| Let me start out by telling a little story that | | | | involved in investing. Take some time and get the |
| happened to me a few years ago. My wife and I | | | | basics down. Some resources can be found at After |
| were referred into a financial advisor to get her set | | | | that, determine what kind of investing you want to |
| up on a 403b retirement program. The broker went | | | | do. |
| through the options for the fund and towards the | | | | In most cases I've seen, someone wants to get |
| end asked if we were ready to make a decision. | | | | started in something uncomplex as a way to get into |
| Since I had never dealt with a broker before, I | | | | the market. Mutual funds offer the ability to do that |
| decided to ask what the fees were. My dad had told | | | | at a very low cost. Typically, a discount brokerage |
| me that day to research the actual mutual fund fee | | | | will be your easiest and cheapest way to do that. |
| on my own 401k, so the question was stuck in my | | | | Examples of discount brokerages are Trowe Price or |
| head. The reponse that I got next still shocks me to | | | | Vanguard. The only fees that you will pay is an |
| this day. 5.75% on every dollar that I put into the | | | | annual fund management fee of anywhere from |
| fund, right off the top. Not only that, but the actual | | | | .25%-1.25%, depending on the fund. The fund |
| mutual fund he was directing me to charges 1.5% | | | | company will tell you the makeup of the fund, the |
| annual fee. | | | | performance, and the morningstar rating. These are |
| I was shocked to say the least. This same broker | | | | all tools to help you determine if you are picking the |
| had just painted my wife and I a scenario, in which if | | | | right fund for your stage in life. If you need help, |
| we put in $250 a month and earned a conservative | | | | then call the number and ask for more information |
| 7% a year, we would be rich when we retired. | | | | about a particular fund. By learning a little about the |
| Imagine my surprise when I did the math and learned | | | | process, you are saving yourself a lot of money |
| that actually, if we earned 7% a year, we would be | | | | going forward. |
| DOWN money because of his fees. As we left I got | | | | I understand that most people are intimidated about |
| more angry, thinking about the fact that the school | | | | money. I have heard people tell me constantly that |
| district had referred us into this person (as well as | | | | they don't understand money, so they listen to their |
| countless other teachers) and here he was, running a | | | | advisor. That is fine, that is what advisors are paid to |
| racket. When I questioned him why his fees are so | | | | do. That's the problem though, they have to put |
| high he responded that we are paying him for advice | | | | food on the table too! So, look at the value of that |
| on which funds to pick. Advice? How much is there | | | | initial meeting that you had. The one where he put in |
| to know? How do you know if you are getting a fair | | | | plain English how easy investing was. Think about him |
| shake? Read below! | | | | taking $345 of your $6K you invested that year and |
| Financial advisors serve a purpose, there is no | | | | the year after and the year after. Pretty soon you |
| question. But, I've seen friends that I KNOW don't | | | | have got to start thinking, "What he was doing |
| know a lick about finance, go through a training | | | | wasn't that hard! He hasn't even done anything for |
| program and 8 weeks later become an expert. I | | | | that initial meeting!". So, if you need an financial |
| don't doubt that they learned something, but they | | | | planner for some more complex situations, then fine. |
| are not qualified to charge me 6% as a fee for their | | | | But, I think its worth your money to get educated |
| wisdom! If you are starting out and want to get | | | | on the basics. |