Way OT- Financial Planning

ksmyrl

Anybody here manage their retirement and/or other investments yourself? I've always paid a planner to manage my paltry investments. Switched to a new guy in 2020. Did well at first and now he's not even matching the S&P. I could buy a cheap index fund, forget about it, and match the S&P. 

Had lunch yesterday with a longtime client and friend. He made me promise to fire my guy asap. He is older than me and already retired. He retired at 54. Manages his own stuff and has donated over $15m to charity in his life. He was a family physician so he made good money working but got wealthy in the market, not from being an MD. 

His advice? "Use common sense and only buy idiot proof companies, cause sooner or later an idiot will be running that company". He only owns a total of 30 stocks. He has never owned a mutual fund in his life but did agree a simple S&P index fund is "idiot proof" for a family man still paying for kids etc. His current monthly income is insane and it's all from dividends from those 30 companies. 

Just curious if any of you are willing to share your experiences. 

 

Foghorn

Your friend is wise - in general.  I've done better than the market average over the years buying stocks that are recommended by The Motley Fool - an online company that espouses a philosophy similar to your friend's in some ways (they "swing for the fences" on many of their recommendations, but also recommend good steady long term holdings as a significant portion of the portfolio).

I've also learned the following about myself.

- I like to buy and track fun interesting stocks.
- I like to track them as long as they are doing well, but even this is sporadic.
- I don't pay as much attention to them as I should when they are not doing well.
- As a result, I don't know when to sell.

Because of all of this, I've basically had a couple of "home runs" (AOL and Amazon in the 1990s), a bunch of losers or minimal winners that collectively have made a little money (all kinds of things), and some things that have done generally well over the long term (Berkshire Hathaway, J&J, Oracle, Coke, Amgen, etc).

Because I recently realized and fully admitted my shortcomings where this is concerned - and because I am about to make a sizable investment in a real estate opportunity, I am about to sell my more risky stocks for a sum total of very little gain and hold onto the types of stocks mentioned above that likely align with your friend's holding and philosophy.  These sales are going to fund the real estate investment.  I'm doing this partly for the tax implications as the net of everything I am selling is only a modest gain.

One thing that isn't obvious to most people is that the dividends make a huge difference.  If you sign up for the Dividend Reinvestment Plan (DRIP) you will get returns that are significantly better - especially over time - than if you don't.  When you look up past returns of any stock, this factor isn't considered in the charts.  For example, a stock that outperforms the S&P500 by 0.5%/year over the last 10 years, but pays a 2.5% dividend, really outperforms by 3%.  Do that over 20 years and with the compounding you have 1.8 times as much as if you did an index fund.

I hope that helps.

lkapigian

No plans has always has always been my plan , worked so far , my out going is always a trickle so it’s easy to keep the hopper full , basically zero debt so maintaining a positive income to debt ratio is easy 

RRP

Your doctor friend is correct in my opinion and @Foghorn gave you some good advice as well. I personally never have seen the need to hire a financial planner - but as you may already know I was a bank controller during my working years. Fresh out of college in 1966 I began investing when I could only afford to buy 5, 10 or 20 shares at a time. Though I am conservative by nature, just remember that being a shareholder has an inherent risk in itself and yes you can lose. That said I have lost on some stocks, but I also have done quite handsomely over the past 57 years.

My only real advice to a newbie reading this is invest for the long haul, expect to ride through some market downturns and DON'T panic!!!

Ozzie_Isaac

NFTs, Beanie Babies, and Crypto.  That is all you need to know.

fishlessman

My waterfront properties and the boat over 30 years has way outdone those financial planners....yes. the boat.....that and I have fun with those things

Foghorn

It's a little off the main topic of this off topic discussion but I'm going to make a couple of statements about a couple of topics and would be curious as to the opinions of others:

1) Most wealthy people I know got there through real estate - at least as a significant portion of their portfolio.  This is because very few people have the discipline to consistently spend less than they earn and put money away over the long haul - but taking on a mortgage becomes a requirement that essentially makes you honor your commitment to acquire wealth.  Real estate rarely outperforms the stock market, especially when all expenses are considered, but if you can buy something on a 15 year mortgage and rent it out, in 15 years you have a sizable holding.  We're on our 2nd round of that process and turned one rental property into 2 after we paid off the first mortgage.  

2) Most people try to follow mathematic guidance to decide where to put their money.  For example, it makes no sense to put money into a savings account or money market account that will earn 1-5% if you have credit card debt at 13-18%.  So they think "I'll just pay off this credit card debt over the next 1-3 months and then start putting money away."  If you fast forward 20 years, they are still in that cycle and have never put any money away.  Something has always come up that they "need" to put on the credit card - a car repair, airline tickets to a wedding or funeral, Christmas gifts for the children, replacing a broken TV or washing machine, etc, etc, etc.  On the other hand, they could have been putting money away FIRST ("Pay yourself first" - reference to "The Wealthy Barber") and then dealing with the credit card with what was leftover.  With this process, you pay more in credit card interest over the course of a lifetime, but after 20 years you have a fair amount of money accumulated (obviously, the "pay yourself first" process could refer to a mortgage on a rental property as mentioned above).

