Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Peter Lynch with Joshua Brown

edited October 4 in Other Investing
Almost whole hour.
LinkedInhttps://lnkd.in/eqt5Gqeg
YouTube

Comments

  • beebee
    edited October 5
    Thanks. Great interview.
    A few of his sentiments stuck with me:

    "know what you own!"

    "If you can't explain your investment strategy to a 10-year-old you have no business being in that investment."

    "I owned plenty of investments that went to zero."

    "If you surround yourself with smart people they will eventually rub off on you."

    "While my friends were delivering newspapers, I made a lot more money as a golf caddy. I met a lot of influential people as a golf caddy. Later, I was hired at Fidelity by Ned Johnson who I caddied for. I guess I impressed him years earlier with the advice and guidance I gave him on the golf course."
  • @Yogi - If you pull up the video and click “copy link” in the upper right corner you can repost that link with better results.
  • What does anyone else think of Brown? I read a lot of their stuff for a while but then ran across a piece he wrote to the rest of their firm emphasizing how important it was to grow the AUM. That seemed to be his top priority
  • Joshua Brown is Cofounder & CEO of the wealth management firm Ritholtz. He also posts on social-media and has podcasts, but he isn't a journalist or economist by education or training.
    https://www.ritholtzwealth.com/
  • edited October 6
    Every money managers top priority (although they might not admit it) is growing AUM. That's how they grow and get richer. Fees, fees, fees the more AUM the more fees. I followed him for a while, some good guest on some of their podcasts (Youtube: The Compound)
  • beebee
    edited October 6
    I try to remind myself of these fees each time I am offered a "free" steak dinner from these wealth management companies.

    In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).

    For example, If I give you $10K to invest and that investment becomes $11K in a year, I am willing to pay you 1% on the gain (1% of $1K or $10), not 1% on the entire $11K.

    You helped me make $1K... I brought you $10K.

    Conversely, If you lost money for me that year, you get $0 fee.

    Or even better, how about you pay me 1% of AUM in the years when my portfolio had negative returns. We are a team, right? If "we do better when you do better" is true, than how about "we both do worse when you suffer a loss (do worse)".

    In terms of retirement Safe Withdrawal Rate (SWR) of say 4%, a typical 1% management fee equates to 25% of that SWR (1% of the 4%). That a significant reduction in retirement income.

    I'll take that steak dinner to go please!
  • edited October 6
    bee said:

    In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
    Are you referring to the asset management fee in wealth management that brokerages offer ?
  • beebee
    edited October 6
    Sven said:

    bee said:

    In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
    Are you referring to the asset management fee in wealth management that brokerages offer ?
    Exactly...We should share in the gains we made together, not the assets I brought you. In real estate its called ROI (Return on Investment).
  • @bee,
    My understanding is that wealth management fee is bases on AUM, not solely on the gain. Win or lose for that year, the management firm, say Schwab or Fidelity, still charges 1% of AUM.

    We must talking about different arrangement or fee structures entirely.
  • bee said:

    Sven said:

    bee said:

    In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
    Are you referring to the asset management fee in wealth management that brokerages offer ?
    Exactly...We should share in the gains we made together, not the assets I brought you. In real estate its called ROI (Return on Investment).
    That reminds me of a futures trading system firm years ago that approached me through my broker about helping seeding their new strategy and then potentially recommending it The offered a typical 2-and-20 which I laughed and said if I was fronting the money, I shouldn't be paying you ANYTHING beyond transaction costs. We haggled and I got them down to .50-and-zero but by that time I was feeling like a potential chump and decided not to play in the end. Probably made the right move, since I never saw them again anywhere. :)



  • bee said:

    I try to remind myself of these fees each time I am offered a "free" steak dinner from these wealth management companies.

    In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).

    For example, If I give you $10K to invest and that investment becomes $11K in a year, I am willing to pay you 1% on the gain (1% of $1K or $10), not 1% on the entire $11K.

    You helped me make $1K... I brought you $10K.

    Conversely, If you lost money for me that year, you get $0 fee.

    Or even better, how about you pay me 1% of AUM in the years when my portfolio had negative returns. We are a team, right? If "we do better when you do better" is true, than how about "we both do worse when you suffer a loss (do worse)".

    In terms of retirement Safe Withdrawal Rate (SWR) of say 4%, a typical 1% management fee equates to 25% of that SWR (1% of the 4%). That a significant reduction in retirement income.

    I'll take that steak dinner to go please!

    Yeah, well said!

    Maybe I am just a cheapskate, but I am not paying for anything that I can do myself, that doesn't involve a septic tank.

    A free steak is not worth hours of my time and enduring a sales pitch.

  • Joshua Brown is Cofounder & CEO of the wealth management firm Ritholtz. He also posts on social-media and has podcasts, but he isn't a journalist or economist by education or training.
    https://www.ritholtzwealth.com/

    I have been a fan for years, from seeing him on CNBC.

    Thanks for the link!

  • edited October 6
    @bee, those hedge-fund type performance-based fees are not allowed for listed funds by the SEC. At best, there can be base fees plus a small incentive fees (+ or -) - that has been used by Fidelity and others.

    People complain about high CEF fees. But the OP video mentions that other firms tried to tempt Peter Lynch with lucrative offers to run some CEFs. That explains in part why the CEF ERs are high. The other part is that CEFs are forced to include the cost of leverage and shorting in their ERs. FWIW, Morningstar and others also provide fund administration/ management fees, but CEFs must report the total ERs.
  • Not sure there is a clear understanding in some of these comments about what services financial managers provide, which is of course OK. It's not just about investment returns; it includes tax, insurance, legacy & estate planning.
  • @bee

    The only investment firm I have ever seen with an incentive arrangement is Check Capital

    https://checkcapital.com/performance-based-fee

    It is for Qualified investors only $1.1 million in their account or $2.2 million net worth.

    they get 10% of profits, nothing if your account does not increase in value

    Maybe someone with better programing skills can tell us which decade that would have worked out as a good deal. Surely in a ten year flat market it would be a better deal but not lately
  • Thanks @sma3,

    This link explains there 4 investment strategies:

    https://checkcapital.com/investment-programs/#quality-growth

    They explain their 2 bucket strategy as:
    For risk-adverse clients, we recommend that five years of withdrawal money initially be placed in Bucket #1. Stocks, as represented by CCM’s Quality Growth Program, have always reached a new high within five years of refilling Bucket #1. For clients willing to accept a little more risk, we believe the allocation of just three or four years of withdrawal money to Bucket #1 to be appropriate.
Sign In or Register to comment.