Giving Investment Advice to Friends and Relatives

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Taylor Larimore
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Giving Investment Advice to Friends and Relatives

Post by Taylor Larimore »

Bogleheads:

This forum frequently receive posts by Bogleheads who want to help friends and relatives with their portfolios. My suggestion is to say "No." Here's why:

* You do not have the qualifications and experience of a full-time professional adviser.

* Many people do not understand how investing works. They may have unreasonable expectations.

* Expect others to say your suggested portfolio is inferior.

* During periods of underperformance, you will feel responsible.

* ALL stocks and bonds have periods of underperformance. You will be blamed.

* When your recommended investments have periods of underperformance (all do) your relationship could be irrevocably damaged.

Suggestion:

Give your friend or relative a good book on investing. This will help them understand successful investing. If you select The Bogleheads' Guide to the Three-Fund Portfolio, all royalties will go to "The John C. Bogle Center For Financial Literacy".

After reading a good book on investing, those you want to help will be ready to self-invest -- or know enough to select a good professional advisor.

Best wishes.
Taylor
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"Simplicity is the master key to financial success." -- Jack Bogle
Dave55
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Re: Giving Investment Advice to Friends and Relatives

Post by Dave55 »

Hi Taylor, I had to take over my dad's portfolio due to his age and cognitive abilities. The whole family wanted me to do it too. I also had to do the same for another elderly family member who insisted on me taking it over, so I did. No regrets. They have very conservative portfolio's as they are in their 90's and all is good. I hope you are doing good!

Dave
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Re: Giving Investment Advice to Friends and Relatives

Post by sailaway »

For those relatives who aren't going to take the time to read large books, we also have the boglehead wikis and the "If You Can" PDF by Bernstein.
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Re: Giving Investment Advice to Friends and Relatives

Post by Normchad »

TAylor, I completely agree. And for all the reasons you cited.
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Re: Giving Investment Advice to Friends and Relatives

Post by Normchad »

TAylor, I completely agree. And for all the reasons you cited.
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Re: Giving Investment Advice to Friends and Relatives

Post by burritoLover »

Definitely good advice. If they ask about my portfolio, I state it rather matter-of-factly almost in a self-deprecating way.
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Re: Giving Investment Advice to Friends and Relatives

Post by abuss368 »

Taylor Larimore wrote: Fri May 13, 2022 1:53 pm Bogleheads:

This forum frequently receive posts by Bogleheads who want to help friends and relatives with their portfolios. My suggestion is to say "No." Here's why:

* You do not have the qualifications and experience of a full-time professional adviser.

* Many people do not understand how investing works. They may have unreasonable expectations.

* Expect others to say your suggested portfolio is inferior.

* During periods of underperformance, you will feel responsible.

* ALL stocks and bonds have periods of underperformance. You will be blamed.

* When your recommended investments have periods of underperformance (all do) your relationship could be irrevocably damaged.

Suggestion:

Give your friend or relative a good book on investing. This will help them understand successful investing. If you select The Bogleheads' Guide to the Three-Fund Portfolio, all royalties will go to "The John C. Bogle Center For Financial Literacy".

After reading a good book on investing, those you want to help will be ready to self-invest -- or know enough to select a good professional advisor.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense."


Hi Taylor -

I could not agree more! I have helped my parents for 15 years but my Mom was ex-Merrill Lynch so it was a different situation. Now they have a simple index fund portfolio.

I have other family who I used to try and help. Now I simply recommend Vanguard PAS. They engaged them and could not be happier and sleep very well at night.

I recommend Vanguard PAS now to anyone who asks me for advice.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Giving Investment Advice to Friends and Relatives

Post by abuss368 »

Dave55 wrote: Fri May 13, 2022 2:02 pm Hi Taylor, I had to take over my dad's portfolio due to his age and cognitive abilities. The whole family wanted me to do it too. I also had to do the same for another elderly family member who insisted on me taking it over, so I did. No regrets. They have very conservative portfolio's as they are in their 90's and all is good. I hope you are doing good!

Dave
You are a fine gent Dave!

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Giving Investment Advice to Friends and Relatives

Post by 000 »

I think target date INDEX funds are a better answer than advisors or books.
Last edited by 000 on Fri May 13, 2022 10:47 pm, edited 1 time in total.
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Re: Giving Investment Advice to Friends and Relatives

Post by vasaver »

000 wrote: Fri May 13, 2022 8:16 pm I think target date funds are a better answer than advisors or books.
Until they put them in a taxable account...that is probably worth the cost of PAS right there.
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Re: Giving Investment Advice to Friends and Relatives

Post by 000 »

vasaver wrote: Fri May 13, 2022 8:23 pm Until they put them in a taxable account...that is probably worth the cost of PAS right there.
I think that now that that has happened it is much less likely to recur, as the different Vanguard TDF classes are now merged.

