When I decided to start managing our own IRA, I was surprised that our financial manager didn't make any effort to dissuade me. He just nodded, and said "ok". We were being charged almost 2% of the principle annually to trail the indexes. On top of that, it's all a black box. I can't see what trades were made. The highest resolution I had was a pie chart that had slices like "emerging markets" and "global targeted returns fund". They are skimming. That's my bet. Old people are moving in with the kids again. At least that might present some social benefits for the grandkids.“The timing couldn’t have been worse for switching to a 401(k) system,” Morrissey said. But they are so lucrative to Wall Street fund managers, with much higher fees than pensions, that reverting back to pensions wholesale is an unlikely scenario.
I watched The Big Short last night. It wasn't very good. In addition to being really shitty storytelling, it also flat out incorrectly explained a lot of the brilliance of the book, which gives you a very clear understanding of the mortgage crisis and its makings. However, it did outline (in a crude and clumsy manner) that Wall Street is largely populated by business majors that have little understanding of algebra and above and that the overwhelming majority of the confusion related to money is due to obfuscation by an industry that substitutes opacity for acumen. It would not surprise me if financial managers, at least at the IRA level, abide by the "Nigerian prince" model of customer service - do deliberately dumb, sloppy shit so that the smart ones leave of their own accord before they can hassle you and drag down your efficiency.
That much is clear to me. I am sure that some rare managers have a clue, but unlike many scientific, technical, and trade disciplines, in the realm of gambling, it takes time to distinguish talent from imitation. If you load up on a bunch of financial terms of art, you can create a pretty good screen. If you do well for a time, you will likely even convince yourself of your acumen. My wife and I still laugh about a time that we listened to a FM pitch for about an hour until he said "1 million", and we both corrected him at the same time with: "No, you mean 100 thousand". I haven't read the book, but I found the movie entertaining. The celebrity explanations were terrible and unnecessary, however. Also, the narration and the talking to the camera. ...I guess my bar could be higher.Wall Street is largely populated by business majors that have little understanding of algebra and above and that the overwhelming majority of the confusion related to money is due to obfuscation by an industry that substitutes opacity for acumen.
Jared Dillian pointed out that the ones that are any good at it have no reason for you to know they exist. They play with their money, make more of it, and have little reason to involve you in the equation in any way shape or form. In fact, considering how much obfuscation is going on, your awareness of their presence and actions substantially hampers their success. The movie was entertaining, to a point. The book was orders of magnitude better.
This is really weird. My 401k is through fidelity, who gave me a bunch of different choices -- buy the tech index, buy the emerging markets index, etc, etc. I bought vanguard general. I know the exact composition of the thing, not that it matters, because it's the s&p. No one "manages" it. Course it's not going anywhere, but I don't really mind at the moment.
Check the fees. My wife had a 'managed' and 'unmanaged' 401k through Prudential and both of them were charging more than a percent. Lookin' at a friend's Fidelity 401k right now (he doesn't understand this shit so he gave it to me to tell him what to do). They talked him into a T Rowe Price mutual fund that charges 1%. One of the tricky things about funds is that yes - they tell you what's in there but not with a lot of specificity. "The S&P 500" - well, what does that mean? In a mutual fund, that means a synthetic blend of trades that model the S&P within whatever error bars they have buried underneath the fine print. With Vanguard it's probably very specific; right now, they're listing all their shit as of a week ago. With Fidelity? That's a quarterly prospectus. ETFs have, buried deep somewhere on the Internet, their daily .csv of holdings; I've found it for a couple of my etfs a couple times. Funds, managed or otherwise, will tell you that shit four times a year and in between, you really have no idea.
Vanguard doesn't really have fees. I think it comes out to $25 a year or something if you add the various fine print up, but you can get a chunk of that back if you sign up for paperless everything. It's been a while since I looked closely. The variable part is tiny. As far as composition, usually an index fund owns pretty much everything you've heard of. A "passive" plan doesn't change much. Vanguard's one of the best. I just bought most of a condo, so I'm certainly not banking on the stock market for my retirement. francopoli details elsewhere why that's nuts.
1) You're with Fidelity. The fact that you're paying little in fees for Vanguard funds is a function of Vanguard, not Fidelity. Again, check the fees Fidelity is making. 2) Index funds do not "own pretty much everything you've heard of." Index funds track indices and even two S&P funds from two different companies have different compositions and different fee structures. 3) Don't talk to me like I'm an idiot. 4) It's entirely possible that even paid in full, you don't own your condo. You own a legal share of a 99-year-lease. That's the mechanism by which many condominium associations enforce their rules.