Ask Stacy: Do I Need a Financial Adviser, or Can I Manage My Money Myself?

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Is investing something you can do on your own, or do you need to pay a pro? While pros can come in handy, many are much worse than going it alone.

When you’re sick, you go to the doctor. When your car dies, you find a mechanic. But when it comes to your money, do you really need a financial adviser, or can you do it yourself?

Here’s this week’s question:

Do I really need a  financial  adviser to handle my money, or will I do just fine in a low fee Vanguard [mutual fund] or something similar?
– Robert

Before we get to Robert’s question, here’s a video we shot a few months ago at the New York Stock Exchange.

Now, on to Robert’s question.

Going it alone: penny wise, pound foolish?

Every year we cover income taxes, and every year, in stories such as 7 Tips to Find the Best Tax Pro, we offer advice like this:

Remember, most preparers are simply entering your information into a software program. Rather than pay hundreds to someone else, you could spend a lot less and … do it yourself.

The same logic applies to managing your money. Money management isn’t rocket science. In fact, I’d consider it more basic than income taxes. Providing you’re willing to do a little reading, you can easily do it yourself. For example, let’s look at Robert’s case. Here’s what he might consider:

  • Step one: Decide how much he can put into long-term savings. Long-term means money he definitely, positively won’t need for at least five years.
  • Step two: Subtract his age from 100 and put that percentage of his long-term savings into a simple, unmanaged stock index fund. So if he were 40, he’d put 60 percent (100 minus 40) of his savings into a fund such as the Vanguard 500 Index Fund or 500 Index ETF. (I typically suggest Vanguard because they’re low cost. I have no affiliation with them.)
  • Step three: Take the remaining part of his long-term savings, 40 percent, and divide it equally. Leave half in an interest-bearing, risk-free savings account, put the other half into a bond mutual fund, such as the Vanguard Intermediate-Term Bond Index Fund, or an ETF.

He’s done. No pro needed.

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