In this episode we look into the common question of how to deal with existing high-fee mutual funds and financial advisors. Should you switch? And how do you know what to avoid in the future?
Kudos and a suggestion to the producer. Throw in some B roll stuff. Less talking heads, more riding around town or thrashing the old man at basketball. Let your creativity flow little dude!
Have been studying stock trading in depth for over 2 years and the video checks out in my opinion! There are a few rare people who can greatly beat the VTI/SPY, but they're hard to find and usually have no reviews/nobody knows about them. Or they only trade their own money. By the way, you should totally do a video on the 401k/IRA. If we're planning to get away from the job world and be self employed, do we even do retirement the same way?
Wow! Your son is amazing! This is the first video I watched of yours about reading about you on Blinkist. Very practical and useful. Looking forward to watching more! 🧡
meant to comment on this video instead of the first one - here it is; hope it helps: Congrats on this new adventure with your son. I see comments about some issues with music and audio (btw, he's doing an excellent job) so I thought to share a quick tip. He can include his instrumental music while you're speaking as long as he is watchful of anything that competes at the same EQ frequencies as your voice, roughly 800hz to 3Khz . That's done many ways but two quick and easy solutions that I used when I started out are to reduce the instruments and instrumental activity in that range, and/ or by attenuating frequencies of those instruments that are in that range.
I'd love to see what he's actually buying at Costco. I know they're cheaper but he's also a bit like me eating and environmental wise, so it is harder to get the good stuff that cheap.
Great videos and advice! I appreciate you guys taking the time to share. It really means a lot! When are you doing episode 7? Haha (yeah it’s only been just over a week, but your content is golden knowledge that should be taught as early as comprehensively possible) Thanks again!
Thank you so much for this video. This has been a great encouragement to change my accounts over to the VTSX. Happy 13th, younger mmm!! (I liked the 🔥 effects!)
Thank you so much for making these videos! It would be great if you could do a video on how to invest the MMM way in other countries 😊 I live in the UK and I am not sure how to go about starting to invest over here. Also income seems to be lower than that of the US, out of university a good starting salary is anything above 20k pounds before tax. When it comes to real estate it seems even more difficult over here, you would want around 20% of the value of the apartment/house which for anything small and close to a city costs around 150k-250k. So it feels like it would take a long time to be able to even start on a mortgage let alone be able to retire early.
PLEASE! PLEASE! More videos on this! We are so close to retirement and we can't seem to trust anyone! I will like we are talking to shady salesmen! Ugh! Thank you for doing what you do! Happy Birthday to your cool, talented son!🎉
Happy Birthday MMM Jr.! We have older friends who have a financial advisor who sends his kids to $27k/ year tuition for elementary, it doesn't make them pause and think.... We believe our friends have done well due to their frugal habits and high savings rate but not because of the financial advisor, they retired at 72!
I strongly support the index fund concept, and will be forever grateful to the late, great Jack Bogle for introducing me to it. To sum it up, on the average, we are all average. Same with stock advisers. There are a large number of them, and the one you pick will be average. If they charge a fee, or a commission, that is straight loss compared to just doing the index fund.
By this reasoning alone you should be buying your groceries blind without inspecting quality because after all, you don't want good, fresh food, you are satisfied with average, sometimes spoiled food. The reason why it is so hard to win through stock picking is that there are so many stock pickers competing with each other, driving prices reflect value (although it is puzzling why the market as a whole undergoes great fluctuations, contrary to that theory). In a world where everyone buys a dumb index fund, there would be incentive for bad companies to become worse (after all, they would get their money anyway from the dumb index fund investors), and it would be easier for (few remaining) stock pickers to outperform by not making the same dumb mistakes as "average". So there is a certain paradox about index investing because of its self-defeating nature. However, we are far away from a world in which most people invest in index funds, and so advantages still outweigh the disadvantages from fees.
@@clray123 Say what you want, but index funds outperform the average fund. Of course they do--the average fund makes average returns, but charges a fee on top. If you have some great insight into funds, or stocks, that is better than the average of all the other millions of people out there trying to pick stocks, by all means pick your own. But only exceptional people have such an ability.
@Christian Libertarian I do not disagree. All I'm saying is just that it's not a given, and with increasing popularity of index funds is going to become less of a given in the future.
Suggestion: Model a comparison. E.g. If you contribute the maximum amount to a 401k every year for 30 years, what would a 0.25% fee look like next to a 2.0% fee? Graphs are fancy and help get the point across.