Recency bias is a very strong influence, but frequently incorrect concerning future outcomes. In this case, the structural causes no longer exist.
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Re: Giving Investment Advice to Friends and Relatives

Post by egri »

Taylor, I agree, for the reasons you mentioned, and in my experience, the relatives who have asked me to get involved are roughly in the same position as someone attempting to take a sailboat over Niagara Falls.
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Re: Giving Investment Advice to Friends and Relatives

Post by arcticpineapplecorp. »

they can also be directed to www.bogleheads.org to have their questions answered.

if, after directed here, they don't ask their questions, they probably aren't that serious about receiving investment advice.

seeking advice from a financial planner is, however, fraught with problems. For starters I think the percentage of advisors who are fiduciaries is very low, like 1%-2% or so. They can, however, and probably should research any potential advisors by reviewing their ADV Part 2. Mike Piper shows use how:

https://obliviousinvestor.com/checking- ... v-part-ii/

They also can have a potential advisor sign the fiduciary oath:

http://www.thefiduciarystandard.org/fiduciary-oath/

otherwise, they might end up with an advisor from Ed Jones, am I right?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: Giving Investment Advice to Friends and Relatives

Post by Grt2bOutdoors »

arcticpineapplecorp. wrote: Fri May 13, 2022 8:50 pm they can also be directed to www.bogleheads.org to have their questions answered.

if, after directed here, they don't ask their questions, they probably aren't that serious about receiving investment advice.

seeking advice from a financial planner is, however, fraught with problems. For starters I think the percentage of advisors who are fiduciaries is very low, like 1%-2% or so. They can however, have a potential advisor sign the fiduciary oath:

http://www.thefiduciarystandard.org/fiduciary-oath/

otherwise, they might end up with an advisor from Ed Jones, am I right?
The most important thing about a book besides the author :wink: is the permanence of it, especially if it is in paperback format. If the site is down or the internet is down, a book on a shelf is a handy reference.

Excellent suggestion Taylor!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: Giving Investment Advice to Friends and Relatives

Post by snackdog »

Unless people ask you for advice directly, do not offer it whatsoever. This applies to family and to friends. It includes finances, romances, child rearing and heaps of other things. Your "advice" will be regarded as unwelcome criticism, no matter how you offer it, including a book. If your in-laws came to dinner then later sent an unsolicited book on cooking, how would you feel?

Just wish them well and mind your own business.
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Re: Giving Investment Advice to Friends and Relatives

Post by arcticpineapplecorp. »

First listen (you, not him) to Rob Berger's Dough Roller Money Podcast episode 299 (https://www.youtube.com/watch?v=XE5xCPMbT5o). It's titled "How to help others with their financial struggles".

Rob discusses how he had conversations with his kids and even friends. He didn't hit them over the head with information. He didn't put down his friends' advisors. He didn't give them books and so on. He didn't start the conversations, they did. But when they did...he didn't give information.

Instead, he asked questions.

Like when you friend mentions the bond fund, you can ask him how much it costs? When your friend looks at you blankly don't press. Let it hang there. The silence should be uncomfortable (for him, not you). It should force him to go back and ask his advisor (or better yet look for himself) how much it costs.

He may come back and say "You know that bond fund I was telling you my fine advisor put me in? Well it costs just 1.5% a year!" You can ask, "Do you think that's a low fee?" When he doesn't know because he hasn't compared bond fund fees or fund families, etc. let it hang there. Don't tell him it's expensive. Let him research it himself. If he can't and he wants to know how, let him ask you.

When he says he's gotten out of the market, you can ask him when the right time will be to get back in. He may not know. He may just say his guy will let him know when the time is right. Let that hang there. Don't respond.

You can ask him how he selected his advisor. You can ask him if he's looked up his advisor's background, checked him out. When he says no he doesn't need to or he didn't know he could, you can let that hang there. Don't offer for him to go to https://adviserinfo.sec.gov/. Wait for him to ask how to do that (he may not. he may not want to know).

