Thursday, February 27, 2014

The best advice needs no more than a 4 by 6 index card (Continued).

The best advice needs no more than a 4 by 6 index card (Continued).


If you missed my last blog, please go back and read it first, as this is a continuation of the advice given by University of Chicago Professor Harold Pollack and my commentary on how to put the advice to use (my advice is in parenthesis unless otherwise noted).

6. Maximize tax advantaged savings like Roth, SEP and 529 accounts. (If this sounds like financial mumbo jumbo, don’t despair.  A good basic investment class, book or advisor can explain how all these work in layman’s terms and help you understand how they can help you meeting your long term goals).

7. Pay attention to fees, avoid actively managed funds. (Fees matter in mutual funds and it is important to know how to evaluate these fees. Actively managed funds can beat an index fund but it is highly unpredictable and only realized in hindsight. Less than .001% of 5-star top performing actively managed funds are still at the top 5 years later.

8. Make financial advisor commit to a fiduciary standard (i.e. Puts your interests as a client ahead of their own, disclosing any conflicts of interest and providing independent advice).

9. Promote social insurance programs to help people when things go wrong. (Many people can afford to plan for the things that can go wrong by purchasing life insurance to pay debt and provide income for family. They can buy long term care insurance to protect their assets for spouse and possibly children as well as save part of their money for the future so social security isn’t the only source of income. Participate in retirement plans. The list goes on and on. If you think partnering with an advisor will help keep you on track, go for it. The fee you pay to do the right things for your family could prove to be “priceless”.)