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No. of Recommendations: 6
I agree with intercst. Remember, this 1.25 to 1.5% fee DOES NOT include the manager's transaction fees for your account (commissions and spreads) that adds another layer of costs to your portfolio. Let's say he's a good manager and doesn't churn your account. We'll add another 1% to the costs. Thus, your portfolio costs will be somewhere from 2.25% to 2.5%. Intercst's costs are less than 0.1% of assets. My costs are about 0.6% of assets because I trade more often than intercst does. From now on, we will call portfolio costs "TER" (total expense ratio).

Since the 100% safe withdrawal rate for 30 years of retirement from a 25% fixed income / 75% stock portfolio is 4%, that means that you must live from an annual withdrawal rate of 1.5% to 1.75%. I.e. if you have a $1M liquid portfolio, you'd better not withdraw more than $15K to $17.5K per year for your living expenses! Essentially, you and your money manager will split your annual retirement income 50/50!! <VBG>

Since less than 90% of money managers and mutual funds beat the S&P500 index over any 10 year rolling period (intercst is being very generous when he says 80% but he's talking 3 to 5 year rolling periods), I think the answer is obvious. Buy and hold a S&P500 index fund or a "Total Market Index Fund". Both of these type of index funds have TERs of 0.12% to 0.2%. That's less than 1/10th of what you'll pay this investment manager and you'll be more than 90% certain of beating his performance over every 10 year period.

Your best bet is to check out: and buy either VFINX (TER=0.18%) OR VTSMX (TER=0.2%). If you have over $250K to invest, you qualify for their even lower cost Admiral shares which would be symbols VFIAX (TER=0.12%) OR VTSAX (TER=0.15%).

FYI, intercst retired 7 years ago at age 38. I retired 6 years ago at age 38. We both live from our FI/Stock portfolios and try to keep our TERs as low as possible. We both like to minimize our taxes also. We both have MBAs. We both think the present investment industry's money managers and managed mutual funds are dinasaurs and rip-off artists. We mainly hang out at "The Early Retirement Homepage Board" on TMF.
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