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9 Top Investment Ideas For Wealthy Investors

FYI: Need ideas for the choppy waters ahead? Harold Evensky, chairman of wealth-management shop Evensky & Katz in Coral Gables, Fla., says the answer is minimizing fees and reducing costly taxes. Evensky manages $1.6 billion in assets, with the ­median client holding $2.5 million, and insists that even very wealthy clients should load up on cheap exchange-traded funds. “We would love to market-time, but we conclude nobody has done that well,” says the 30-year veteran of the financial planning business. “So we figured if we could save half a percentage point on taxes and expenses, we could improve performance, net of fees, taxes, and inflation, by maybe 15% to 20%” a year.


  • edited May 2015
    Thanks for this and all articles, Ted. Guess I'm a little cranky this beautiful morn but not sure about owning low cost, broad based ETF's and then losing the savings to add on advisory fees. I do know Mr. Evensky gives a lot of interviews and makes a lot of appearances. Would like to see the math involved in the 15%-20% improvement in performance.
  • Hi Morningstars,

    Costs matter even more when portfolio expectations are lowered. Bogle has been playing this song for decades. Here' an example.

    Suppose a balanced portfolio expects a market return of 7.5% with expenses at 1.5 %. Your return is 6.0%.
    An option is to go the low cost route so that the return is the same, but costs are only 0.5%. Your take home payoff is now 7.0%.

    You have substantially increased your payday before taxes. Like 7.0/6.0 or roughly 1.167 or 17%.

    It's important to consider stats in both an absolute and a relative framework.

    I hope this helps.

    Best Regards.
  • You have substantially increased your payday before taxes
    Some adjustments to the calculations above:
    - Evensky is talking about real (inflation adjusted) returns after taxes as well as after expenses
    - The typical (dollar-weighted average) cost of investments is closer to 1.0% than to 1.5% (from memory, cite corrections as appropriate)
    - Evensky is suggesting just a 0.5% absolute improvement in ER + taxes

    The general concept is right - that he's referring to relative improvement. That is, 0.5% could be as much as 15%-20% of the net, real, after-tax return. But all the figures, numerator (0.5%) and denominator (current net return) are smaller.

    I haven't yet delved too deeply into the following article from Thornburg, but if you're interested in getting a sense of "real" real returns (i.e. returns net of expenses, taxes, and inflation), and trying out your own numbers, here's an historical analysis on different asset classes.

    FWIW, Thornburg uses 0.50% as its estimate for average expenses, so if you like my figure (1.0%) or MJG's (1.5%), subtract off 0.5% or 1.0% from the stated average returns.
  • Thank you MJG and msf for the time and thought you put into your replies. I was unclear with the article in regard to the word fee/fees . I thought Mr. Evensky was trying to focus the writer on the 15-20% improvement on the portfolio return net of portfolio fees , taxes, and inflation. If a were a client , I would be considering my total return ( risk adjusted as Mr. Evensky advises ) which would include Mr. Evensky's approximate 1.33% fee, all in, as given by the writer. I was thinking, as I read , that the word fees as used by Mr. Evensky meant portfolio expense ratios/transaction costs but did not include his and Mr. Katz's 1.33% fee.
  • Advisors don't save (not their job) in Reality they COST.....
    They CAN Make you more money than you could on your own if you don't know what your doing,
    my car mechanic saves me aggravation over me doing the work, but he costs...
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