Oscar Wilde quipped that a cynic was someone who "knows the price of everything and the value of nothing." The phrase has also been used to jibe the accounting profession. Sadly, though, it is a problem that is endemic in human nature. We all, to greater and lesser extents, suffer from it. This forum has long advocated awareness of costs, so as not to overspend and undersave. Yet that can be taken too far, as one reader poignantly commented in recounting the ultimate futility of his parents' penny-pinching (they died young). I agree with this perspective and made essentially the same point, prior to the comment, in yesterday's post.
So with the awareness that there are situations in which one should spend, we return to the subject of economizing based on an article on today's SA by Adam Hoffman, CFA, in which he notes that $1,000 saved annually, and left to compound at a 3% rate for 30 years, increases to a sum of $49,000. I think we can reconcile the two impulses - spending and saving - by suggesting that investors shower themselves with brotherly love and purchase for themselves a gift of $49,000 starting 30 years hence (though paid for each year starting now).
Hoffman's article offers many ideas for minimizing investment costs, and to his immense credit, the professional financial advisor intelligently subjects the acquisition of professional financial services to the same sort of analysis, noting that "a good or service should be purchased if its value exceeds its cost." He dispassionately explains how one might determine if hiring an advisor is worthwhile, understanding that for some the answer will be yes and for others no. Read the entire article here and sign up for his feed.
Please share your thoughts in the comments section. Here are today's other advisor-related links:
- Evan Powers hones in on the problem with "safe" retirement withdrawal rates.
- Jeff Miller's crew of trading characters look to energy for the long term and finance and software for short-term trades.
- Rob Marstrand created a unique chart highlighting how expensive the S&P 500 is.
- John Mauldin arrives at a similar conclusion.
- For more content geared to FAs, visit the Financial Advisor Center, sponsored by Franklin LibertyShares ETFs.