And so on. That sort of thing. You'll see that asking questions is a better way of getting people to find the answers to questions they don't know. If they care to. Many people prefer to remain ignorant for some reason that's beyond me. Ignorance is bliss they say. It's also expensive.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: Giving Investment Advice to Friends and Relatives

Post by vasaver »

000 wrote: Fri May 13, 2022 8:26 pm I think target date funds are a better answer than advisors or books.
vasaver wrote: Fri May 13, 2022 8:23 pm Until they put them in a taxable account...that is probably worth the cost of PAS right there.
I think that now that that has happened it is much less likely to recur, as the different Vanguard TDF classes are now merged.

Recency bias is a very strong influence, but frequently incorrect concerning future outcomes. In this case, the structural causes no longer exist.
Since your original advice didn't specify Vanguard Funds...you might want to look at what some TDFs can do in a taxable account with distributions :

Columbia Adaptive Retirement 2020 Fund CARGX - 29.18%
https://www.columbiathreadneedleus.com/ ... =19767X100

Franklin LifeSmart 2050 Retirement Target ~ 24%
https://www.franklintempleton.com/inves ... tributions

Franklin LifeSmart 2040 Retirement Target ~ 20%
https://www.franklintempleton.com/inves ... tributions

Also the impact seems to be across all share classes of the funds for Franklin LifeSmart
https://www.franklintempleton.com/inves ... stribution
000
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Re: Giving Investment Advice to Friends and Relatives

Post by 000 »

vasaver wrote: Fri May 13, 2022 10:27 pm Since your original advice didn't specify Vanguard Funds...you might want to look at what some TDFs can do in a taxable account with distributions :

Columbia Adaptive Retirement 2020 Fund CARGX - 29.18%
https://www.columbiathreadneedleus.com/ ... =19767X100

Franklin LifeSmart 2050 Retirement Target ~ 24%
https://www.franklintempleton.com/inves ... tributions

Franklin LifeSmart 2040 Retirement Target ~ 20%
https://www.franklintempleton.com/inves ... tributions

Also the impact seems to be across all share classes of the funds for Franklin LifeSmart
https://www.franklintempleton.com/inves ... stribution
Those are high ER, actively managed funds that would not be the fund families I would tell someone to take a look at, nor funds someone is just likely to stumble across in a taxable account, nor funds that members of this forum might for some reason think to recommend if they agreed with my post.

I thought it would be obvious here on bogleheads.org that I was referring to target date INDEX funds, but I guess I should emphasize the word INDEX in case someone who knows almost nothing about investing just so happens to open a taxable account with actively managed funds from less well known fund families as their first investing step.

In any event, investing in taxable is usually several steps ahead of those who don't know anything about investing at all and losing tax deferral on gains (the only harm by CG distributions) may be dwarfed by other investing issues in these cases.
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Re: Giving Investment Advice to Friends and Relatives

Post by wander »

I agree that No is the answer. One of the reasons is their money seems like state top secret and they think they know best.
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Re: Giving Investment Advice to Friends and Relatives

Post by Scott S »

arcticpineapplecorp. wrote: Fri May 13, 2022 9:10 pmRob discusses how he had conversations with his kids and even friends. He didn't hit them over the head with information. He didn't put down his friends' advisors. He didn't give them books and so on. He didn't start the conversations, they did. But when they did...he didn't give information.

Instead, he asked questions.

[snip]

And so on. That sort of thing. You'll see that asking questions is a better way of getting people to find the answers to questions they don't know. If they care to. Many people prefer to remain ignorant for some reason that's beyond me. Ignorance is bliss they say. It's also expensive.
Great stuff! We get so proud of the things we've learned, and we want so badly to share them, but it's often more powerful when people arrive at the answers themselves.
(Something I'm learning as the parent of a toddler.) :sharebeer
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Re: Giving Investment Advice to Friends and Relatives

Post by passive101 »

vasaver wrote: Fri May 13, 2022 8:23 pm
000 wrote: Fri May 13, 2022 8:16 pm I think target date funds are a better answer than advisors or books.
Until they put them in a taxable account...that is probably worth the cost of PAS right there.
Still cheaper then Edward Jones :sharebeer
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Re: Giving Investment Advice to Friends and Relatives

Post by Parkinglotracer »

arcticpineapplecorp. wrote: Fri May 13, 2022 9:10 pm First listen (you, not him) to Rob Berger's Dough Roller Money Podcast episode 299 (https://www.youtube.com/watch?v=XE5xCPMbT5o). It's titled "How to help others with their financial struggles".

Rob discusses how he had conversations with his kids and even friends. He didn't hit them over the head with information. He didn't put down his friends' advisors. He didn't give them books and so on. He didn't start the conversations, they did. But when they did...he didn't give information.

