What to Recommend to Interested Friends

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Slowtraveler
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What to Recommend to Interested Friends

Post by Slowtraveler » Thu Sep 19, 2019 7:00 am

I have had many friends ask me about investing, their eyes then glaze over within 10 seconds of me excitedly describing indexes, low expense ratio funds, and asset allocation.

What do I recommend to all those who ask for investment advice?

An x global stock index/(100-x) bonds for their country? I could say all stocks but I think this is very hadd psychologically without all the understanding of what they own. Even then, it's difficult and psychology is the biggest part of investing.

I've leaned towards Wellesley since I feel Wellesley is so easy to hold Psychology and it has beat all treasuries or the bank and will likely continue to do so over any 5 year period. But many friends are international from my travels so they don't have this option. I'm still trying to even find global equity index funds they can buy in some countries.

goblue100
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Re: What to Recommend to Interested Friends

Post by goblue100 » Thu Sep 19, 2019 7:13 am

Friend: What do you invest in?
You: I believe that investing in a balanced portfolio of extremely low cost index funds is the surest way to build wealth slowly and surely.


If that want more info they will ask. Most people will not want more, I'm afraid.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

fujiters
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Re: What to Recommend to Interested Friends

Post by fujiters » Thu Sep 19, 2019 7:17 am

In tax advantaged accounts, a target date fund.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

Schlabba
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Re: What to Recommend to Interested Friends

Post by Schlabba » Thu Sep 19, 2019 7:34 am

Slowtraveler wrote:
Thu Sep 19, 2019 7:00 am
I have had many friends ask me about investing, their eyes then glaze over within 10 seconds of me excitedly describing indexes, low expense ratio funds, and asset allocation.

What do I recommend to all those who ask for investment advice?

An x global stock index/(100-x) bonds for their country? I could say all stocks but I think this is very hadd psychologically without all the understanding of what they own. Even then, it's difficult and psychology is the biggest part of investing.

I've leaned towards Wellesley since I feel Wellesley is so easy to hold Psychology and it has beat all treasuries or the bank and will likely continue to do so over any 5 year period. But many friends are international from my travels so they don't have this option. I'm still trying to even find global equity index funds they can buy in some countries.
I had the same question a while ago. If you recommend the right fund and AA, but if they don’t understand why, they might still make the wrong decisions later on.
Finding the right fund is simple but just putting your money there because a friend recommended it isn’t a solid foundation.

I would recommend them a good book on the topic like ‘a simple path to wealth’ or ‘the little book of common sense investing’. After they read it they should be convinced. Then just translate the funds recommended in the book to the non-US bogleheads funds and you’re set.
IWDA: MSCI World | EMIM: MSCI Emerging Markets | AGGH: Global Aggregate Bond Hedged to €

Valuethinker
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Re: What to Recommend to Interested Friends

Post by Valuethinker » Thu Sep 19, 2019 7:40 am

Slowtraveler wrote:
Thu Sep 19, 2019 7:00 am
I have had many friends ask me about investing, their eyes then glaze over within 10 seconds of me excitedly describing indexes, low expense ratio funds, and asset allocation.

What do I recommend to all those who ask for investment advice?

An x global stock index/(100-x) bonds for their country? I could say all stocks but I think this is very hadd psychologically without all the understanding of what they own. Even then, it's difficult and psychology is the biggest part of investing.

I've leaned towards Wellesley since I feel Wellesley is so easy to hold Psychology and it has beat all treasuries or the bank and will likely continue to do so over any 5 year period. But many friends are international from my travels so they don't have this option. I'm still trying to even find global equity index funds they can buy in some countries.
AFAIK only US residents can hold Wellesley?

You wouldn't be able to find an adviser in Europe I don't think to sell it to you. And brokers in EU basically cannot sell the ETF (if they have one) due to PIIRP rules.

livesoft
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Re: What to Recommend to Interested Friends

Post by livesoft » Thu Sep 19, 2019 7:46 am

Slowtraveler wrote:
Thu Sep 19, 2019 7:00 am
I have had many friends ask me about investing, their eyes then glaze over within 10 seconds of me excitedly describing indexes, low expense ratio funds, and asset allocation.

