Can We Still Afford the Riverboat Cruise?

By SJHarris @ Shutterstock.com

Are you falling for the oldest trick in the book? Here’s how it reads. Managers today draw you in with low-cost index funds and past performance—not necessarily in that order. Then, once you’re in the door, they sell you on other stuff, like toxic variable annuities, until you’re blue in the face. It’s hard not to fall for the sales pitch. I get it.

Here’s what happens. It’s Sunday morning. You don’t have a care in the world. Frank Sinatra is playing in the background. Life is good. Then you peel open the quarterly funds report in the Journal and look at the performance like a box score from last night’s game.

You’re reviewing this manager and that manager. Their performance captures your mind’s eye, whisking you away to a hammock under some palm trees where you’re enjoying the Island Life. It’s performance, of course, that gets you dreaming. It’s the past performance that gets you excited.

Unfortunately, it’s past performance that brings out this nagging feeling of frustration—this feeling of missing out. And you begin to imagine how much richer you could be. Then you feel angry, and come Monday morning, you’re going to change your life and call your broker. No time to waste.

The other attraction, of course, is the low cost. “If I save this much, it means a free riverboat cruise come September.” You set sail in January with the new index funds, save a few basis points, and your cruisin’. Then, out of nowhere a virus hits and you shelter in place, afraid to tell your spouse how much your account is down. “Should we sell so we can still afford the cruise?” She asks.

Look, you and I know times, they are a-changin’. No longer do you need to pay an expense ratio on a mutual fund or ETF and for some manager charging you even more to pick the funds for you. Don’t forget his fee—over a percent and a quarter.

The best way forward is to take charge with a zero commissions account at Fidelity and to construct a solid mix of stocks and bonds. Avoid owning some rat’s nest of stuff picked out by some guy whose name you can never pronounce quite right. Don’t be the guy who’s sold a package of goods you never signed up for—you deserve better.

Action Line: There’s a high price to pay for not knowing why you own something. “Why” is perhaps the most important word in the investing language. There is a better way to invest. Let me help you find yours—allow me to show you the way.

Originally posted on October 28, 2020.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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