Who Manages Your Investments?

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transaction fees stockbrokers money management managing money individual stocks vs mutual funds individual stocks financial newsletters commissions active management

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For the past several months, I’ve featured a reader poll on the upper left sidebar on this site seeking feedback on the question below, with the possible answers listed underneath:

Who Manages/Directs Your Investments?

  • Self-Directed Using Individual Stocks
  • Self-Directed Using Mutual Funds
  • Friend or Family Member Manages Everything
  • Stockbroker Directs Investments
  • Fee-Only Financial Planner
  • Using Investing Newsletter / Column / Blog Recommendations

After the poll closed this past week, I went in and tallied the results. They can be seen on the pie chart below:

transaction fees stockbrokers money management managing money individual stocks vs mutual funds individual stocks financial newsletters commissions active management

Self-Directed Investing in Mutual Funds Takes the Top Spot! 

As you can see, the most popular method (almost 60% of readers) of directing investments among blog readers by far is making your own choices through a mix of mutual funds (red on pie chart). Of course, since I’m a big fan of passive investing as a long term saving strategy, I hope that a lot of you all are using passively managed index mutual funds (such as the low cost options at Vanguard and Fidelity).

Self-Directed Investing in Common Stocks

Self-directed investing using individual stocks came in at the second most common spot (dark blue portion). Given the historically bad track record that professional money managers and stock picking newsletters have in failing to beat the overall market, it’s great to see that everyone is avoiding the management fees and directing their own investments!

Differences in Pay Structure and Objectivity Between Stockbrokers and Fee-Only Financial Planners

A somewhat fascinating result of the poll results above is that the % of people that use a stockbroker and fee-only financial planner to direct their investments was equivalent. I would have expected many more people to be using a fee-only financial planner than a stockbroker because a stockbroker is paid by a commission on how much TRADING he or she executes, not how much money they make you. And, often times, stockbrokers are more of a salesperson than a knowledgeable investing professional.

On the other hand, a fee-only financial planner will provide a much more impartial perspective on your finances since they are only paid on their time they take to help you, not by what products they get you investing in.

Comparison of Blog Reader Results with the Rest of the United States?

When I started writing this post, my original ideal intention was to compare the site reader poll results above with a more complete study published online about how people manage their money. Unfortunately, I was unable to find a robust enough study in searching online that I could publish here.

As a far-from-perfect proxy, I figured that instead, I would take a poll of how my family, friends, and co-workers manage their investments. The results are shown in the pie chart below:

transaction fees stockbrokers money management managing money individual stocks vs mutual funds individual stocks financial newsletters commissions active management

Again, we see that self-directed investing using mutual funds carries the largest % occurrence by far. In second place this time is employing a stockbrokers to direct one’s investments.

A big thanks to everyone for participating in my reader poll. I should have another one up very soon. Also, if you have any specific requests for poll results, please feel free to email me!

How about you all? How do you manage your investments? Do you use individual stocks or mutual funds? Do you make the decisions yourself or enlist the help of a stockbroker/financial planner/newsletter?

Why did you choose one specific method over another?

Share your experiences by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/12738795@N00/3474012583/sizes/l/in/photostream/

    Comments

    1. I use vanguard mutual funds and pick them myself for everything not in my 401k. I don't feel like I have enough assets to pay someone else for advice right now and am very comfortable with my strategy.

    2. Manette @ BFPF says:

      My husband and I started our investment with a few stocks that we bought, based on suggestions and recommendations of our mentors and colleagues. We also read various books and blogs for techniques and advice. Although we can pay a financial planner, we want to learn the ropes as well.
      My recent post 5 TIPS TO GET RICH AND BUILD WEALTH

    3. I’m actually amazed that so many people still use mutual funds. I thought ETFs are more dominant and mutual funds are almost dead. Very interesting results. Would be interesting to see who is doing better: stock, ETF or mutual funds holders.

      • Hope to Prosper says:

        Art,

        I read a great article earlier today comparing when it's better to invest in an ETF or a mutual fund. For accumulating investors like me, who invest money from each paycheck, mutual funds are the way to go. The brokerage fees from an ETF would eat into the profits. For those with high balances and stable investments, the low expenses of an ETF makes more sense. BTW, mutual funds are far from dead.
        My recent post 10 Threats to your Future Prosperity

        • Yeah I'd probably agree with this line of thinking too. In general, if you can find ETFs that don't require commissions to trade, they will carry lower costs and therefore preserve more of your investment. I'm a fan of mutual funds because they enable you to buy specific dollar amounts in them, as opposed to ETFs where you have to buy full shares.
          My recent post The Pros and Cons of a Down Payment Assistance Program

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