27 Comments
Aug 17, 2021Liked by Tomas Pueyo

Good article on the fundamentals, however "plan to retire at age 70-75" - how is this possible when every day there is a new report about how people over 50 are having a harder and harder time finding work? I guess the real insight here is that you need to find a way to make yourself employable (or self-employed) until age 75, which seems near impossible for the vast majority.

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A second comment... you were too kind to the AUM ("assets under management") fee model that's typically a 1% fee. Besides the enormous lifetime cost (as you showed in your variations of exponential charts), there are at least two other problems with the 1% AUM fee besides the obvious one that they can't beat a passive index.

First, it essentially captures close to 100% of the after-tax returns in the fixed income portion of the portfolio -- all the gains go to the advisor but any losses accrue to the client. Nice work if you can get it!

Second, it's rife with conflicts of interest. Consider the simple case of a $1 million client who asks his advisor if he should pay off his $300K mortgage with some of his savings. If he does so, the advisor's fee is going to shrink by 30%. That's tricky to resolve when the advisor tells you you're better off keeping the mortgage.

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Aug 31, 2022Liked by Tomas Pueyo

where do I find the premium articles for subscribers mentioned?

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There is another reason to chose deferring taxes, you can die before retirement.

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So, you don't have any concern right now with putting everything in say an S&P500 index fund that looks like it's at the top of a huge bubble? I am gun shy with investing because most of my investing has occurred at the tops of bubbles, which took years to claw back their worth. I've also had investment advisors who cost me money but rarely made me much. I feel very skeptical of the whole financial industry.

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Aug 17, 2021Liked by Tomas Pueyo

TIL Warren Buffett is actually spelled with two T at the end

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Aug 17, 2021Liked by Tomas Pueyo

No professional advice from me either just my personal stance: I have not seen any reason for me to get a roboadvisor compared with just an ETF following an index. Maybe taxes are mich easier in Germany than in the US...

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One small quarrel with your point about robo advisors... They're fine as you suggest but I think a low-cost target date fund is better. It essentially does the same thing as a robo-advsior but the all-in cost is a bit less. Yes, it's true that a TD fund cannot do tax-loss harvesting and a good robo-advisor can but it is also true that for most middle-income Americans, nearly all of their wealth is in retirement accounts and tax-loss harvesting is irrelevant. Also, robo-advisors don't work for 401K plans (at least not now) and TD funds are perfectly suited for that.

With a robo-advisor, I believe the typical cost is 25 pbs plus a few more bps for the ETFs they use and the bid-ask spread -- call it 30 bps in total. Vanguard's TD fund is ~13 bps. (Fidelity's index version is even less.) Not a huge difference but as your charts showed, can add up over a lifetime.

I always point people to a low-cost TD as the best choice for 95% of us.

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Hola Tomas, me gustaría saber tu opinión sobre Finizens y si lo incluirías en la lista de top robo advisors de España. Gracias!

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