"You don't know what you're doing," my wife said. "We need to find a broker, someone who's been trained in how to invest. Someone who knows what they're doing." She'd said that before, and I let her get away with it. Until last October. That's when I decided that my high-priced broker really didn't have my best interests at heart, and if I didn't want to end up being a Wal-Mart greeter on the graveyard shift just to make ends meet in my Golden Years, that I needed to take matters into my own hands.
Flash back to later summer, 2008, or thereabouts. Bear Sterns just went under. My wife, who is a conservative radio talk show addict, insists that we pull our meager funds out of our portfolio of predominantly USA stocks at a reputable brokerage and stash the money in a cash account. In this case, she was right. Not long after that, the market crashed and we entered The Great Recession. If we'd left our money where it had been invested, it would have lost about half of its value. Bullet dodged.
That's the good news. Roll the clock forward to July of 2010, and our precious nest egg is still sitting in a money market account, doing pretty much nothing while the market recovered reasonably well after the low points of 2009. Now she's ready to get our funds back into investments, but she insists that we use a particular brokerage firm that specializes in foreign securities. This firm and its CEO believe wholeheartedly that the USA economy is doomed to collapse in the not-too-distant future, and their recipe for salvation is to invest exclusively in non-USA securities and/or currencies. I don't happen to agree with this doomsday philosophy about the almighty dollar, but I can't talk her out of it and I get the, "You don't know what you're doing, you're not trained to do this" speech again, so I go along with it. We ended up getting nicely diversified in non-USA equities and a few funds. These guys are supposed to know what they're doing, and for their "personalized" service we pay very high commissions if we ever want to move anything around, sell something that's not working or buy something else that might be better (or when we've accrued enough dividends). But we get sold into a "set-it-and-forget-it" kind of mentality, with the assurance that they will be in touch with us periodically to review our positions and see if anything needs to be rebalanced.
Time marches on and we get monthly paper reports from our broker that I really don't understand, but the little graphics on the first page don't paint a very bright picture for how our money's doing. October of 2011 rolls around, and my employer embarks on a program of providing all employees with access to all sorts of tools and professional advice on saving for retirement. Stimulated by this, I wake up to the realization that I should be able to check my investments online. This was 2011, after all. Eventually I get access to my account online, and I'm greeted with a lot of red numbers. Doesn't look good, so I call up my broker to talk to him, and his first response was, "Yeah, most of what you're invested in we don't support or recommend anymore." Fabulous. What happened to keeping an eye on things periodically and advising us when we should shuffle things around? After all, that's why we were paying them those high commissions and fees, right? "Yeah, we kind of lost track of you guys, you slipped through the cracks…" Even more fabulous.
Some of the stuff he had gotten us into had done reasonably well, but most of it was not doing well at all; net-net, we were slightly ahead of where we were when we entrusted our life savings to these guys back in July of 2010, but there's a lot of damage control that needs to be done. So we set about dumping all of the positions that were bleeding all over my statement, and he comes back with some recommendations for where I should redeploy what's left of my assets.
This becomes the pivotal moment in my investing life.
I decide that this guy really doesn't have my best interests at heart, and my account is probably "too small to matter" to his firm. I think I can do a better job managing my money in the approximately 17 years I've got left before I have to retire, but I've got to convince my wife that 1) I really do know what I'm doing, and 2) I can do it better than our broker has been doing it for us. I decide that I'm not going to take all of his suggestions, but that I will split the available cash into two groups, one of which I will go ahead and take his advice with, the other of which I will do some research on my own and make my own picks.
A little over seven months later, here are the results…
(The rest of this story can be found in the article entitled "Could It Be That I'm Smarter Than My Broker" here on Seeking Alpha. I hope you take the time to venture over and read the rest of tale…)