Should I Use an Investment Professional?
People ... are nearly twice as likely to ... feel confident Great, confidence is amazing. That and $5 will buy you a cup of coffee. 44% [who hired a pro] have $100K or more [vs.] 9% of DIYers There's no way to examine these numbers without a link to the source, but it stands to reason that if you have a plan that you're sticking to you'll save more money than if you are just investing haphazardly. It's too bad that we can't see what the returns are for those using a pro vs. DIYers. That would be much more valuable than an arbitrary dollar level. Unfortunately $100K isn't really that much money if you live in the US, so it's an irrelevant talking point. The real question is whether investment knowledge is readily available to the masses or if having a person who specializes in finance is required to make good decisions about investment. I think the fact that the conventional wisdom prefers index funds to actively managed funds demonstrates that investment professionals are less useful than they might have been even a decade or two ago. If money should be spent on professional advice, it's probably better spent on CPAs or other tax professionals who can help optimize your investments for tax efficiency, though even that is now available as more common knowledge. "Let me start with something you might dismiss as trite - Correlation does not mean Causation.  A money manager charging say, 1%, isn't likely to take on clients below a minimum level.  On the other hand, there's a long debate regarding how, on average, managed funds don't beat the averages.  I think that you should look at it this way. People that have money tend to be focused on other things. A brain surgeon making $500K/yr may not have the time, nor the inclination to want to manage her own money.  I was always a numbers person. I marveled at the difference between raising 1.1 to the 40th power, getting 45.3 (i.e. Getting 45.3 times your investment after 40 years at 10%) vs 31.4 at 9%. That 1% difference feels like nothing, but after a lifetime, 1/3 of your money has been skimmed off the top. the data show that one can do better by simply putting their money into a mix of S&P index and cash, and beat the average money manager over time, regardless of convoluted 12 asset class allocations.  Similarly - There are people who use a 'tax guy.' In quotes because I mean this as an individual whom they go to, year after year, not a storefront. My inlaws used to go to one, and I was curious what they got for their money. Each year he sent them a form. 3 pages they needed to fill in. Every cell made its way into the guy's tax program. The last year, I went with them to pick up the tax return. I asked him if he noticed that they might benefit from small Roth conversions each year, or by making some of their IRA RMD directly to charity. He kindly told me ""That's not what we do here"" and whisked us away. I planned both questions in advance. The Roth conversion was a strategy that one could agree made sense or dismiss as convoluted for some clients. But. The RMD issue was very different. They didn't have enough Schedule A deductions to itemize. Therefore the $3000 they donated each year wasn't impacting their return. By donating directly from their IRAs, this money would avoid tax. It would have saved them more than the cost of the tax guy, who charged a hefty fee, in my opinion. It seemed to me, this particular strategy should be obvious to one whose business is preparing returns." "Ask yourself the same question for furniture making. Would you feel more comfortable sitting in a chair that you made yourself versus one that you bought from a furniture store?  How about one that you bought from IKEA and assembled? For an experienced, competent furniture maker, you might be able to make an equivalent chair for less money and be highly confident.  For a ""DIY"" builder, you might be less confident but be willing to take more of a risk with the possibility of making a good chair for less money (and gain experience on what not to do next time).   The same applies to investing - if you are highly confident in your own abilities, DIY investing may work better for you.  For the ""general population"", however, relying on experts to do the hard work (and paying a little more for their services) is probably a better option and gives you more confidence. As for the second quote, I'm note sure there's a causality there.  If anything, I think it's the other way around - people who have more money saved for retirement are more likely to use investment advisors." I am sure there would be many views on the above topic, my take is that DIY takes the following: Now, for many, one or more of the other factors are missing. In this case, it is probably best to go for a financial adviser. There are others who have some of the above in place and are interested but probably cannot spend enough time. For them a middle ground of Mutual Funds probably is a good choice. Here they get to choose the fund they invest in and the fund manager manages the fund. For the people who have the above more or less in place and also are willing to take risk and learn, they probably can do a DIY for a while and find out the actual result. Just my views and opinion. "Even if we accept these claims as being true, neither the fact that their clients are more confident, nor the fact that people who use an investment professional have a higher net worth tells you anything about the value of the service that such professionals provide.  Judging a service provider is a complex matter where you take into account multiple variables but the main ones are the cost and quality of the service, the cost and quality of doing it yourself and the value you assign to your time and effort. I think it's highly likely that professional gardeners will on average maintain larger gardens than those who do their own garden work. And any professional will have more experience at his profession than an average member of the public. But to determine if hiring a professional is objectively ""better"" requires defining what that word means. Finance is a bit weird in that respect since we actually do have objective ways of measuring results by looking at performance over time. But since the quotes you give here don't address that at all, we can simply conclude that they do not make the case for anything related to financial performance." Agree with the above poster regarding causation vs. correlation. Unless you can separate out the variables questions like this are somewhat impossible to answer.  