Instead, he asked questions.

Like when you friend mentions the bond fund, you can ask him how much it costs? When your friend looks at you blankly don't press. Let it hang there. The silence should be uncomfortable (for him, not you). It should force him to go back and ask his advisor (or better yet look for himself) how much it costs.

He may come back and say "You know that bond fund I was telling you my fine advisor put me in? Well it costs just 1.5% a year!" You can ask, "Do you think that's a low fee?" When he doesn't know because he hasn't compared bond fund fees or fund families, etc. let it hang there. Don't tell him it's expensive. Let him research it himself. If he can't and he wants to know how, let him ask you.

When he says he's gotten out of the market, you can ask him when the right time will be to get back in. He may not know. He may just say his guy will let him know when the time is right. Let that hang there. Don't respond.

You can ask him how he selected his advisor. You can ask him if he's looked up his advisor's background, checked him out. When he says no he doesn't need to or he didn't know he could, you can let that hang there. Don't offer for him to go to https://adviserinfo.sec.gov/. Wait for him to ask how to do that (he may not. he may not want to know).

And so on. That sort of thing. You'll see that asking questions is a better way of getting people to find the answers to questions they don't know. If they care to. Many people prefer to remain ignorant for some reason that's beyond me. Ignorance is bliss they say. It's also expensive.

Great technique … before there can be a teacher there has to be a student.
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Re: Giving Investment Advice to Friends and Relatives

Post by tennisplyr »

Thanks Taylor. Unless you absolutely have to, stay out of other peoples’ business.
“Those who move forward with a happy spirit will find that things always work out.” -Retired 11 years 😀
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Re: Giving Investment Advice to Friends and Relatives

Post by froggy »

As usual, excellent post, Taylor and all true. I've found over the years that attempting to convince a person to learn about investing is similar to attempting to convince a smoker to stop smoking. If they don't really want to, it's probably not going to happen

Thanks again, Taylor
Charles
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Re: Giving Investment Advice to Friends and Relatives

Post by HueyLD »

froggy wrote: Sat May 14, 2022 8:28 am As usual, excellent post, Taylor and all true. I've found over the years that attempting to convince a person to learn about investing is similar to attempting to convince a smoker to stop smoking. If they don't really want to, it's probably not going to happen.
+100!
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Re: Giving Investment Advice to Friends and Relatives

Post by johnegonpdx »

I tend to go the route of responding to inquiries rather than offering advice.

When asked, I try to center the conversation on self awareness of risk, time, effort and expense tolerance.

I ask "how much inherent risk are you willing to accept? that will determine which markets you are willing to invest in."

I then ask "do you want to outperform these markets, and if so, by how much?

If the person I'm talking to does want to try and outperform markets, I tell them that I have no specific advice for them because my goals and the risks, time, effort and expenses required to pursue my goals are very different from theirs.
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Re: Giving Investment Advice to Friends and Relatives

Post by unclescrooge »

arcticpineapplecorp. wrote: Fri May 13, 2022 8:50 pm
They also can have a potential advisor sign the fiduciary oath:

http://www.thefiduciarystandard.org/fiduciary-oath/

otherwise, they might end up with an advisor from Ed Jones, am I right?
What's to stop an advisor from EJ signing the fiduciary pledge?
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Re: Giving Investment Advice to Friends and Relatives

Post by nedsaid »

The sad reality is that for most people experience is the best teacher. Some things have to be experienced as most folks don't want to make the effort to study, in other words they don't want to learn from other's experiences and knowledge. Lots of us want to try to match wits with the market, to see if we can do better than the professionals. Of course, most don't realize that most professional investors fail to beat the market after taking into account the management fee.

I had this revelation in the early 2000's when I realized that my carefully chosen stocks more or less mirrored the market and that all my research seemed to make little difference in performance. I was sampling the market. So I stopped doing most of the research, rarely did stock trades, and more or less let things ride. Haven't checked the performance of my individual stocks for a while but I found that my Value oriented stock picks sometimes trailed the Vanguard Value Index a bit and other times beat the Value Index by a bit over rolling 15 year periods.

