How to convince a young person that she is right?

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cholan
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How to convince a young person that she is right?

Post by cholan » Sun Feb 28, 2016 1:54 pm

My daughter( in her thirties), has no debts, saves 15% gross salary and contributes maximum to Roth

401k
Vanguard Institutional Index SP 500, Blackrock SP 500, Fidelity Spartan SP 500 -three different companies and the cheapest ER at 0.04 25%

Taxable
at Vanguard
FTSE All world Ex-Us 25%
Total Stock Market 25%

Roth IRA
at Vanguard
Total Bond Index 20%
Total International Bond Index 5%

Why am I posting this for your comments?
My daughter seems to manage her money sensibly. But she seems to have no knowledge of investing. She does not read any investing books I have donated her over the years. She will call me occasionally to say that her "friends" at work are doing things differently and the financial guidance from her 401k provider seems to point her towards expensive funds.

How do I convince her that she is doing the right thing, other than "trust me"?

Thanks
...leaving not a rack behind.

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Rob5TCP
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Re: How to convince a young person that she is right?

Post by Rob5TCP » Sun Feb 28, 2016 1:55 pm

There are plenty of studies (just Google) that show just how much "advice" from an "investment professional" can cost you in the long run.
She is 30 - show her the affects of 10, 20, 30 years of high fees.

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Toons
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Re: How to convince a young person that she is right?

Post by Toons » Sun Feb 28, 2016 1:58 pm

Suggest to her that she stop by this website now and then and do some reading.
I think it will reaffirm the choices she has made regarding low cost investing :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

lack_ey
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Re: How to convince a young person that she is right?

Post by lack_ey » Sun Feb 28, 2016 2:06 pm

Tell her that the 401k planner has a conflict of interest, and this is how the investment industry works, that their livelihoods depend on selling people on ideas and products rather than to figure out what's best in an unbiased fashion. Unlike in many other professions, there usually isn't even a legal or professional requirement to do otherwise (and even in these cases like medicine there are untowards influences creeping in).

If she's not interested in reading any of the books you gave her, I doubt she'd want to stop by here or Google some studies about costs.

mhalley
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Re: How to convince a young person that she is right?

Post by mhalley » Sun Feb 28, 2016 2:06 pm

I think her portfolio could use some tweaking. For example, I don't like having her Roth 100% bonds. Have her come here to get a portfolio revamp and reassurance.

livesoft
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Re: How to convince a young person that she is right?

Post by livesoft » Sun Feb 28, 2016 2:23 pm

My mom would always say "If your friends jumped over a cliff, would you jump over after them?"

I would turn it around: "Prove to me that what your friends and that guy are telling you is right and I'm wrong."
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neofight
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Re: How to convince a young person that she is right?

Post by neofight » Sun Feb 28, 2016 2:36 pm

lack_ey wrote:If she's not interested in reading any of the books you gave her, I doubt she'd want to stop by here or Google some studies about costs.
On the contrary, I find one has a much easier time convincing someone to do internet research or read a study, before they commit to reading a whole book (or multiple books).

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Taylor Larimore
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Re: How to convince a young person that she is right?

Post by Taylor Larimore » Sun Feb 28, 2016 2:40 pm

cholan wrote:My daughter( in her thirties), has no debts, saves 15% gross salary and contributes maximum to Roth

401k
Vanguard Institutional Index SP 500, Blackrock SP 500, Fidelity Spartan SP 500 -three different companies and the cheapest ER at 0.04 25%

Taxable
at Vanguard
FTSE All world Ex-Us 25%
Total Stock Market 25%

Roth IRA
at Vanguard
Total Bond Index 20%
Total International Bond Index 5%

Why am I posting this for your comments?
My daughter seems to manage her money sensibly. But she seems to have no knowledge of investing. She does not read any investing books I have donated her over the years. She will call me occasionally to say that her "friends" at work are doing things differently and the financial guidance from her 401k provider seems to point her towards expensive funds.

How do I convince her that she is doing the right thing, other than "trust me"?

Thanks
Cholan:

Send her copy, or give her this pdf link to Dr. William Bernstein's "If You Can."

Wm Bernstein, who has one of the most brilliant minds in finance, recommends (almost) the same three funds: Total U.S. Stock Market, Total International Stock Market and Total Bond Market. You might also give her a link to my favorite Three-Fund Portfolio

Best wishes.
Taylor
Last edited by Taylor Larimore on Sun Feb 28, 2016 2:47 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle

Boglegrappler
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Re: How to convince a young person that she is right?

