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Friday, December 08, 2006

An article about Passive Investing

San Francisco magazine had a great article about investment and investing advice. It also has several interesting bits about how Jonathan Rosenberg inoculated Google employees against the flock of vulture capitalists who wanted desperately to manage soon-to-be wealthy employees' money. I wish I could say that most employees paid attention to Bill Sharpe and Burton Malkiel, but my impression is to the contrary.

There is, in addition, a great section in the article about that rare breed, the honest financial planner:
It took Solli a couple more painful meetings and a few dozen trades to clean the parasites out of my account and reinvest the proceeds in index funds, the lifeblood of his business. Without exception, he moved me into funds that have outperformed the ones I was in, like the Vanguard REIT Index Fund, some Pimco bond and stock funds, and Artisan International. And he did it for an annual fee of .5 percent of money under management, saving me over a full percent in overall costs and a lot of taxes in the future. Then he did something I doubt any other financial manager would have done. He fired himself.

“You really don’t need me anymore,” he said, and closed my Aperio account that day, ending his fees, but not our relationship.

I will say that if you really are uneasy and need hand holding while you handle your investments, you can do much worse than some like the Aperio group. A 0.5% management fee is high, but someone who will fire himself after he's done fixing a mess demonstrates a high level of integrity that one simply does not see in the financial industry.

This is an article very much worth reading, and comes highly recommended.

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