I give advice only when asked and I tell them to have as their core investments the broad Stock and Bond Index Funds. Specifically, this would be Total Stock Market, Total Bond Market, Total International Stock, and Total International Bond. For the Fixed Income portion of the portfolio, I would recommend an allocation to TIPS. Such topics as Factor tilting are too confusing to new investors, just better to have them in the broad indexes and be done with it.
A fool and his money are good for business.
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Re: Giving Investment Advice to Friends and Relatives

Post by somewhatentertained »

This topic has been on my mind for a while. I *know* that I can't know as much as an advisor so when my mom was in need I helped her find an advisor to trust. He's OK but he charges AUM and sells insurance. She doesn't like the fees and she also dislikes someone outside the family involved in her private business. I had already run across many of the points of OP from elsewhere on Bogleheads. So I told her I cannot know everything needed to handle her investments and retirement plan, instead I can provide help to find trusted advice and research ways to evaluate that advice. So whether it is this particular advisor or another source of getting professional guidance, a third party in our situation is best. Bogleheads is my go-to cross reference, both the Wiki and the community posts, to cut through advisor sales pitches and internet hysteria and get her to the advice she needs.

Anecdotally, I have pronounced this website "Boggleheads" and thought how appropriate since I'm boggled by financials, and only recently after listening to some podcast figured out the actual pronunciation is Boh-gle-heads. :oops: :D
Last edited by somewhatentertained on Sat May 14, 2022 10:28 am, edited 1 time in total.
student
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Re: Giving Investment Advice to Friends and Relatives

Post by student »

000 wrote: Fri May 13, 2022 10:46 pm
vasaver wrote: Fri May 13, 2022 10:27 pm Since your original advice didn't specify Vanguard Funds...you might want to look at what some TDFs can do in a taxable account with distributions :

Columbia Adaptive Retirement 2020 Fund CARGX - 29.18%
https://www.columbiathreadneedleus.com/ ... =19767X100

Franklin LifeSmart 2050 Retirement Target ~ 24%
https://www.franklintempleton.com/inves ... tributions

Franklin LifeSmart 2040 Retirement Target ~ 20%
https://www.franklintempleton.com/inves ... tributions

Also the impact seems to be across all share classes of the funds for Franklin LifeSmart
https://www.franklintempleton.com/inves ... stribution
Those are high ER, actively managed funds that would not be the fund families I would tell someone to take a look at, nor funds someone is just likely to stumble across in a taxable account, nor funds that members of this forum might for some reason think to recommend if they agreed with my post.

I thought it would be obvious here on bogleheads.org that I was referring to target date INDEX funds, but I guess I should emphasize the word INDEX in case someone who knows almost nothing about investing just so happens to open a taxable account with actively managed funds from less well known fund families as their first investing step.

In any event, investing in taxable is usually several steps ahead of those who don't know anything about investing at all and losing tax deferral on gains (the only harm by CG distributions) may be dwarfed by other investing issues in these cases.
I agree with you. If someone is not even willing to read some books or is not capable of understanding, I think simplicity and low cost trumps tax efficiency. Target date index fund is an excellent choice.
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Re: Giving Investment Advice to Friends and Relatives

Post by Normchad »

student wrote: Sat May 14, 2022 10:27 am
000 wrote: Fri May 13, 2022 10:46 pm
vasaver wrote: Fri May 13, 2022 10:27 pm Since your original advice didn't specify Vanguard Funds...you might want to look at what some TDFs can do in a taxable account with distributions :

Columbia Adaptive Retirement 2020 Fund CARGX - 29.18%
https://www.columbiathreadneedleus.com/ ... =19767X100

Franklin LifeSmart 2050 Retirement Target ~ 24%
https://www.franklintempleton.com/inves ... tributions

Franklin LifeSmart 2040 Retirement Target ~ 20%
https://www.franklintempleton.com/inves ... tributions

Also the impact seems to be across all share classes of the funds for Franklin LifeSmart
https://www.franklintempleton.com/inves ... stribution
Those are high ER, actively managed funds that would not be the fund families I would tell someone to take a look at, nor funds someone is just likely to stumble across in a taxable account, nor funds that members of this forum might for some reason think to recommend if they agreed with my post.

I thought it would be obvious here on bogleheads.org that I was referring to target date INDEX funds, but I guess I should emphasize the word INDEX in case someone who knows almost nothing about investing just so happens to open a taxable account with actively managed funds from less well known fund families as their first investing step.

In any event, investing in taxable is usually several steps ahead of those who don't know anything about investing at all and losing tax deferral on gains (the only harm by CG distributions) may be dwarfed by other investing issues in these cases.
I agree with you. If someone is not even willing to read some books or is not capable of understanding, I think simplicity and low cost trumps tax efficiency. Target date index fund is an excellent choice.
I wouldn’t even recommend TDFs to people. Folks that were in Target Data 2010 funds took big losses in 2008-2009. And I’m sure they were all surprised by that, since the sales line is “this get safer the closer you get to 2010 when you retire”. A lot of those folks still lost 40%. And they will absolutely blame you for it…..