Triple M love the work u and your son are doing. Can’t wait to some sick transitions and some daily vlogs at some point. Maybe take us around town? To your “office”, bike riding and other narly stuff! Anyhow my question is- there seem to be many opinions on how to calculate ones saving rate? Can u settle this issue for me and discuss/show how to calculate it. Including 401k contribution and maybe even pension contribution. My wife is a teacher here in California and contributes $500 bucks a month to there required plan. How do I think about that $600? Clearly we don’t plan on working until she is 62! Or else we wouldn’t be binge watching Triple M.
I would like to leave my RIA but not sure how to go about it in terms of transition: sell everything vs. keep some of the existing portfolio, minimizing transaction costs (over 100 individual securities), managing resulting taxes, etc. I feel this topic of how to actually manage the switch is not well covered. Would appreciate any advice on this.
I highly recommend ditching high fee mutual funds, actively managed ETFs, and most other investments and put the entirety of your savings into auto-pilot with simple, low cost (less than 0.05%), broad stock market index funds like Vanguard Total Market (VTI) or iShares S&P 500 (IVV). Just plow money into these long proven wealth creators every month, don't try to time the market, and enjoy more life!
What is your opinion on obtaining a mortgage as the best location? Online company, bank, credit union, banker vs independent broker? Is it situational? Why?
I’m currently using Acorns with no fees as long as I’m a student, pretty sure it’s a money market account. Would you recommend this since it’s seems to be more flexible with wanting to retire early? Thanks for the help glad to see your videos
You should move to a larger platform when you have the money and actually invest in stocks and bonds. You will not grow money very quickly in a money market. At today's rates it would take about 36 years to double, whereas investments in stock index funds take about 9 years to double on average.
MMM, Can you do a video on taxable accounts? I completely understand maxing out your 401k and IRA, but after that I'm confused how the taxable account works, what exactly the taxable account is (can this account be through Vanguard?), and how to figure out the typical returns on taxable accounts. Or even if you recommend having another type of account to invest in after maxing out your 401K & IRA? I'm a 26F with a $95K salary - not sure what that limits me to in respect to taxable accounts.
A taxable account can be invested in the same or similar fashion as a 401k or IRA. A couple key differences are 1) you don't get a tax break for contributing to a taxable account and 2) gains and dividends in a taxable account are taxed. Some investments, such as VTSAX, are more "tax-friendly" than others due to having low or no capital gains distributions and low dividends, which are mostly (95ish%) qualified. All that effectively means you won't pay much, if any, tax until you sell.
Once you retire....you use the 4% rule but that means still worrying about the market....how do you feel about taking some of your retirement savings and buying a SPIA to create a lifetime income, so we don’t have to worry about the market and keep the remaining amount in index funds worry free since we now have enough guaranteed income ?
Most of my investment is with Betterment and most of that is Vanguard funds. Am I gaining much by going through Betterment or would I be better off going with simply a Vanguard account?
Love to know the answer here. Lol I have all my investments with them because, when I started, it was cheaper at the low money I had in it. Now I'm up over about 30k or so there and I'm not sure it's still worth it.
I wonder if the 4% percent rule would work as a model if the whole population followed it? Would there be enough consumerism/consumption to drive the profits of indexes we are invested in?
Wealth generation is not driven by consumption, but by (surplus) production. So the real question is, would there be enough production if everyone instead of working sat on their ass in hope of their capital multiplying itself miraculously. I guess you know the answer.
Hi MMM, I know that you say 'just buy the whole stock market', therefore it's the VTI. But do you buy any other Index funds? My concern is, if I go fully into VTI, and when the stock market crashes, I don't have a 'Bond index fund' or other sources of income to buy cheaper VTI when being fully retired. I know that the FIRE movement says that when the market is bad, you can always go back to work and you don't have to sell any shares to survive. (I think because guys who achieve FIRE at a very young age. They assume that they can always go back to work.) But what if I cannot go back to work when the market crashes example old age or due do some medical conditions. I won't have any Bond fund to make use of. What are your thoughts on having a stock/bond ratio?
Happy Birthday Mini MMM! You're doing a great job! Question: If someone is trying to build from scratch (exhibit a: Me) is it better to max out your contribution to a retirement savings account ( in Ireland it's a PRSA, which boss doesn't contribute to), or would it be better to use my meagre funds to buy the index and try to accumulate for a while. Don't have either yet, as was tryna get out of student debt til now. Any feedback appreciated. Thanks muchly.
I've heard MMM say before to just put money into index funds as soon as you get it. However, I have accounts with Scottrade (Ameritrade), managed by me, but it costs $7 per trade . So if you are buying vangaurd index funds every month, you will be paying alot of $7 fees. For this same reason I'd like to know how people take money out when they are retired. Do they sell their index funds monthly and pay $7 fees ? Or take it out yearly and have it sitting there doing nothing for a year? I assume the $7 per trade thing is common..