Additionally, one of the fundamental issues is the Agency Problem. Depending on the fee structure the advisor might be more interested in their own self benefit then yours. Yes.  The investment world is extremely fast-paced and competitive. There are loads of professional traders with supercomputers working day in and day out to make smarter, faster trade decisions than you. If you try to compete with them, there’s a better than fair chance you’ll lose precious time and money, which kind of defeats the purpose. A good wealth manager: In short, they can save you time and money and help you take the most advantage of your current savings. Or, you can think about it in terms of cost. Most wealth managers charge an annual fee (as a % of the amount invested) for their services. This fee can range anywhere from close to zero, to 0.75% depending upon how sophisticated the strategy is that the money will be invested in, and what kind of additional services they have to offer. Investing in the S&P500 on the behalf of the investor shouldn’t need a fee, but investing in a smart beta or an alpha strategy, that generates returns independent of the market’s movement and certainly commands a fee. But how does one figure if that fee is justified? It is really simple. What is the risk-adjusted performance of the strategy? What is the Sharpe ratio? Large successful funds like Renaissance Technologies and Citadel can charge 3% in addition to 30% of profits because even after that their returns are much better than the market. I have this rule of thumb for money-management fees that I am willing to pay:
"This is basically what financial advisers have been saying for years...that you should invest in higher risk securities when you are young and lower risk securities when you get older. However, despite the fact that this is taken as truth by so many financial professionals, financial economists have been unable to formulate a coherent theory that supports it.  By changing the preferences of their theoretical investors, they can get solutions like putting all your investments in a super safe asset until you get to a minimum survival level for retirement and then investing aggressively and many other solutions.  But for none of the typically assumed preferences does investing aggressively when young and becoming more conservative as you near retirement seem to be the solution.  I'm not saying there can be no such preferences, but the difficulty in finding them makes me think maybe this idea is not actually correct. Couple of problems with your intuition that you should think about: It's not clear that things ""average out"" over time.  If you lose a bunch of money in some asset, there's no reason to think that by holding that asset for a while you will make back what you lost--prices are not cyclical.  Moreover, doesn't your intuition implicitly suggest that you should transition out of risky securities as you get older...perhaps after having lost money? You can invest in safe assets (or even better, the tangency portfolio from your graph) and then lever up if you do want higher risk/return.  You don't need to change your allocation to risky assets (and it is suboptimal to do so--you want to move along the CAL, not the curve). The riskiness of your portfolio should generally coincide (negatively) with your risk-aversion.  When you are older and more certain about your life expectancy and your assets, are you exposed to more or less risks?  In many cases, less risks.  This means you would choose a more risky portfolio (because you are more sure you will have enough to live on until death even if your portfolio takes a dive). Your actual portfolio consists both of your investments and your human capital (the present value of your time and skills).  When you are young, the value of this capital changes significantly with market performance so you already have background risk.  Buying risky securities adds to that risk.  When you are old, your human capital is worth little, so your overall portfolio becomes less risky.  You might want to compensate by increasing the risk of your investments. EDIT: Note that this point may depend on how risky your human capital is (how likely it is that your wage or job prospects will change with the economy). Overall the answer to your question is not definitively known, but there is theoretical evidence that investing in risky securities when young isn't optimal. Having said that, most people do seem to invest in riskier securities when young and safer when they are older. I suspect this is because with life experience people become less optimistic as they get older, not because it is optimal to do so.  But I can't be sure." It depends on a couple of things.  One is your age -- if you're recently out of college that's totally fine; if you've been a professional for a long time then you may want to go a bit more formal.  It also depends on the kind of investment firm and how client-facing the role / firm is.  For example, I used to be at a firm where interviewing in shorts and a t-shirt would've been completely acceptable but I wouldn't suggest that at a white-shoe bank. As a general rule of thumb, age and resiliency of your profession (in terms of high and stable wages) in most cases imply that you have the ABILITY to accept higher than average level of risk by investing in stocks (rather than bonds) in search for capital appreciation (rather than income), simply because you have more time to offset any losses, should you have any, and make capital gains. Dividend yield is mostly sough after by people at or near retirement who need to have some cash inflows but cannot accept high risk of equity investments (hence low risk dividend stocks and greater allocation to bonds). Since you accept passive investment approach, you could consider investing in Target Date Funds (TDFs), which re-allocate assets (roughly, from higher- to lower-risk) gradually as the fund approaches it target, which for you could be your retirement age, or even beyond. Also, why are you so hesitant to consider taking professional advice from a financial adviser? Well, to get money, you need to leverage your assets.  