"The **ultimate irony** of the investment business is that there's no question that an obstetrician will deliver babies better than the husband or the wife. Or if you take dentists as a whole, they will remove teeth or fill teeth better than if the patients try to do it themselves.
But in the investment world, somebody who believes in American business — and who will seek out the lowest way to participate in business and do it consistently— will achieve results that exceed those of investment professionals as a group.
It's the only industry I can think of where the professional's efforts **subtract value** from what the layman can do himself.“
***Warren Buffet - CFA Magazine, Jan-Feb 2003***
Here comes another case of the MONDAYS!
But this has a hangover.
This one hurts.
The math does not lie. Wall Street does!
Wall Street likes us to be dumb and blind.
Once upon a time, you were told to work hard, invest in your retirement, and fund your 401k and if you do it consistently you will have enough to retire comfortably. ( hopefully )
But what is comfortable?
When can you retire?
How much is enough?
What will be left over for your family or your legacy?
If you are like me, most folks took this to heart and signed up for their employer's matching program and “set it and forget it." You bought some forced choice funds that looked good at first pass, but the details were buried in the fine print and the mechanics you never saw or understood.
And that is where the hidden lie begins.
Wall Street likes to tell you... "managing your money is too complicated - for you. You should be busy working hard.
We will manage your money for you."
But the smart money will tell you, "Your money should always be working harder than you do! Put it to work or fire it!"
The familiar finance marketing ads tease you to let WALL STREET manage your money “passively” in an ETF or pay a premium to get a top-notch "active manager" to grow your funds. And you will become rich and live the good life "some day." (A new AI tool to manage your funds should be hitting your inbox as you read this.) We are told.... "Buy this special ETF fund, or get in on this new hot fund and you should be good!"
So we all fall in line and set the deposits on auto withdrawal from our monthly paychecks and off we go. We may look at it once or 2x per year to see if the balance is going up. It becomes invisible, hard to read, harder to understand, and Wall Street likes it that way. We shift to "hopium" investing. We hope it will all work out - eventually.
But do we really understand what is going on?
You tell yourself, I won't have to live off this money until ”someday” so it is really not real money yet.
I will worry about it later... you can't time the market.. right?
For some reason, money does not seem real unless we get to spend it. We feel it when we get the “all-inclusive band” at the resort on vacation. Then the money is real.
The 1-2% our advisor takes out as fees every year is not. Everybody has to pay it ....so it is ok right?
Unfortunately, that is the status quo and Wall Street likes it that way. Compounding is a quiet tsunami that can sneak up on us - for or against us without warning and often too late. For most of us, our parents outliving their retirement funds is often the brutal reality check we need to realize the error in our ways.
Here are the mind-numbing facts and numbers to give you a wake-up call to the impact of ADVISOR FEES. (i.e. what Wall Street won't tell you!)
- The real effect of inflation on your investments over time (i.e. the compounded value of your declining dollar) is that it is going down in real buying power.
- Managers have to stay FULLY INVESTED all the time to justify their FEES. (ie AUM - ASSETS UNDER MANAGEMENT ) They can not sidestep a downturn in the market. A 50% loss in the market will require a 100% return to break even. Most people don't comprehend the asymmetrical effect losses have on their portfolio. Most people can not think in negative returns.
- By definition, a passive index fund exhibits pro-cyclical behavior, buying more of the stocks that have risen and selling more of those that have declined as their weightings move during index re-balancing. They routinely buy after high price appreciation and sell after high price depreciation. NET NET: You BUY HIGH and SELL LOW!
- Your ADVISOR gets their fee's no matter what! Your FEES are not paid based on performance! There is NO fiduciary duty in most funds. But there are always commissions..and it's those commissions that kill your retirement benefits and you don’t even see it.
Let's ask PERPLEXITY AI / CHAT GPT!
Let’s let AI show you the lie! ( and try not to cry )
ENTER THIS SIMPLE AI PROMPT:
"What is the amount lost to fees on an investment for 50 years with a 7% annual return with a 2% annual fee? Give the answer in % of total capital."
The AI response will be:
The amount lost to fees over 50 years with a 7% annual return and a 2% annual fee is approximately -61.07% of the total capital.
A FEW FACTS TO NOTE:- It has been estimated that each one-quarter (.25) percent increase in annual fees can push one’s retirement back by one full year. The U.S. Department of Labor has also weighed in on the issues of fees, warning 401(k) plan participants that each percent in fees can reduce a worker’s 401(k) balance by 28% over a 35-year working lifetime.
- Many investors never find out how much they are paying for their mutual funds because the cost of each mutual fund is automatically deducted from the fund’s gross return – and not broken out as a separate expense on the account statement. In other words, there is no “aha, these are my fees!” moment.
- Most investors don’t realize that (90%) ninety percent of financial advice is provided by advisors who are under no legal obligation to put the client's “best interest” ahead of their own.
- Investors are often directed to high-fee mutual funds, or other products that generate much higher revenue for the advisor than ultra-low-cost index funds do. In contrast, less than 10% of financial advice is provided by an investment fiduciary.
- 401(k) participants are often subject to a limited menu of high-fee mutual funds. Sellers of 401(k) plans rarely discuss investment fees before the employer actually purchases the plan, because, under current law, plan sellers are only required to disclose investment fees during enrollment, after employers have purchased the plan, making it difficult for participants and employers to effectively “comparison shop”. Worse, one General Accounting Office study showed that 80% of plan participants were unaware that they were paying any fees!
- For mutual funds that primarily hold equities, costs are significantly greater for retail shares. Annual expenses for median retail shares were 0.34 percentage points higher than those for institutional shares. Although this seems like a small difference, it represents about 37% higher fees.
“What happens in the mutual fund business is that the magic of compound interest on returns is overwhelmed by the tyranny of compounding costs.
It’s a mathematical fact.”
- Vanguard founder John Bogle.
While fees and taxes can not be fully eliminated, you should be able to make the conscious choice to manage the compounding ( or negative compounding of fees ) of your assets.
You
WILL have to live off of your investments
one day....
( not someday).
How will you live?
How will you manage?
Will your assets work harder than you?
Will you know what and how to manage it?
Will you have enough? If you are unsure of these answers, how will you close the gap?
If you want to learn to do it yourself,
Time Freedom Trading is a great place to start. Volatility can be your friend. Trading stocks and options can be done safely and with minimized risk to replace your income. The stock market does not have to be a scary place. Trading with a proper system and the proper tools is within your reach. You just need the right knowledge, process, and skills. If you can do 5th grade math, you can trade and invest in the stock market. Don't let Wall Street steal you money from you 2% at a time.
Whether with us or not... please start somewhere.
Just start!
No one cares more about
your money than
you do.
Protect your money from hidden fees and learn to make it earn and work harder for you.
Everyone deserves to earn time freedom.
Learn to earn the time freedom you deserve.
Life is better with Time Freedom.
TIME FREEDOM AWAITS!
For your Freedom;
| THE BALD BULL
P.S.S. PLEASE PAY IT FORWARD!
Every one deserves Time Freedom! If you know someone who would like to learn to earn time freedom, please forward this email / link and share the freedom!
"Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes."
- Jesse Livermore
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