has been prepared from sources believed to be reliable, but is not guaranteed and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for information purposes only and does not constitute a recommendation.
Keep in mind that:
- Past performance is no guarantee of future performance
- Investments involve the risk of loss of principal and earnings
- ETFs, mutual funds, money market funds, etc. are not guaranteed by the US Government, the FDIC, a bank or anyone else
- “Average annual return” evens out variations in the actual year-to-year returns
- ETFs, mutual funds and individual stocks and bonds fluctuate in value and there will always be times when they lose value
- None of the information provided is necessarily relevant to anyone’s personal situation. Circumstances differ among individuals and they should not assume that these generalizations or information apply to them
- Investments mentioned may not be suitable for all investors