Anyway, the bottom line with both of these topics is that it seems to me that 

Psychology >>> Math

At least where most people's behavior of personal finance is concerned.

Referring back to the original post - it seems that the more remarkable thing about the doctor who was mentioned is not that he picked good stocks, it is that he had the discipline to consistently put money into the market over a long time.

I welcome pushback on any of this.

ksmyrl

@foghorn that's sort of Dave Ramsey's debt snowball philosophy. Ditch the math and build "momentum" by paying off small debts first. He's been flamed for that philosophy but it works. My doctor friend had and has some real-estate. He says it's good and safe but very slow to increase...generally speaking. He's hit some home runs and some foul balls w real-estate. And says "if I had put the money I lost on real estate in the market I'd have considerable more wealt". He also doesn't have the desire to be a landlord, so rentals are not his thing. 

The fact that his monthly income, all from dividends, is greater than at any time.when he was working is something extraordinary. Clearly his method may not be for everyone but it certainly has worked for him. Again...this man has given away $15M++ in his lifetime with no signs of slowing down. 

Dobie

1 live below your means.
2 increase your means.
3 repeat. 

Ozzie_Isaac

ksmyrl said:

@foghorn that's sort of Dave Ramsey's debt snowball philosophy. Ditch the math and build "momentum" by paying off small debts first. He's been flamed for that philosophy but it works. My doctor friend had and has some real-estate. He says it's good and safe but very slow to increase...generally speaking. He's hit some home runs and some foul balls w real-estate. And says "if I had put the money I lost on real estate in the market I'd have considerable more wealt". He also doesn't have the desire to be a landlord, so rentals are not his thing. 

The fact that his monthly income, all from dividends, is greater than at any time.when he was working is something extraordinary. Clearly his method may not be for everyone but it certainly has worked for him. Again...this man has given away $15M++ in his lifetime with no signs of slowing down. 

Real estate is where I have made my real money.  I have steady safe investments that have netted some decent returns, but those are not nearly as tax advantaged as real estate is for me.

Horses have lost me a lot of money.  Horses are a terrible investment.  Even when you hit a homerun with one who winds up being worth a lot, it just barely offsets the costs with finding that one.  I keep trying though.  Kind of like gambling or playing the loto.

Corv

For me, it's rental property. I got lucky and invested in an area that's been desirable for a long time. I have friends that bought poorly and paid for it. And like other other advice here, buy and hold it.

alaskanassasin

Name a asset you can depreciate on your taxes and appreciates at the same time.

JohnInCarolina

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Langner91

Ozzie_Isaac said:

ksmyrl said:

@foghorn that's sort of Dave Ramsey's debt snowball philosophy. Ditch the math and build "momentum" by paying off small debts first. He's been flamed for that philosophy but it works. My doctor friend had and has some real-estate. He says it's good and safe but very slow to increase...generally speaking. He's hit some home runs and some foul balls w real-estate. And says "if I had put the money I lost on real estate in the market I'd have considerable more wealt". He also doesn't have the desire to be a landlord, so rentals are not his thing. 

The fact that his monthly income, all from dividends, is greater than at any time.when he was working is something extraordinary. Clearly his method may not be for everyone but it certainly has worked for him. Again...this man has given away $15M++ in his lifetime with no signs of slowing down. 

Real estate is where I have made my real money.  I have steady safe investments that have netted some decent returns, but those are not nearly as tax advantaged as real estate is for me.

Horses have lost me a lot of money.  Horses are a terrible investment.  Even when you hit a homerun with one who winds up being worth a lot, it just barely offsets the costs with finding that one.  I keep trying though.  Kind of like gambling or playing the loto.

Living one town away from Dixon, Illinois, it always seemed very easy to make money in horses.

But, I guess the old saying is true; if you want to make a small fortune in horses, start with a large fortune.

alaskanassasin

JohnInCarolina said:

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Work is the secret sauce.

JohnInCarolina

alaskanassasin said:

JohnInCarolina said:

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Work is the secret sauce.

Is it really now?  I'll be sure to tell the fairly poor people I know working two jobs that they should just work harder or add a third job.  

alaskanassasin

JohnInCarolina said:

alaskanassasin said:

JohnInCarolina said:

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Work is the secret sauce.

Is it really now?  I'll be sure to tell the fairly poor people I know working two jobs that they should just work harder or add a third job.  

Is there another way to obtain “Financial independence and wealth?” Please enlighten me professor.

JohnInCarolina

alaskanassasin said:

JohnInCarolina said:

alaskanassasin said:

JohnInCarolina said:

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Work is the secret sauce.

Is it really now?  I'll be sure to tell the fairly poor people I know working two jobs that they should just work harder or add a third job.  