I just do not tell people how to,live their lives or what to do with their money.

https://www.marketwatch.com/story/quest ... unds-after

I’m not saying these types of funds are bad. Or inappropriate. I’m just saying the blanket advice to use them is inappropriately simple.
student
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Re: Giving Investment Advice to Friends and Relatives

Post by student »

Normchad wrote: Sat May 14, 2022 10:32 am
student wrote: Sat May 14, 2022 10:27 am
000 wrote: Fri May 13, 2022 10:46 pm
vasaver wrote: Fri May 13, 2022 10:27 pm Since your original advice didn't specify Vanguard Funds...you might want to look at what some TDFs can do in a taxable account with distributions :

Columbia Adaptive Retirement 2020 Fund CARGX - 29.18%
https://www.columbiathreadneedleus.com/ ... =19767X100

Franklin LifeSmart 2050 Retirement Target ~ 24%
https://www.franklintempleton.com/inves ... tributions

Franklin LifeSmart 2040 Retirement Target ~ 20%
https://www.franklintempleton.com/inves ... tributions

Also the impact seems to be across all share classes of the funds for Franklin LifeSmart
https://www.franklintempleton.com/inves ... stribution
Those are high ER, actively managed funds that would not be the fund families I would tell someone to take a look at, nor funds someone is just likely to stumble across in a taxable account, nor funds that members of this forum might for some reason think to recommend if they agreed with my post.

I thought it would be obvious here on bogleheads.org that I was referring to target date INDEX funds, but I guess I should emphasize the word INDEX in case someone who knows almost nothing about investing just so happens to open a taxable account with actively managed funds from less well known fund families as their first investing step.

In any event, investing in taxable is usually several steps ahead of those who don't know anything about investing at all and losing tax deferral on gains (the only harm by CG distributions) may be dwarfed by other investing issues in these cases.
I agree with you. If someone is not even willing to read some books or is not capable of understanding, I think simplicity and low cost trumps tax efficiency. Target date index fund is an excellent choice.
I wouldn’t even recommend TDFs to people. Folks that were in Target Data 2010 funds took big losses in 2008-2009. And I’m sure they were all surprised by that, since the sales line is “this get safer the closer you get to 2010 when you retire”. A lot of those folks still lost 40%. And they will absolutely blame you for it…..

I just do not tell people how to,live their lives or what to do with their money.

https://www.marketwatch.com/story/quest ... unds-after

I’m not saying these types of funds are bad. Or inappropriate. I’m just saying the blanket advice to use them is inappropriately simple.
Sure. One can select to not give input. I am talking about someone come to me and ask for suggestions. In that case, I say a subset of the following, depending on who the person is: I like to invest in index funds and I mention asset allocation with links, and I mention that one popular way achieve that is a TDF. I never give direct advice. (The only exception is for one of my siblings.)
Normchad
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Re: Giving Investment Advice to Friends and Relatives

Post by Normchad »

student wrote: Sat May 14, 2022 10:51 am
Normchad wrote: Sat May 14, 2022 10:32 am
student wrote: Sat May 14, 2022 10:27 am
000 wrote: Fri May 13, 2022 10:46 pm
vasaver wrote: Fri May 13, 2022 10:27 pm Since your original advice didn't specify Vanguard Funds...you might want to look at what some TDFs can do in a taxable account with distributions :

Columbia Adaptive Retirement 2020 Fund CARGX - 29.18%
https://www.columbiathreadneedleus.com/ ... =19767X100

Franklin LifeSmart 2050 Retirement Target ~ 24%
https://www.franklintempleton.com/inves ... tributions

Franklin LifeSmart 2040 Retirement Target ~ 20%
https://www.franklintempleton.com/inves ... tributions

Also the impact seems to be across all share classes of the funds for Franklin LifeSmart
https://www.franklintempleton.com/inves ... stribution
Those are high ER, actively managed funds that would not be the fund families I would tell someone to take a look at, nor funds someone is just likely to stumble across in a taxable account, nor funds that members of this forum might for some reason think to recommend if they agreed with my post.

I thought it would be obvious here on bogleheads.org that I was referring to target date INDEX funds, but I guess I should emphasize the word INDEX in case someone who knows almost nothing about investing just so happens to open a taxable account with actively managed funds from less well known fund families as their first investing step.