Post by Boglegrappler » Sun Feb 28, 2016 2:43 pm

You need to find a synopsis of the points made by Bogle in his Little Book.

I found his basic arguments to be quite powerful.

Fees are (very, very) important.

Half the managers, by definition, underperform.

Because of fees, most of those who overperform in a given year don't.

Even if they do overperform after fees, there isn't easily predictable persistence over time in performance.

......I'm sure somewhere someone has summarized these points succinctly. They really are quite simple.

Teague
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Re: How to convince a young person that she is right?

Post by Teague » Sun Feb 28, 2016 3:35 pm

How to convince a young person that they are right? Heh, I can't say I've ever had that problem. Now, convincing a young person they are wrong has been quite a different matter. When I was 16 I knew everything - decades later I hardly seem to know anything at all.

Is the concern that she is planning to significantly change her investing style, or a more general concern that she doesn't really have an investing style and is likely to be blown about by the winds of financial "noise?" Unfortunately, it seems many (most?) people have little desire to learn about money management and investing, even served up on a silver platter, though that is obviously in their best interest. This may be one of those things where you can plant seeds as time goes along, but whether she will perform the necessary cultivation is beyond your control.
Semper Augustus

cholan
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Re: How to convince a young person that she is right?

Post by cholan » Sun Feb 28, 2016 9:20 pm

Thank you for the responses. I read Bernstein's If You Can and it seems to be the right starting point. I will encourage her to join the forum and ask questions and perhaps get support when she has doubts.

Thanks
...leaving not a rack behind.

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TXJuice
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Re: How to convince a young person that she is right?

Post by TXJuice » Mon Feb 29, 2016 12:22 am

"An Investor who pays the average .74% fee for a mutual fund and invests $500 a month for 30 years (with a 6% gain) will pay more than $33,615 more than an investor in a low-cost index fund that charges .05%."

It looks like she is probably contributing more than $500 a month, so it would be more than $33k in the end.
That's all of the convincing that I would need.

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LowER
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Re: How to convince a young person that she is right?

Post by LowER » Mon Feb 29, 2016 1:13 am

20 minutes with firecalc and you.

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dratkinson
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Re: How to convince a young person that she is right?

Post by dratkinson » Mon Feb 29, 2016 7:16 pm

"She's right."

You can point her to this topic and let her read us echoing your thoughts that she's right.

And if she wants to know "why", then that's were the books come in. And why would she want to know "why"? Because you will not always be there to guide her. And so she can teach her kids.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

jarhead_jr
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Re: How to convince a young person that she is right?

Post by jarhead_jr » Mon Feb 29, 2016 8:14 pm

Reminder her fees and risk are the only control she has in her portfolio. Risk isn't really even controllable as we never know what can happen. Focus on the thinks you can control and broadly diversify to reduce risk.

cholan
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Location: new york

Re: How to convince a young person that she is right?

Post by cholan » Mon Feb 29, 2016 9:22 pm

dratkinson wrote:"She's right."

You can point her to this topic and let her read us echoing your thoughts that she's right.

And if she wants to know "why", then that's were the books come in. And why would she want to know "why"? Because you will not always be there to guide her. And so she can teach her kids.
Thank you.You have understood my intent clearly. This is precisely why I asked the original question.
...leaving not a rack behind.

derosa
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Re: How to convince a young person that she is right?

Post by derosa » Mon Feb 29, 2016 9:59 pm

Humble Brag.

Ok Dad you have received your compliments from the board. She is clearly an adult with a decent job and doing well in life. We get it - you raised a good kid. Must not be a spouse or significant other because you would have had to have mentioned that person. Unless she comes to you I would stay out - it's her life.

If there were problems you would have filled the post with bankruptcies, credit card debt, living in the basement, no job, 30 jobs, boyfriend that doesn't work, drugs, borrowing money and not paying back, etc etc.

There is a saying in sales that is as old as sales. Telling ain't Selling. What? Think about it. Telling people what to do doesn't result in them doing anything. does it? People don't buy a thing because you told em. {Yes OP you are selling aren't you?} The key is to question question question...

If, for some reason you can't resist talking about finances with her again, everything you say should be in the form of a question. Why? Because when you are asked a question you have to think and respond. Don't you? And you are engaged. When someone sits there and tells you the state of the world - what is your response? Eyes glaze over, what was I going to do later, what time is it, I'll just nod and duck out....oh yeah Now what were you saying? Good ideas I talk with you later about that...