I have an Etrade account. Many index funds including VOO and VTI are "Commission Free ETFs" on the Etrade account. I just started it a couple months ago, but have not paid any fees at all investing in only in those. I just googled it and apparently Etrade has over 250 commission free ETFs. I'm not affiliated with Etrade. I wouldn't be surprised if Vanguard did something similar through their own website.
Vanguard funds are indeed free to buy (and sell - but don’t. See MMM blog or jlcollinsnh.com for why) with an account, trading fees are only assessed if you buy individual stocks - and based on the advice in this video, you won’t be doing that anyway, right? ;)
Hi MrMoneyMustache, I live in Canada and I was taught to always work and safe, I have no bad debt (consumer debt/car/credit car) I have a house with tenants and the rental income covers all of its expenses because of this I Have some money lying around. Basically Im Trying to figure out where to invest my money to get started on f.i.r.e
Polar vortex, Alberta clipper, Black ice, things happen we can't control. Be prepared, don't panic, work together and will be fine. Enjoy your teen years.
The idea of Real Estate Investment Trusts (REITs) is a good one, and often a nice check on the excessive optimism that some beginner landlords apply to the field of rental houses. After all, if you can get equal or better returns passively by owning REIT shares, why do all the work of owning a rental property? I wrote about the category once in this 2011 article, but it's still accurate today: www.mrmoneymustache.com/2011/08/15/become-a-lazy-landlord-with-reits/ But in general, stock index funds are even better - you will own companies in all industries rather than just housing and land. In general, these returns will tend to be more consistent and higher over time. For example, note that the SNH shares I mentioned in 2011 were about $22 each back at the time. Today, the shares are only $12 each, so they have fallen by 50%. Although the dividend yield has remained fantastic all this time, you would have still done better owning the entire US index through Vanguard's VTI.
Do you agree with the using of your age as the ideal % of bonds to have relative to stock funds? Recession is supposed to be coming soon, what investments do you recommend to best weather this?
@@josemacenteno That isn't saying that it will happen SOON, just that one is coming at some point. I don't care if you're Warren Buffet or Jimmy Buffett, nobody knows what the stock market will do in the future.
I'm using an index fund in The Netherlands that charges 0.5%. Which is according to you pretty high. How can I invest in an index fund in The Netherlands that has much lower fees?
The 4% Rule accounts for inflation. You add an inflation factor to the withdrawal rate every year. But I would tilt towards a more internationally-based portfolio outside the US and add a little bit of gold to the mix.
Stocks are real assets, just like gold or property. So their price rises along with inflation. In advanced stock market countries, the stock prices have risen over time because the productive value of the firms' profits have risen over time. And the stock prices have also risen with inflation. So there is a real gain, based in profits providing real goods and services, and an inflation-based gain, and these add up each year to the nominal gain reported in the papers. Now, this process is only possible in open capital markets with strong property rights. How far is India along in the process of becoming a country that really respects private property? The recent anti-foreign firm policies don't bode well. Does buying all the stock in a company mean one really can control the fate of the company? If the value of stock in the stock market is very subject to the whims of the current government, then one is less likely to be able to count on the long-term real growth I was talking about above.
If you invest in instruments that yeild growth rates around inflation+rate of withdrawal, you'll be fine. If your rate of withdrawal is 4% as MMM advocates, your total returns should be around 9% assuming inflation is 5%.
Please start by naming them. 10+ year records of beating the market. Then, after that--if someone hires them do you want to guarantee they'll continue to do it for the next 10 years?
@@droptozro Hahaha, listen smart ass, there are no guarantees in life, period. When you have to look across the table from someone in 2008 and the portfolio I manage for them is beating the crap out of thier index portfolio in their 401(k) plan and they ask you why my portfolio is doing so much better I answer because the folks that manage their portfolio moved to cash and bought futures contracts to hedge against losses. Index portfolios cannot do that. I 'm not naming crap for you. I spend hundreds of hours a year doing research, I don't give that away for free. When you manage a lot of money through bull and bear markets you understand there is a place for indexes, and a place for managed money. Indexes do outperform in some markets. In 2008 they got smoked. I manage tens of milliions of dollars for clients and am a multimillionaire myself, and I'm not putting all of my money in index funds.
@@jasonkoslow4174 if you beat them I'm not against you. The point is the odds are highly against you net of fees. The hundreds of hours of study you've done don't compare to the thousands of hours of studies done by those like Jack Bogle. Again... If you beat the market that's awesome for you and I hope you keep doing it. But looking in hindsight is easy. And I didn't ask for you to tell me your management strategy... I said to name these individuals. If you're one, the odds are very high you won't best the market over the next 10+ years. If you do then you should be working for a hedge fund because even the one that Buffett did the 10 year bet with lost horribly to the market index not counting fees.
