A friend asked me to take a look at her IRA with Chase. I couldn’t believe how horrible the products she was sold were. Here is some quick info to help you make better investment decisions.
If your IRA is managed by Chase, MorganStanley, Merrill Lynch or similar, there is a 99% chance you are being hosed. Try Betterment or Wealthfront.
If you still think that you should keep your money where it is, here’s some more advice:
- If your adviser tells you he’s going to trade individual stocks, RUN!!!
- When investing in mutual funds, ask your adviser what the front end load is. If the answer is >0, RUN!!!
- When investing in a specific fund, ask your adviser what the expense ratio is. If the answer is >1.5%, RUN!!!
- Ask if there are any fee waivers in place. Often mutual funds will offer a promotional rate to lure in money. Your “regular” price can be much higher.
- If investing in a S&P 500 Index fund, ask what the expense ratio is. If the answer is >0.10%, RUN!!!
Some funds also have a short-term redemption fee. Don’t worry about this; you shouldn’t be doing short-term trading.
The generic advice I give to most people is:
- Don’t bother with individual stocks. They are too risky and require too much maintenance. If you think a certain sector is going to be hot (e.g. healthcare), buy a sector-specific fund instead of individual stocks.
- For retirement, pick a target date retirement fund. These usually have a year in them, e.g. 2030, 2040, 2050. Pick the date that you expect to retire. Put ALL of your retirement money in that fund. Get one of these funds from Vanguard or Fidelity.
- For non-retirement assets, invest in Betterment or Wealthfront. They give you a diversified portfolio at low management rates.
I was inspired to write this by my friend who was sold funds with a 4.5% front end load and expense ratio of 1.3% something. (Temporarily waived to .96%.)
For those of you who’ve followed me and think, “that’s not what you do.” “Didn’t you make a pile of money shorting Groupon and buying options?”: you’re right. But I have specific expertise in technology, accounting and tax. I read annual reports and listen to earnings calls.
You probably have a life and don’t have time to do such things.
Besides, I trade stocks and options with play money. Most of my assets follow the rules above.
(If we’re close friends and you want me to look at your IRA, shoot me a note.)