How to be your own financial planner – Chicago Tribune

Can you be a successful investor on your own?

I believe you can, if you are willing to put in the time. I have been retired now for over 20 years, and have had very good results as an investor without paying large fees.

I have always accepted most of the responsibilities of being my own financial planner. That doesn’t mean I haven’t sought help from experts. I always have hired competent attorneys for estate planning, and I continue to use experts for help with investment decisions and tax issues. I read as many books and periodicals as I can about investing, and I have recommended good sources in my columns.

Here is how I did it.

The bank I worked for offered a defined-benefit pension. Unfortunately, most major corporations no longer offer them. I also took advantage of the 401(k) plan the bank offered, always making the maximum contribution in order to receive the maximum company match. Generally, before retirement I invested almost 100 percent of my portfolio assets in diversified U.S. index funds. I believe those who are many years from retirement should invest almost exclusively in diversified common stock funds or exchange traded funds (ETFs), and reduce the percentage as retirement nears.

After retirement, I shifted to a 50-50 ratio of stocks to bonds. Almost all my stock portfolio has been and is now in low-cost index funds, mostly Vanguard, because of the low annual fees and consistent performance. I have never hired an outside party to manage my portfolio, and if you are willing to put a minimum amount of time in, you don’t have to either.

If, when I retired, I had hired an investment firm to manage my portfolio at a 1 percent annual fee, it would have cost me approximately $150,000 by now — and frankly I doubt that I would be any better off. By reading the latest publications and Vanguard’s website, I believe I am able to stay up to date with the latest trends and investment options. I have generally invested in mostly U.S. and global index funds, rather than funds outside the U.S., because I thought (up to now) that U.S.-based funds were better long-term investments.

Although most of my investments are in index funds, I sometimes invest in specific sectors I believe have good prospects. For example, for the last five years (as I have mentioned in columns) I have invested in the utility sector and health care sector, using re-balancing, with good results.

Although I have invested about half of my portfolio in bonds, I am somewhat aggressive there. I have always maintained a substantial portion of my bond portfolio in Vanguard’s high-yield (or, as some call them, “junk”) bonds. Vanguard is conservative regarding its high-yield portfolio, and its long-term results have been very good for a conservative portfolio. For most of the rest of the bond portfolio, I have invested in their intermediate-term investment-grade corporate bond funds. The yields in this sector are not as high as the high-yield fund, but they are not as risky.

Ever since I retired, I have been withdrawing at least $30,000 per year from my portfolio (mostly from the bonds) to supplement my pensions, IRA rollover from my 401(k), and Social Security. Despite the consistent withdrawal, my portfolio has increased substantially because of the increase in value of the common stock holdings.

Each year, at least once a year, I rebalance my portfolio back to the 50-50 stock-to-bond ratio. In that way, if the stock market has done very well, I take some profits, and reinvest some of the gains into bonds.

There are more options now than ever before to have your portfolio managed for less than 1 percent. If you are paying 1 percent or more to have your portfolio managed, I suggest you look at the performance of some of the low-cost index funds and determine if you are better off managing your own portfolio.

(Elliot Raphaelson welcomes your questions and comments at


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