Author: rrosenkoetter | Date: 2/8/05 12:50 AM | Number: 443740So you think that every financial advisor is a fraud? That none of them understand the markets at all? (I wouldn't disagree with that out of hand).I think you have a misunderstanding about what a good financial advisor does. Any financial advisor who says he knows what the market will do in the future is one to walk away from. No one knows what the market will do in the future regardless of what they claim. If you hire a financial advisor who has 'called' the last two bear markets, then he has been lucky two times in a row. That's the same as a person who has thrown two sevens in a row with a pair of dice. Do you think he will be lucky again?A reputable financial advisor will work with you to plan all areas of your finances. This would include amoung other things, a savings plan, an estate plan, and a portfolio tailored to your specific needs, based on your risk tolerance, age, and other personal information. It will be a portfolio that sets a level of growth and risk based on an allocation between uncorrelated (weakly correlated) asset classes. It may be as simple or as complex as you are willing to pay for. A simple asset allocation plan assigns a percentage between stocks and bonds and keeps that percentage constant. A complex plan could involve many different asset classes (precious metals, real estate, foreign currency, etc). However, you get about 95% of the benefit of diversification from just using the Total Stock Market mixed with the Total Bond Market (mutual funds). Once this allocation is established, the financial advisor will recommend to you to rebalance as needed to keep the percentages constant, and he will meet with you at least once a year to review your whole plan and make changes as necessary to reflect changes in your life.The more experienced an advisor is, the more emphatically he will tell you that past performance does not indicate future performance. You have to protect yourself from the risk that past performance does not properly indicate actual performance.I've read some good books, and some older guys newsletters. The whole cycle of bull\bear markets, how P/E ratios have historically "shown the way"There are several organizations that study how successful each financial newsletter has been over long periods of time, and overall, in my opinion, there isn't a single newsletter that is worth buying. I think you should read some books like:'The Wealthy Barber' by David Chilton'The Four Pillars of Investing' by William Bernstein'A Random Walk Down Wall Street' by Burton Malkiel'Common Sense on Mutual Funds' by John Bogle'Stocks for the Long Run' by Jeremy SiegelAll this said, most people here at the Fool have decided to learn enough to do most, if not all, of their own investment planning. Most still need professional help with their estate planning.Russ
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