In any event, investing in taxable is usually several steps ahead of those who don't know anything about investing at all and losing tax deferral on gains (the only harm by CG distributions) may be dwarfed by other investing issues in these cases.
I agree with you. If someone is not even willing to read some books or is not capable of understanding, I think simplicity and low cost trumps tax efficiency. Target date index fund is an excellent choice.
I wouldn’t even recommend TDFs to people. Folks that were in Target Data 2010 funds took big losses in 2008-2009. And I’m sure they were all surprised by that, since the sales line is “this get safer the closer you get to 2010 when you retire”. A lot of those folks still lost 40%. And they will absolutely blame you for it…..

I just do not tell people how to,live their lives or what to do with their money.

https://www.marketwatch.com/story/quest ... unds-after

I’m not saying these types of funds are bad. Or inappropriate. I’m just saying the blanket advice to use them is inappropriately simple.
Sure. One can select to not give input. I am talking about someone come to me and ask for suggestions. In that case, I say a subset of the following, depending on who the person is: I like to invest in index funds and I mention asset allocation with links, and I mention that one popular way achieve that is a TDF. I never give direct advice. (The only exception is for one of my siblings.)
That seems like a perfectly reasonable response to me. I don’t do it, but it’s reasonable for sure.
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Re: Giving Investment Advice to Friends and Relatives

Post by bikechuck »

Taylor Larimore wrote: Fri May 13, 2022 1:53 pm Bogleheads:

This forum frequently receive posts by Bogleheads who want to help friends and relatives with their portfolios. My suggestion is to say "No." Here's why:

* You do not have the qualifications and experience of a full-time professional adviser.

* Many people do not understand how investing works. They may have unreasonable expectations.

* Expect others to say your suggested portfolio is inferior.

* During periods of underperformance, you will feel responsible.

* ALL stocks and bonds have periods of underperformance. You will be blamed.

* When your recommended investments have periods of underperformance (all do) your relationship could be irrevocably damaged.

Suggestion:

Give your friend or relative a good book on investing. This will help them understand successful investing. If you select The Bogleheads' Guide to the Three-Fund Portfolio, all royalties will go to "The John C. Bogle Center For Financial Literacy".

After reading a good book on investing, those you want to help will be ready to self-invest -- or know enough to select a good professional advisor.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense."


I don't offer investing advice to friends other than suggesting books and forums like this one that have helped me.

I do make additional recommendations to my daughters including encouraging them to save at least 15% of their salary, suggesting index funds instead of individual stocks. When my grandaughters were born I strongly suggested that my daughters buy term life insurance beyond what they had through their employers. I also suggested that they purchase iBonds. They have implemented some of my suggestions which gives me hope for their future.
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ClevrChico
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Re: Giving Investment Advice to Friends and Relatives

Post by ClevrChico »

All well said, Taylor, and this has been my experience. I feel like this should be at the top of the page or in the wiki.

I have helped my older mom who is pretty savvy and listens to my advice, and she'd done well.

All other people that have approached me either did the opposite (bought crypto instead), unhappily told me they are exiting the market in a downturn, or rolled their Vanguard roth I helped them with into a variable annuity with an insurance agent. :oops:
RadAudit
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Re: Giving Investment Advice to Friends and Relatives

Post by RadAudit »

I've tried giving financial advice to my wife and kids. Fortunately, they don't listen, and they don't take it. :oops:
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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arcticpineapplecorp.
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Re: Giving Investment Advice to Friends and Relatives

Post by arcticpineapplecorp. »

unclescrooge wrote: Sat May 14, 2022 10:11 am
arcticpineapplecorp. wrote: Fri May 13, 2022 8:50 pm
They also can have a potential advisor sign the fiduciary oath:

http://www.thefiduciarystandard.org/fiduciary-oath/

otherwise, they might end up with an advisor from Ed Jones, am I right?
What's to stop an advisor from EJ signing the fiduciary pledge?
1. common sense.
2. their compliance department
3. fear of lawsuit from failing to deliver on promises unable to deliver
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
backpacker61
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Re: Giving Investment Advice to Friends and Relatives

Post by backpacker61 »

My dad was probably the first person in his family that had ever invested in an equity (began in late 1950's or very early 1960's). In some cases, he made recommendations to siblings or co-workers to purchase some shares in a Closed End Fund (this was in the 1970's and 1980's). The siblings that did this did much better than those that just saved their money in a passbook account or CD. Index funds weren't common thing in that era.

