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Learn to Invest Money: Three More Tips for Finding a Superior Financial Consultant Finance Articles | April 8 J. R. Richard Astros Jersey , 2006
If you?re frustrated from having one financial consultant after another financial consultant provide you with inadequate returns on your stock portfolio, then I hope you read my first article ?Three Tips for Finding a Superior Financial Consultant.? In this article, I?ll drill down some more to really hammer home those points.

If you?re frustrated from having one financial consultant after another financial consultant provide you with inadequate returns on your stock portfolio, then I hope you read my first article ?Three Tips for Finding a Superior Financial Consultant.? In this article, I?ll drill down some more to really hammer home those points.

Finding a superior financial consultant Carlos Lee Astros Jersey , isn?t always about the financial consultant. Sometimes it is also about you. Are you willing to also make the commitments to find a superior financial consultant? In this article, I?ll discuss one more crucial behavior about financial consultants and two regarding the behavior of you, the investor. Three more tips:

(1) Don?t hold mutual funds;(2) Don?t be stingy if you find a superior advisor; and(3) Be patient and ask lots of questions in your search for a superior financial consultant.

Don?t Hold Mutual Funds

Let me tell you why I?m not a fan of mutual funds. Mutual funds have so many hidden fees that it?s often difficult to know exactly what your costs are. Besides upfront costs that can be upward of 5% for some funds, there are 12b-1 advertising , marketing and distribution fees that range from 0.25% to 1.0% Roy Oswalt Astros Jersey , administrative fees that range from 0.20% to 0.40% and of course management fees paid to the mutual fund manager of 0.50% to more than 1.0% annually. This doesn?t even include undisclosed ?soft? costs of trade commissions that can add another 2.0% to 4.0% in costs. And yes you didn?t incorrectly read the first part of that last sentence. Many mutual funds charge you 12b-1 expenses they incur from advertisements and commercials that urge you to buy their funds, and if you?re buying no load funds, chances are that your 12b-1 fees are higher than average. Add to this, intangible costs such as the performance that is sacrificed to maintain the necessary level of liquidity to satisfy share redemption, and your costs become even greater. For a fund that turns over 100% of its assets annually Mike Scott Astros Jersey , Roger Edelson of the University of Pennsylvania Wharton School estimated this sacrificed performance to be 1.5% of returns annually. Lastly to add insult to injury, sometimes fund managers sell out of their biggest winners to meet liquidity needs, generating a capital gains income tax for you, the investor, even if the mutual fund lost money that year. But this isn?t even where the negative traits of mutual funds end. If you have one of the many financial consultants that merely try to jump on the hot emerging market bandwagon by buying mutual funds in China Jose Cruz Astros Jersey , India, or any other country, I advise you to exercise extreme caution. When pullbacks happen in these country?s economies as will inevitably happen, you are at high risk of losing money quickly. Why? In a mutual fund, you are at the mercy of a herd mentality that more often than not Jimmy Wynn Astros Jersey , will induce panic upon the release of bad news, and cause millions of investors to redeem their shares over a short period of time. If this happens, fund prices will plummet before you even knew what hit you. But if you choose to own just the best stocks in the best industries in these countries, most likely your stock prices will be much more insulated and less volatile in such a scenario. While these stocks may still decline, they will most likely decline a lot less than the fund will. Strong companies? stock prices tend to weather country-wide economic downturns much better than fund prices Andy Pettitte Astros Jersey , and if they are in the right niche, they may even continue to flourish.

Be Willing to Pay Fees for Superior Advice

Superior advice is superior because a lot of hard work and time go into producing that advice. I remember talking to a potential client one time that had a million dollars in the stock market and was adamant about not paying fees. He just wanted to pay commissions on stock trades. When he showed me his statements (by the way he was with a major Wall Street firm that I won?t name), there seemed to be no structure or investment strategy in his portfolio. He owned a mix of mutual funds and individual stocks, and many times those stocks were traded as soon as there was a nominal 5% gain in any of them. Furthermore, the statements by his financial consultants were misleading. The consultant handwrote on his statements that he was doing great because he was up 6% that quarter (which I believe just about matched the S&P 500?s performance that quarter). He told me that annualized Gerrit Cole Astros Jersey , that the 6% translated into 24% returns. But when I explained that his net returns would be much lower because his portfolios quarterly 100% turnover rate produced excessively high capital gains taxes that would undercut his net returns, he didn?t seem to understand. I guess his financial consultant didn?t bother explaining this small detail to him. Still, he insisted on paying no fees no matter what. I could tell that he was the ty