Financial Advisors

[wdcbooks]

A few things:

Barron, I am really surprised you haven't read "Random Walk". As someone who really seems passionate about investing and the theory behind it, you have skipped one of the seminal books out there. It isn't perfect, but it challenged orthodoxy and formed the basis for guys like Taleb.

I understand what you are saying about passive and active, and I agree that anything but holding the market for life can be considered 'active', but I am not so sure why you are hung up on this point. The great majority of people DCA by necessity (401k) and almost all passive advocates eschew market timing. If you want some boring investing conversations come read www.bogleheads.org, where the last thing left to talk about is the most nitpicky nuances of asset allocation.

I believe gull made an early post advising someone look into Altruist and Rick Ferri as potential advisors. One could hardly choose more ethical and respected advisers. Nice call.

I am not going to get into it with meditate, but anyone who states a variation of, "Anyone can beat the market with a little research and effort", has put a whole lot of thought into the idea. It is simply a provable logical fallacy, and you will find that even active investment believers, both academic and practicing, would never say it was easy.

People like me would put 'beating the market' as not only not easy, but incredibly difficult at best, a hair shy of impossible at the worst.

[DcifrThs]

[ QUOTE ]
I understand what you are saying about passive and active, and I agree that anything but holding the market for life can be considered 'active', but I am not so sure why you are hung up on this point.

[/ QUOTE ]

hmmm. good point. i dont' know either. i guess i just feel that it is an important point and one that is often not understood so i'd like to correct that lack of understanding.

[ QUOTE ]

The great majority of people DCA by necessity (401k) and almost all passive advocates eschew market timing.

[/ QUOTE ]

yup. obviously when i said "DCA is not optimal" i meant if you had a choice.

[ QUOTE ]
If you want some boring investing conversations come read www.bogleheads.org, where the last thing left to talk about is the most nitpicky nuances of asset allocation.

[/ QUOTE ]

just went over there. apparantly there is a "published finance" guy who chimes in. haven't read any of his stuff but that's kinda cool.

thanks for the link.
Barron

[whyherro]

I would probably stay away from financial advisors assuming your net worth is <$5mm. Above that point opportunities exist that are largely unavailable to the common investor.

The first thing to do is determine your risk tolerance. If you are young and fairly open to taking swings in your account balance I would just open up an online brokerage account (multiple if needed) and dump everything into an assortment of ETFs with an emphasis on US equities - Russell 2000 and S&P500 - with a reasonable percentage allocated to world markets (read: Europe, China, Japan, etc).

This minimizes your total transaction costs and you can feel very comfortable that you are sufficiently diversified. Moreover, given your young age you have plenty of time to ride out variance on the way to historically-evidenced higher returns for equities.

If you are looking to have some fun, I would probably take about 5% of my portfolio and use it to play around and make some specific bets.

If you are looking to take on less risk, simply delever yourself and keep a certain % of your portfolio in the highest yielding money market fund you can find - I would recommend keeping a certain amnt in any case.

Nevertheless, the financial advisors available to someone with less than millions to invest are largely inept - chances are with a little bit of research there is a high probability you will outperform under self-management. The people working these jobs simply aren't the best and brightest the finance world has to offer.

[whyherro]

Btw - Barron, reading Random Walk is probably a waste of time for you - it seems like you understand essentially everything in it. However, you might like "The New Finance" by Haugen, it's a quick read and is right up your alley.

[whyherro]

The same types of opportunities that exist for large institutional investors (read, pension funds, etc). PE and hedge funds, especially the good ones, are largely inacessible for the casual investor, but, for example, at the high net worth asset management group at like a goldman sachs, they will pool the assets of their investors to place in top hedge funds / PE funds.

[DcifrThs]

[ QUOTE ]
Btw - Barron, reading Random Walk is probably a waste of time for you - it seems like you understand essentially everything in it. However, you might like "The New Finance" by Haugen, it's a quick read and is right up your alley.

[/ QUOTE ]

THanks. seems like this guy (haugen) is a strong opponent of EMT.

there are 3 books i've found:

1) the new finance: compexity, uniqueness etc.
2) the new finance: the case against efficient markets
3) the inefficient markets

i'm assuming you mean the shortest one...one i'd like to call, book number 2.

i'll take a look since it is indeed, quite short, cheap, and i can likely skim it (mandelbrot presents a more formal case against modelling using assumptions similar to those used for EMT). thus, mandelbrot has missed attacking all the assumptions of market efficiency and there may be some in that book that i haven't learned about yet.

thanks for your recommendation.
Barron

[edtost]

[ QUOTE ]
[ QUOTE ]
Btw - Barron, reading Random Walk is probably a waste of time for you - it seems like you understand essentially everything in it. However, you might like "The New Finance" by Haugen, it's a quick read and is right up your alley.

[/ QUOTE ]

THanks. seems like this guy (haugen) is a strong opponent of EMT.

there are 3 books i've found:

1) the new finance: compexity, uniqueness etc.
2) the new finance: the case against efficient markets
3) the inefficient markets

i'm assuming you mean the shortest one...one i'd like to call, book number 2.

i'll take a look since it is indeed, quite short, cheap, and i can likely skim it (mandelbrot presents a more formal case against modelling using assumptions similar to those used for EMT). thus, mandelbrot has missed attacking all the assumptions of market efficiency and there may be some in that book that i haven't learned about yet.

thanks for your recommendation.
Barron

[/ QUOTE ]

for haugen, just read the paper he coauthored with nardin baker in (i think) 98, "commonality in the determinants of expected stock returns", which is the research book (3) in your list is about, but obviously presented in more detail.

disclaimer: i am unfamiliar with book (1) above.

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Btw - Barron, reading Random Walk is probably a waste of time for you - it seems like you understand essentially everything in it. However, you might like "The New Finance" by Haugen, it's a quick read and is right up your alley.

[/ QUOTE ]

THanks. seems like this guy (haugen) is a strong opponent of EMT.

there are 3 books i've found:

1) the new finance: compexity, uniqueness etc.
2) the new finance: the case against efficient markets
3) the inefficient markets

i'm assuming you mean the shortest one...one i'd like to call, book number 2.

i'll take a look since it is indeed, quite short, cheap, and i can likely skim it (mandelbrot presents a more formal case against modelling using assumptions similar to those used for EMT). thus, mandelbrot has missed attacking all the assumptions of market efficiency and there may be some in that book that i haven't learned about yet.

thanks for your recommendation.
Barron

[/ QUOTE ]

for haugen, just read the paper he coauthored with nardin baker in (i think) 98, "commonality in the determinants of expected stock returns", which is the research book (3) in your list is about, but obviously presented in more detail.

disclaimer: i am unfamiliar with book (1) above.

[/ QUOTE ]

do u have the link to the article or is it purchased?

thanks,
Barron

[whyherro]

Barron - the one I was referring to was "The New Finance: Overreaction, Complexity and Uniqueness". He makes a pretty good case against the efficient market hypothesis in the book, specifically related to US equities.

btw - do you have any recommendations for books related to macro-economics / world markets? I really have no experience with the concepts of GDP, relative-country interest rates, inflation, etc.