Benefits to sticking with managed portfolio?

[bilmar]

I am 57 and just retired at the end of 2014 so I am still getting acclimated.

My job was high pressure and very long hours so I kept my money in a Schwab managed portfolio and forgot about it. My 3 yr performance is about 7% ( after fees)  compared to 18% S&P 500.


Now I have the time and interest to make my money work harder for me.
Most discussions about this revolve around lower fees - e.g. Vanguard, Index funds etc and then somehow balancing those entities to reduce risk.

In the case of Schwab, they offer data showing average, max and min performance of their portfolios so you can supposedly choose one with a reasonable return with lower risk based on their ability to adjust the 100 or so holdings to match the desired risk

Q. Is this just good marketing hype to keep me paying thousands in fees or do they have a point?

I would be interested in hearing opinions on the pros and cons of managed portfolios.

Thanks

Bill

[Retire-Canada]

I have a bunch of my $$ in financial advisor mutual funds [pre-MMM investments]. They earned me 14%+ in 2014 and are going strong so far in 2015.

So I'm not racing to move the money out, but I do want them $$ in self-managed ETFs eventually.

My plan is to take all dividends and all free withdrawals and move them to my self-managed accounts over time [all tax sheltered in an RRSP]. I'll also no longer make any annual contributions to my MFs.

That will keep my withdrawal fees low and my current MF performance is pretty good so I am not stressed.

-- Vik

[Greystache]

A good compromise might be a balanced fund. Vanguard has funds like Wellesly and Wellington that are composed of stocks and bonds. Wellesly is tilted more towards bonds and Wellington is tilted more towards stocks.  You pay slightly higher costs, but avoid the hassle of rebalancing.

[James]

You talked about fees, but you didn't list your funds or the actual fees you are paying. Start there, find out what total fees you are paying, and any hidden fees your adviser might be receiving. I assume there isn't anything surprising to be found, but now is the time to fully investigate what your current situation is before deciding what to do next.

In general, I think financial advisers error on the side of being too conservative. (People rarely fire advisers for being too conservative, but if you lose money in a given year less knowledgeable investors get mad...) Since you are retired, that might suit you fine, but something to consider given your returns over the last few years. How much risk you want is simply up to you and how much return you are hoping for, but it should be something you are figuring out, not just left to your adviser without your full understanding and input.

So find fee amounts, determine risks acceptance, and then see if you can make your current situation work for you. Sometimes just transferring your funds to lower fee accounts is enough. But transferring to a new company is also fine and isn't that hard. But do a lot of reading here, and read MMM posts on the subject, it is something to really know and feel comfortable with before making your final decision on where to keep you funds.

[LordSquidworth]

I am 57 and just retired at the end of 2014 so I am still getting acclimated.

My job was high pressure and very long hours so I kept my money in a Schwab managed portfolio and forgot about it. My 3 yr performance is about 7% ( after fees)  compared to 18% S&P 500.


Now I have the time and interest to make my money work harder for me.
Most discussions about this revolve around lower fees - e.g. Vanguard, Index funds etc and then somehow balancing those entities to reduce risk.

In the case of Schwab, they offer data showing average, max and min performance of their portfolios so you can supposedly choose one with a reasonable return with lower risk based on their ability to adjust the 100 or so holdings to match the desired risk

Q. Is this just good marketing hype to keep me paying thousands in fees or do they have a point?

I would be interested in hearing opinions on the pros and cons of managed portfolios.

Thanks

Bill

The performance is absolutely terrible.

[skyrefuge]

In the case of Schwab, they offer data showing average, max and min performance of their portfolios so you can supposedly choose one with a reasonable return with lower risk based on their ability to adjust the 100 or so holdings to match the desired risk

Q. Is this just good marketing hype to keep me paying thousands in fees or do they have a point?

It is not exactly marketing hype. They most definitely can give you different asset allocations that will give you higher returns in exchange for higher risk. But this is true of any investment portfolio from any provider (including a do-it-yourself portfolio), so there no reason to pay any fees for that opportunity.

Changing the risk/reward profile of your portfolio can have an enormous effect on your returns. Your current portfolio may be invested in a very low-risk asset allocation, so it is not really valid to compare the 7% to the S&P500's 18% if the two aren't trying to do the same thing.

But, if you do-it-yourself with Vanguard, even if you keep the same low-risk asset allocation, your returns are almost guaranteed to be higher than with your managed account, simply because the fees are lower (so maybe you'd see 8-9% rather than 7%).

So the one possible advantage of an investment advisor is that they might make it easier for you to determine what you want your risk/reward balance to be. But once they help you with that, then you can take your money from them and invest it own your own at that same risk/reward balance.

The performance is absolutely terrible.

Again, we can't really say that for sure unless we know what the OP's allocation/target is. It's probably lower than it would be if he wasn't paying management fees, but it's also probably not an 18%-7% = 11% difference.