What do I recommend to all those who ask for investment advice?
You have learned that you have less than 10 seconds to give any advice that you are going to give. I suggest you say, "I use broad market index funds and recommend them. That way, I save money by not paying anyone for useless or dubious advice that fills their pockets and not mine", then stop talking. A guy did that on Judge Judy and he was told to shut up.
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Jack FFR1846
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Re: What to Recommend to Interested Friends

Post by Jack FFR1846 » Thu Sep 19, 2019 7:53 am

I think about my own path to where I am now. Here's the questions I saw and asked myself:

1) Where are your investments now? (I did not know this. We had a good couple dozen old accounts scattered all over)

2) How much do you have? (I had zero clue. When I added it all up, I was well over $1M. Had you asked me a number before doing the math, I'd probably have said no more than half that)

3) What are your costs? (Before any analysis of funds and types and where they should be, what do they cost me now? This is what got my spread sheet livened up.)

4) What do you want for an asset allocation? (understanding the target gets things lined up to meet the target)

5) Are you diversified? (I know people who are my age and have invested only in GE stock for over 30 years. That isn't serving them very well anymore)

You can literally ask just question number one and respond to answers like Edward Jones, Raymond James etc and recommend the low cost providers as cheaper alternatives, Vanguard, Fidelity, Schwab, TDAmeritrade, Merrill Edge. If they are still interested, move to other questions.....and they don't have to be in order.
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KlangFool
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Re: What to Recommend to Interested Friends

Post by KlangFool » Thu Sep 19, 2019 7:55 am

Slowtraveler wrote:
Thu Sep 19, 2019 7:00 am
I have had many friends ask me about investing, their eyes then glaze over within 10 seconds of me excitedly describing indexes, low expense ratio funds, and asset allocation.

What do I recommend to all those who ask for investment advice?
Slowtraveler,

1) Explain to them how they could save a lot of taxes by contributing to a target retirement fund at their Trad. 401K account.

2) Most people do not contribute to their Trad. 401K account. They need to save first before they could invest.

3) Contribute as much as they can afford to Trad. 401K and put the tax savings into Roth IRA.

4) Pick a target retirement fund and/or Lifestrategy or Balanced fund.

It is good enough for 90+% of people. For the remaining 10%, they will be motivated enough to learn more. You do not need to help them.

KlangFool

tibbitts
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Re: What to Recommend to Interested Friends

Post by tibbitts » Thu Sep 19, 2019 7:59 am

I'm not sure how investing comes up in casual conversation; how is this happening?

KlangFool
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Re: What to Recommend to Interested Friends

Post by KlangFool » Thu Sep 19, 2019 8:04 am

OP,

I usually responded to that question with another question.

Do you know how much taxes you could save by contributing to Trad. 401K?

KlangFool

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Sandtrap
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Re: What to Recommend to Interested Friends

Post by Sandtrap » Thu Sep 19, 2019 9:18 am

What do I recommend to all those who ask for investment advice?
Responses to this questions:

1. What kind of investment advice are you interested in?

If they proceed to tell me their current strategy and how they are beating the market, or how much they "made" on a recent market swing, I go no further, smile and nod.

If they say, "I was just curious on your thoughts on that, personally, I don't trust the markets and wouldn't touch it. I buy real estate when I have extra funds. I have 3 luxury homes in Scottsdale. . . . . " I smile and nod and go no further.

2. What kind of personal investments do you have now?

If they talk enthusiastically about their Edward Jones or "my" Financial Advisor or Wealth Manager, then I might say, "did you know you could save a lot of money by handling your own investments."

If the next word from them begins with "Butt", then I nod and smile and say no more.

3. I give them a link to the "Boglehead's Forum" if they are interested. Most are not interested enough even to write it down.

I many years, nobody who has ever asked me for investment advice has gone farther than the above steps.

j :happy
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nisiprius
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Re: What to Recommend to Interested Friends

Post by nisiprius » Thu Sep 19, 2019 10:00 am

I agree with Sandtrap. No point in preparing an elevator speech about it, most people who ask don't want the kind of answer I give.

I've only been asked this question in two forms.

When asked by a non-novice, my answer doesn't matter, because what want is a hot stock tip--or at least, "One word. Just one word. Plastics." If I say "low-cost index funds" and they know what I'm talking about, they instantly write me off as stupid. If they don't know what an index fund is, they lose interest as soon as they are explained.