It's also worthwhile to remember that not everyone reads books. We tend to make assumptions that others turn to the same sources that we do for information, but the reality is that most people aren't Bogleheads and there are honestly many that never read books for pleasure.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
000
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Re: Giving Investment Advice to Friends and Relatives

Post by 000 »

Normchad wrote: Sat May 14, 2022 10:32 am I wouldn’t even recommend TDFs to people. Folks that were in Target Data 2010 funds took big losses in 2008-2009. And I’m sure they were all surprised by that, since the sales line is “this get safer the closer you get to 2010 when you retire”. A lot of those folks still lost 40%. And they will absolutely blame you for it…..

I just do not tell people how to,live their lives or what to do with their money.

https://www.marketwatch.com/story/quest ... unds-after

I’m not saying these types of funds are bad. Or inappropriate. I’m just saying the blanket advice to use them is inappropriately simple.
I wouldn't give unsolicited advice either, but IF a friend or relative asked me about investing, I might let them know of the existence of Vanguard, Fidelity, or Schwab target date index funds.
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mokaThought
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Re: Giving Investment Advice to Friends and Relatives

Post by mokaThought »

backpacker61 wrote: Sat May 14, 2022 12:51 pm My dad was probably the first person in his family that had ever invested in an equity (began in late 1950's or very early 1960's). In some cases, he made recommendations to siblings or co-workers to purchase some shares in a Closed End Fund (this was in the 1970's and 1980's). The siblings that did this did much better than those that just saved their money in a passbook account or CD. Index funds weren't common thing in that era.

It's also worthwhile to remember that not everyone reads books. We tend to make assumptions that others turn to the same sources that we do for information, but the reality is that most people aren't Bogleheads and there are honestly many that never read books for pleasure.
I am finding among my co-workers between the ages of 25 and 35 that they would rather watch YouTube videos about investing than read books.
"October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February."
dcabler
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Re: Giving Investment Advice to Friends and Relatives

Post by dcabler »

Fortunately, none of my friends or relatives have asked me for such advice. But if one of them did, I would point them to various resources for low cost investing.

The only exception will be my daughter as she finishes college and enters the working world. But it will be gradual advice, starting with advice to build up an emergency fund, then we'll talk about 401K's, etc....

That's not to say that I don't have friends with whom I discuss investing. I do, but we're all sufficiently mature investors that we only discuss generalities about what we do and mainly stick to more technical topics (Roth conversions, withdrawal methods, etc). We're all engineers and just can't help ourselves....

Dru
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Re: Giving Investment Advice to Friends and Relatives

Post by iamblessed »

I would point them to a LifeStrategy or Target fund that fit their age and call it a day. I think in this case simple rules. I would tell them no matter what do not sell in the red wait. My relatives would not ask for investing advice if I was the smartest Boglehead and more than willing with advice they would just ask me for money. To learn and invest way to much work for them.
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Re: Giving Investment Advice to Friends and Relatives

Post by harvestbook »

My daughter 22 asked me about buying gold because her military husband had some feelings on it. I just let them talk about it and picture the world where gold would be the best thing to have and the whole logistics of it and said buy some if it makes you feel better and see how it does without betting your entire future on it. And that the best investors were dead people who did nothing. I asked what she was doing with her 401k at work, she said "Target date fund" and I said "You've won." Then I mailed her the book "Your Money and Your Brain."

I have a Roth IRA for her but she hasn't made the name-change switch at Vanguard so it's just sitting there percolating. If she gets interested enough in investing I will listen to her ideas but it's not like I know what's best. She's saving for law school in cash and that's great because my advice would've had her down probably 10 percent at least because I would've said "Bonds are fine for that." At that age the most important financial decision for me was whether there was enough change in the sofa cushions to get a beer.

PS they ended up not buying gold.
I'm not smart enough to know, and I can't afford to guess.
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Joypog
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Re: Giving Investment Advice to Friends and Relatives

Post by Joypog »

bikechuck wrote: Sat May 14, 2022 11:11 am I do make additional recommendations to my daughters including encouraging them to save at least 15% of their salary, suggesting index funds instead of individual stocks. When my grandaughters were born I strongly suggested that my daughters buy term life insurance beyond what they had through their employers. I also suggested that they purchase iBonds. They have implemented some of my suggestions which gives me hope for their future.
The one piece of unsolicited advice I spout off with close friends is to get disability insurance (and life insurance if they have kids).

If asked about finances, I'd happily share my own struggles in chosing an investing path, hand them Bernstien's "If You Can", send them on their way.

Beyond that I totally agree, best stay out of other's business.
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