MMM, I would like to somehow figure out a way to teach personal finance and the financial independence ideas to high school or college aged students. I was wondering if you have any ideas about what the best way to go about this would be. I do not have a teaching degree or a finance degree so i plan to find ways to get around this without actually becoming a certified teacher. Also if you are looking for anyone to do a case study on, I am a 27 year old Police Officer from Chicago who plans to be financially independent by 35-37. I have some questions too which you may be able to help with, regarding pensions and early retirement but I'll keep it to one question at a time for now. Please email me or comment if you are interested in talking about any other topics. Thank you... Matt
I will say...I found the best way was to encourage my slightly younger friends and family at the college grad age to simply find some roommates close to work. I sold it by talking about how it'll be like a more fun college that allows them to have more money for their life
Vanguard is the best! There are global sites on their website: Vanguard.com. Try to open an account online. Call Vanguard if you need help. They have very good customer service over the phone.
BiiigBeee what country are you from? Check out Facebook group Financial independence Europe. There are people in it from every European country. You can ask a question for a specific country there and someone will surely have an answer.
This is going to be a bit long winded. Financial planners (referred to as planner fiduciaries) are worth their value, often confused with Investment Advisors and proclaimed Financial Advisors such as New York Life, which they're not. Investment advisors only do one thing. Invest in a portfolio and depending on the share class, A-Shares being 5.75% up front with a .25% yearly load only makes sense if you're holding that fund 10+ years. a C-share is a level 1% and only makes sense if you're holding it less than 10 years. Z or Investment grade shares have no load or very little expense ratio. ETFs tend to have low fees due to passive management but suffer in performance. Active management funds tend to out-perform passive funds. That's what 90% of the industry does, brokerage investing. If you're dealing with a true financial planner, fees are justified as you're getting: Investment management, retirement planning, tax planning, estate planning, risk management, business planning, life insurance, long term care, tax withdrawal strategies, etc. Everything is tailored and the complexity of your situation determines your fee. Managed accounts typically are no load and no commissions, no load funds (no fees) and charge the typical 1% which brings a lot of added value of tactical asset management to give an overall higher potential net gain and out perform a passive account with low/no fee funds. An example, Vanguard ETF SP500 Index 18% YTD, passive management, that's phenomenal on its own. After indirect fees, I netted 28% YTD with tactical asset management, as in the economy changes, the sectors invested change. You get what you pay for. On the planning side, there's estate planning, for example establishing a trust to achieve lower tax brackets/shield from creditors/ex spouses, if anything trusts do not have income, typically qualified dividends and capital gains which have a much lower tax treatment so that in retirement as an example, people might not be paying taxes at all depending on the gains generated. I could go on, but every little minute detail is considered and tailored with a planner. Investment advisors don't provide much value and are a waste of time, insurance salespeople aren't "advisors", they're annuity and whole life jockeys which makes me laugh when they refer to themselves as such. Planners are the only people worth paying for because of the value they bring. You're paying for peace of mind, all your bases covered, everything planned for in case something happens. Investment advisors don't do that, insurance people don't do that. I pay someone so I don't have to worry or manage things myself and 99% of the time they do a hell of a lot better than I can and I used to do it myself. It's a lot of work, and me personally have seen much of my friends lose their money as they think they can do it themselves. Everyone wants something for nothing. You're always paying a fee, but make sure you get value from it. Ask questions, ask what you're getting, what fees you're paying and what value you get in return.
The reason Edward Jones goes door to door IS to build relationships. Highly inefficient, but it works. I knocked on about 10,000 doors during my tenure with Jones. While there are easier ways to advise and make money, none I know of create such meaningful relationships. One woman (who my wife refers to as "the orange lady") invited me in to eat messy oranges over a sink while wearing my suit. Over the years we exchanged cards and gifts. I've been to client funerals. I don't think air quotes accurately captures what sort of relationship it is and should be, at least at Jones. This sort of thing isn't atypical - Jones drives home the point that the client comes first and I saw that firsthand (often to the "detriment" of the firm and advisors) over the years. If some people don't agree, that's ok. But having seen both sides of the story (as a FIRE investor and as a Financial Advisor), I can tell you the majority of advisors I've encountered aren't just trying to make a sale. And few FIRE promoters understand the actual benefits of having an advisor. As someone that's reached FI and still uses an advisor, I can tell you that for every person who doesn't understand FIRE, there's a person who doesn't understand the value of an advisor.