MathWizard
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Re: How to convince a young person that she is right?

Post by MathWizard » Mon Feb 29, 2016 10:09 pm

Perhaps you/she would find the frontline video
The Retirement Gamble
helpful.

finite_difference
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Re: How to convince a young person that she is right?

Post by finite_difference » Mon Feb 29, 2016 11:18 pm

One thing you could help her do as an exercise would be to take 5% of her earnings and invest it in whatever fund she thinks is so great. (Provided it's not some crazy 5% load garbage.) Let's say it's an expensive fund with an ER of 1.5%. Then each year you can compare how it's doing to the low ER funds. Over time chances are the low ER funds will win out. If not, well your exercise failed but at least she earned some extra money!

I bet after 10 years if she compares notes with all these "friends" of hers she'll find that she's well ahead of the game. But learning how to track is not a bad idea I think. I sold some taxable stock recently to invest in a Roth IRA. I have no idea how well I did compared to if I had originally investing in VTSAX using a Roth IRA for example. I am pretty sure I would've been better off doing that originally. But I should try to ballpark the calculation to see :)
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

NOLA
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Re: How to convince a young person that she is right?

Post by NOLA » Tue Mar 01, 2016 12:01 am

Since she is not likely to read any of the great investment books, maybe share this thread/link at Bogleheads with her? Unless of course you think it will upset her that you discussed her "investment future" with some of the brightest people out there. I bet some kids would really appreciate it, and some might get a little ticked off.

Anyway, carry on good Bogleheads!

Bfwolf
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Re: How to convince a young person that she is right?

Post by Bfwolf » Tue Mar 01, 2016 12:31 am

For somebody who has not read anything about investments, she sure seems to have a perfect Boglehead portfolio. Did she figure out on her own that this was the right asset allocation or is this what you or somebody else suggested to her?

Whakamole
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Re: How to convince a young person that she is right?

Post by Whakamole » Tue Mar 01, 2016 2:59 am

She sounds like a sharp tack looking at her investments.

Maybe point her to Larry Swedroe's article about how star managers/funds can fall apart, even with long track records of outperformance, and end up reverting to the mean or below in many cases. Or Warren Buffett's statements about leaving his trust in a stock-bond index fund.

hyla
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Re: How to convince a young person that she is right?

Post by hyla » Tue Mar 01, 2016 1:55 pm

Also, I would try to avoid being overbearing about this. If SHE brings up investments in a conversation, by all means use some of the good suggestions other posters have put forth to encourage her that her current portfolio is a good one. But I'd go easy on giving her more books or frequently starting investment discussions; excessive badgering about a topic from a parent can be annoying and drive people to turn to others for advice. If she's doing things well now, there's no reason why she needs to read investment books or run simulations. People can make good investing decisions without being particularly interested or excited about every detail of investing - and it sounds like your daughter is one of these people. Maybe she'd just rather spend her time reading history books or mystery novels or something instead of your investment books - that doesn't mean she's going to move her excellent low cost portfolio to expensive active funds.

inbox788
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Re: How to convince a young person that she is right?

Post by inbox788 » Tue Mar 01, 2016 4:16 pm

cholan wrote:My daughter seems to manage her money sensibly. But she seems to have no knowledge of investing. She does not read any investing books I have donated her over the years. She will call me occasionally to say that her "friends" at work are doing things differently and the financial guidance from her 401k provider seems to point her towards expensive funds.

How do I convince her that she is doing the right thing, other than "trust me"?
She's wrong to think she can do better!
Bfwolf wrote:For somebody who has not read anything about investments, she sure seems to have a perfect Boglehead portfolio. Did she figure out on her own that this was the right asset allocation or is this what you or somebody else suggested to her?
I was thinking exactly the same thing. How did she stumble upon the holy grail of investing when many people try and fail at everything else before seeing the light or never find it?

She doesn't know how good she has it. Maybe she needs to lose some money before realizing she's doing great. It's like listening to gamblers coming back from the casino bragging how much they won this weekend.

mouses
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Re: How to convince a young person that she is right?

Post by mouses » Tue Mar 01, 2016 4:27 pm

I would do a projection for her of how much money she'll have when she retires if she leaves things as is. If it's plenty, why mess with success?

livesoft wrote:My mom would always say "If your friends jumped over a cliff, would you jump over after them?"
"Just because everybody else does it, doesn't mean that you have to do it." Are we related :-)

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