Do you understand your personal finances?

[kutuz_off]

I'm quite an idiot when it comes to this. It's rather upsetting. It's caused by a mix of mega-procrastination (mmm...I think it's about time I filed my 2005 taxes), being too irresponsible to do things that help me, and having a bit of a gambling streak (losing too much on stock market).

Currently my money is in cash, poker accounts, and emerging markets index ETF (I think it's a better bet than american indices long-term...gambling again). At least I started deducting from my paycheck into retirement accounts again recently.

[NajdorfDefense]

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right, but as it turns out most of these professionals are a big waste of money, yet few people know that.

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O RLY? Are you going to prove 'most?' I doubt it.

I think if they put a random person in a target VGuard or Fido fund, it'd be better than what 90% of people could do on their own. Or a balanced fund. Something a broker could do with 10hrs of training, for example.

[quadzilla]

I can't say that I really understand my personal finances. I have a friend from college that manages my assets which consist of Traditional IRAs and a simple IRA. I also have equity in my home and business. I also keep way more money than I should in a savings account at my bank. I know how to make money through my business but, have no real desire or time to learn about my retirement accounts, stocks, etc.

[ahnuld]

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right, but as it turns out most of these professionals are a big waste of money, yet few people know that.

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O RLY? Are you going to prove 'most?' I doubt it.

I think if they put a random person in a target VGuard or Fido fund, it'd be better than what 90% of people could do on their own. Or a balanced fund. Something a broker could do with 10hrs of training, for example.

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I meant these guys dont beat the market, so ETFs are better. Obviously a financial advisor can do better than a doctor buying individual stocks.

[ImsaKidd]

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Is understanding just knowing where everything is, or understanding the fundamentals behind where your $$ is?

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Id like to think its understanding why your money is where it is so you can tell if the person managing it is competent. You dont have to understand all the financial jargon, but you should know a few principles or why this guy is putting your money where it is.

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I'm not old enough to have IRA's or finance people or whatever. I (will) have a vanguard account and maybe some CD's. I would like to think i am at least somewhat competent.

[NajdorfDefense]

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right, but as it turns out most of these professionals are a big waste of money, yet few people know that.

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O RLY? Are you going to prove 'most?' I doubt it.

I think if they put a random person in a target VGuard or Fido fund, it'd be better than what 90% of people could do on their own. Or a balanced fund. Something a broker could do with 10hrs of training, for example.

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I meant these guys dont beat the market, so ETFs are better. Obviously a financial advisor can do better than a doctor buying individual stocks.

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1) ETFs don't beat 'the market,' so aren't necessarily better than anything else. They're not even as predictable as they should be, according to recent research.

2) Not everyone's goal is to 'beat the market.' Most rich, successful people I know have other fin'l goals related to investing.
You take care not to define your terms, but I assume you mean the SPX. Most clients are very, very unhappy when you are down 20% with their money and the SPX is down 23%. Very unhappy.

A standard asset allocation program has been crushing the SPX since at least 2000, it would take any legit, competent fin'l advisor - fee only or broker, about 15 mins to do a minimal template that would have beaten the SP500 - if that was the bar you set.

Small caps also dominate large-caps over time. So it's very easy to beat the SPX as long as your universe includes simple things like small-cap stocks and Int'l stocks.

I believe long-term UST bonds were beating stocks from 1982 until relatively recently, and for far less risk. You should only put all your investable assets in the SPX if you're looking for 100% US large-cap exposure, which is going to be terrible advice anyway.

10 year returns -
VFINX {the market} returned 7.85% annually over 10 years.
Fido Balanced [incl bonds obviously] 10.7%
Fido Contra - 10.8
FDIVX - 13.2
FLPSX - 15.4
FDVLX - 12.1
DODGX - 14.1
CWGIX - 13.7
Clipper 11.8
Colum Acorn 15.1
Davis NY 10.2
ITHAX - 15.6
BJBIX - 16.9
LM Value Trust - 12.4
LAVLX - 14.7
Meridian Value - 17.9
Muhlenkamp - 12.7

Those are all 10-yr returns, all pretty much 3-10% over the SPX, annually, for 10 years [I own all of them for myself or my clients]. Meridian has more than doubled the return of the index, all returns after fees, of course, feel free to check some of these funds on MStar.

[Leaky Eye]

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Curious to see what people say as in the finance forum alot of people's parents and friends dont know and dont care about their money positioning at all.

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Are these people's friends dim? I don't think I know anyone who doesn't.

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I meant that they have them stashed in some fidelity retirement fund recommended by some financial advisor. The thing is they place blind trust in that person and dont want to be bothered to understand or double check the allocation.

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Ya that is what I got from it. I don't know anyone that blindly trusts their money like that. Most people I know talk about their investments frequently.

I would say people track it with wildly different amounts of success though. As would be expected.

[Leaky Eye]

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Small caps also dominate large-caps over time. So it's very easy to beat the SPX as long as your universe includes simple things like small-cap stocks and Int'l stocks.

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Total derailment: I think small caps, as a whole, are currently overvalued due to this becoming the prevailing wisdom.

[LearnedfromTV]

Yes, I manage it myself.

Until recently, our money was split about 1/3rd in Vanguard funds, about 1/3rd in a handful of stocks (Scottrade account, buy and hold philosophy), with the rest in a couple managed Asia funds and a Japan ETF. Something like 80/5/15 stocks/bonds/money market, 60/40-50/50 US/Intl.

Retirement money is mostly in "Target Retirement" type accounts (the kind that get more conservative over time), international index funds, with like 1/10th in a random aggressive stock fund I opened five years ago. One thing I want to do soon is rollover a couple old retirement accounts into a single IRA.

Also have a primary bankroll and a backup money market account "assigned" to poker.

But we just bought a condo; so nearly all of paragraph 1 is now invested in Chicago RE! Time to rebuild.

I have a spreadsheet I use for forecasting savings/targeting an overall allocation. Not very good about details of monthly budget, but have a handle on average monthly expenses.

[kidcolin]

No, I suck at it and it's something I want to get better at, but keep shying away from actually learning about it.

I've got a pretty good job for my age with a solid 401(k) and stock plan. I only put 5% of my pay in my 401(k), I definitely should bump that up. After that, I've saved up about 35K, and all it does is sit in ING.