Is there another way to obtain “Financial independence and wealth?” Please enlighten me professor.

Scroll up.  

alaskanassasin

JohnInCarolina said:

alaskanassasin said:

JohnInCarolina said:

alaskanassasin said:

JohnInCarolina said:

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Work is the secret sauce.

Is it really now?  I'll be sure to tell the fairly poor people I know working two jobs that they should just work harder or add a third job.  

Is there another way to obtain “Financial independence and wealth?” Please enlighten me professor.

Scroll up.  

To the other posters comments? 

JohnInCarolina

alaskanassasin said:

JohnInCarolina said:

alaskanassasin said:

JohnInCarolina said:

alaskanassasin said:

JohnInCarolina said:

I tend to avoid giving people financial advice, because I have seen so many friends - most very smart, well educated people - relay their financial plans and tell me how much of a “sure thing” they were, only to have them not pan out years later.  It seems like there’s this human tendency to believe we’ve discovered the “secret sauce” to obtaining financial independence and wealth.  

Work is the secret sauce.

Is it really now?  I'll be sure to tell the fairly poor people I know working two jobs that they should just work harder or add a third job.  

Is there another way to obtain “Financial independence and wealth?” Please enlighten me professor.

Scroll up.  

To the other posters comments? 

No, just mine, where I explained that I tend not to give people advice on this topic and why.  You quoted it, but it seems like you didn't actually read it the first time.  So I was hoping the second time might take.  

alaskanassasin

 It’s ok @JohnInCarolina you can be wrong and still be the smartest person on the forum.

JohnInCarolina

alaskanassasin said:

 It’s ok @JohnInCarolina you can be wrong and still be the smartest person on the forum.

I appreciate that - thank you!

Ozzie_Isaac

Langner91 said:

Ozzie_Isaac said:

ksmyrl said:

@foghorn that's sort of Dave Ramsey's debt snowball philosophy. Ditch the math and build "momentum" by paying off small debts first. He's been flamed for that philosophy but it works. My doctor friend had and has some real-estate. He says it's good and safe but very slow to increase...generally speaking. He's hit some home runs and some foul balls w real-estate. And says "if I had put the money I lost on real estate in the market I'd have considerable more wealt". He also doesn't have the desire to be a landlord, so rentals are not his thing. 

The fact that his monthly income, all from dividends, is greater than at any time.when he was working is something extraordinary. Clearly his method may not be for everyone but it certainly has worked for him. Again...this man has given away $15M++ in his lifetime with no signs of slowing down. 

Real estate is where I have made my real money.  I have steady safe investments that have netted some decent returns, but those are not nearly as tax advantaged as real estate is for me.

Horses have lost me a lot of money.  Horses are a terrible investment.  Even when you hit a homerun with one who winds up being worth a lot, it just barely offsets the costs with finding that one.  I keep trying though.  Kind of like gambling or playing the loto.

Living one town away from Dixon, Illinois, it always seemed very easy to make money in horses.

But, I guess the old saying is true; if you want to make a small fortune in horses, start with a large fortune.

Key to money in horses is to get a sire who becomes famous.  Then sell his semen.  That is why Metallic Cat was willing to pay $165k to be featured in an episode of Yellowstone.  You just need a few money earner off-spring and then you have an ATM at your barn.

Another key is to always have a lot of horses moving through your program.  Then you just need to focus on hitting singles and doubles, occasionally get a homerun.  That will account for the horses that you will strike out on.

AlmaHolzhert

I've gotten rich the old-fashioned way.

dmchicago

I flip gently used Pizza Ovens. 

SGH

AlmaHolzhert said:

I've gotten rich the old-fashioned way.

You stole it? That’s about the oldest fashion way that comes to mind. 

SGH

Ozzie_Isaac said:

Real estate is where I have made my real money. 

Just for a single moment I wish that I could experience what having “real money” feels like. It’s got to be great. Unfortunately I will never know.  

dbCooper

SGH said:

AlmaHolzhert said:

I've gotten rich the old-fashioned way.

You stole it? That’s about the oldest fashion way that comes to mind. 

Once, many years back, I was oh-so-close to marrying money.  She wised up and was for the best. 

I do think you have a leg up on the game if your partner shares the same financial goals/strategies as you.

fishlessman

Financial planning in Maine is getting off your lazy arse and finding your wife a second job

RajunCajun

Slow and steady....sloowwwww andddd steadyyyyyyy with some level of patience.  Time in the market with a dividend and DCA strategy has worked.....but we didn't get rich in 6-12 months, but met some level of realistic expectations.  If you need a service that you aren't an expert at, then hire somebody.  The key is to find one for YOU that gives you the "warm and fuzzy".  Best of luck

TheFishWhisperer

fishlessman said:

Financial planning in Maine is getting off your lazy arse and finding your wife a second job

Did I mention I’m not married?  I’m not married.