So your options basically are:  - Asset: Cash.  Well, I figure if you had, you wouldn't have asked how to get more of it, but its always worth mentioning.  Don't forget about cash that can be in tricky places to tap, like 401ks, IRAs, investment accounts, etc.  There is usually some way to get at the cash, but it may not be worth it and you could end up sacrificing long term financial stability if you do.  - Asset: Job Skills and Initiative.  Get a job and and earn the cash.   $2k is not a ton, and if you live frugally you should be able to save it.  There are tons of websites dedicated to living frugally and earning extra cash on the side.   My personal favorite is r/beermoney.   - Asset: Good Credit. Borrow the money from a traditional bank.  Signature loans go up to $35k at most banks, just ask what it would take to qualify.  You could also get a credit card for that amount, and use it to start up the business.    - Asset. Bad Credit.  If you've got bad credit, you can still take out a loan from a place like Prosper or Lending Club or Sofi (these places are handy if you have good credit, too).  Your rates will be much higher, but they will still lend to you.  - Asset: Property.  If you own stuff, you can sell it and get cash.  Clean out your attic (or ask relatives if you can have the stuff in theirs!) and sell it.  If you own fancy stuff, you can borrow against it (home, car, boat, etc.).  - Asset: Your Charm and Winning Smile.  If you have a good, solid business plan (written down and professional looking), ask around and see if you can find an investor.  It could be friends or family, but it could also be someone who is looking to invest.  Be professional, and be sure to draw up the appropriate business docs if you do a partnership or take a private loan.  - Asset: Your Government.  If you live in the US, there are federal programs that offer Small Business Loans.  Check out sba.gov for more info.  You will need a business plan and will have to meet the criteria of the loan or grant.  Not sure if your Ecommerce business will meet the criteria, as the intent of these types of programs are to spur the economy by allowing small business owners to hire workers.  But its worth checking out. Not sure if you mean that your SO stands to inherit $18 million or has inherited it already.  I would hope that her family already has a team of financial advisors at that point.   The name of the game at that asset level is protection.  You have enough money so you want to keep up with inflation and generate some income.  Most of my firm's clients at that size have at least 50% in tax-free municipal bonds the other half is about 10% in aggressive investments (private equity, aggressive stock managers), and 25% in conservative stock investments, 5% in international investments, and 10% in alternative investments (long/short, GTAA, hedged equity) .  They also tend to have quite a bit of income producing real estate.   Make sure you meet with a financial advisory firm the specializes in high net worth clients.  I work for an independent RIA so I may be biased towards independent and fee-only firms but it seems like the best arrangement.  You pay a percentage of assets under management and get objective investment advice with no commissions.  For $18 mil anything over .50% as an advisory fee is a ripoff.  You all in investment cost should be less than 0.90%.   Also you should look into a high net worth insurance broker.  You current insurance salesman will be in way over his head.    Feel free to PM me with specific questions.  Also, if you want to hire my firm that would be great haha! My recommendation is not to pursue anything. Set up a set of index funds that hits the balance of risk and reward you're comfortable with, and settle for market rate of return. Trying to beat the experts doesn't even work for the experts. Life Strategy funds are more appropriate if you want to maintain a specific allocation between stocks and bonds that doesn't automatically adjustment like the Target Retirement funds which have a specific date.  Thus, it may make more sense to take whichever Life Strategy fund seems the most appropriate and ride with it for a while unless you know when you plan to retire and access those funds. In theory, you could use Vanguard's Total Market funds,i.e. Total Stock Market, Total International, and Total Bond, and have your own allocations between stocks and bonds be managed pretty easily and don't forget that the fees can come in a couple of flavors as betterment doesn't specify where the transaction fees for buying the ETFs are coming out just as something to consider. JoeTapayer has good advice here. I would like to add my notes. If they give a 50% match that means you are getting a 50% return on investment(ROI) immediately. I do not know of a way to get a better guaranteed ROI. Next, when investing you need to determine what kind of investor you are. I would suggest you make yourself more literate in investments, as I suggest to anyone, but there are basic things you want to look for. If your primary worry is loss of your prinicipal, go for Conservative investments. This means that you are willing to accept a reduced expected ROI in exchange for lower volatility(risk of loss of principal). This does not mean you have a 100% safe investment as the last market issues have shown, but in general you are better protected. The fidelity investments should give you some information as to volatility or if they deem the investments conservative. Conservative investments are normally made up of trading bonds, which have the lowest ROI in general but are the most secure. You can also invest in blue chip companies, although stock is inherently riskier. It is pointed out in comments that stocks always outperform bonds in the long term, and this has been true over the last 100 years. I am just suggesting ways you can protect yourself against market downturns. When the market is doing very well bonds will not give you the return your friends are seeing. I am just trying to give you a basic idea of what to look for when you pick your investments, nothing can replace a solid investment adviser and taking the time to educate yourself.