When asked by a novice, the answer is "a target retirement fund." I'm thinking of a young person who's just been confronted with their first 401(k). And I understand why target retirement funds are popular. Because I can just reinforce and support the idea of just using the darned target retirement fund. My answer to this goes like this. I ask "does it have funds that have a retirement year in their name, like 'Retirement 2060?'" The answer so far has always been "yes." I say "Just go ahead, use that one. 100% of your contributions, you don't need anything else. You won't make any serious mistake by choosing it. They aren't perfect and I could quibble about them but they're fine." I have to hold my nose a bit when I say this because... stock allocation probably too high, expense ratio often too high, too often actively managed, but I do it. If the conversation goes any farther I will suggest that they round their retirement year down and not up, and I will explain that they are investing mostly in stocks and they shouldn't expect it to grow smoothly like a savings account.
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delamer
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Re: What to Recommend to Interested Friends

Post by delamer » Thu Sep 19, 2019 10:07 am

I wouldn’t give advice to someone who doesn’t pay US taxes.

Without knowing a specific countries laws/financial markets, it is too risky.

iamblessed
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Re: What to Recommend to Interested Friends

Post by iamblessed » Thu Sep 19, 2019 10:28 am

I would just say pick a LifeStrategy fund. They are great and so easy for new people. No need to explain indexing or rebalancing. Tax wise they are very good. They hit 95% of the boglehead points. Don't worry about the 5% I even thought about going to them myself. Just pick your Asset Alocation and don't sell in a down market. I am not sure you can buy them outside the US

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unclescrooge
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Re: What to Recommend to Interested Friends

Post by unclescrooge » Thu Sep 19, 2019 11:05 am

People underestimate the power of compounding.

I usually start with a game asking them to guess the returns if they bought Amazon, and it continues it's 5 year growth of 35% over the next 30 years?
How much would a $100k turn into?

$100k turns into $1.6 billion. Most of them guess a few million, so they're short by $1.595 billion.

Then I ask them if is likely they will pick the next Amazon and if they will become billionaires. Everyone says laughs and says no.

Then I pull out my calculator app and show them 30 year returns at 8%... They are all blown away. Because people are really bad at compounding interest calculations.

Then I launch into the spiel about globally diversified assets, believing in capitalism to make us rich, and how investing is simple, but not easy.

Then, having engaged and entertained them for several minutes I talk about lot cost index funds. Most are receptive to the idea.

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onthecusp
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Re: What to Recommend to Interested Friends

Post by onthecusp » Thu Sep 19, 2019 11:09 am

tibbitts wrote:
Thu Sep 19, 2019 7:59 am
I'm not sure how investing comes up in casual conversation; how is this happening?
I will bring it up along with general retirement discussions.

GAAP
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Re: What to Recommend to Interested Friends

Post by GAAP » Thu Sep 19, 2019 11:10 am

I generally tell people that free advice is worth what you paid for it -- rarely hear much after that...
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee

livesoft
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Re: What to Recommend to Interested Friends

Post by livesoft » Thu Sep 19, 2019 11:19 am

tibbitts wrote:
Thu Sep 19, 2019 7:59 am
I'm not sure how investing comes up in casual conversation; how is this happening?
It happens to me all the time. I am retired. I meet other retired folks. They ask how can I not be working. I've met quite a number of folks who actually do use index funds. Also I've been quoted a few times in the Wall Street Journal which some friends have noticed and ask about.
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whodidntante
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Re: What to Recommend to Interested Friends

Post by whodidntante » Thu Sep 19, 2019 11:30 am

It is more fun to give investment advice to your enemies. :twisted:

For people you do not want to harm, first try to ascertain if they actually want advice on costs and portfolio construction, or if they just want to shoot the breeze about their favorite stock. You will not be able to convince someone who is just waiting for their turn to speak. I don't have anything to prove nor do I feel the need to save someone who thinks differently than I do.

If someone seems to be listening, I try to convince them that saving enough and keeping costs low is a reasonable path to financial independence.

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Raymond
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Re: What to Recommend to Interested Friends

Post by Raymond » Thu Sep 19, 2019 1:40 pm

If asked for financial advice, I never tell anyone what *they* should do, but what *I* would do in their situation.

"If I had your 401(k), I would go with the Target Retirement 2525 fund, but that's up to you." :happy

That way they can't blame you if the market drops next week.

But they might blame you anyway.
"Ritter, Tod und Teufel"

Coburn
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Re: What to Recommend to Interested Friends

Post by Coburn » Thu Sep 19, 2019 1:57 pm

Why do you recommend anything? Are you in investments by profesion? Not that it would influence the answer in any way.

This type of question rarely comes up in my circle.

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