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I have $60-70K that I'm planning on investing in stocks/ETFs/funds. What are some of the advantages and disadvantages of investing this amount of money with a human financial advisor vs an automated "robo" advisor vs broad market ETFs vs newsletter/portfolio services like the ones offered by Zacks. I'm also open to other suggestions.

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Typical Human Advisor:

  • Advantages: They can recommend funds and allocations that fit to your portfolio.

  • Disadvantages: Those who are just fund salespeople in disguise will usually recommend poor-performing funds for higher commission pay. Their advice will not be much different from random person internet advice. When your portfolio drops, they still get paid, and they don't care because they are not a fiduciary.

Robo-Advisor:

  • Advantages: Rules are automated, and typically based on crunched numbers. Somebody else executes the trades, and remembers to rebalance your portfolio when you'd usually forget to.

  • Disadvantages: Not always accurate, usually relies on momentum from popularity. No one at the helm to adjust for risk. If you follow, you'll usually just lag behind. Yet, those with simple, low-cost diversified ETF portfolios can be attractive.

Market ETFs:

  • Advantages: Low cost funds that typically match the market. High performance. Easy to sell when you need to, zero decision making required, and you will be sure to nearly match the general market.

  • Disadvantages: Boring. You need to enter your own orders, but you won't be doing that too often. No thrill except counting all the commas in your account. No wacky stories to wow your friends and family about your gambling addiction. Seriously, some people just can't help but take the high risk route.

Newsletter / Portfolio / Online "Expert":

  • Advantages: They usually have some idea of what indicators to look for and can make predictions about price movements.

  • Disadvantages: Predictions are as frequently wrong as they are right. Good ones won't have much to say, and incompetent ones will write multi-paragraph essays about Fibonacci sequences, resistance levels, trends RSI, ROIT, everything that might show an indicator in some direction maybe... and it's usually forgotten by the next newsletter.

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    A bit cynical... but largely accurate. I'll add that (non-commission based) financial advisers can be very useful for helping set the right risk and build a balanced portfolio for your particular needs. There are robo-advisors that can do the same for people without complicated needs and use index etfs so you should only lag by their fees (which are often small). However, Newsletter/Internet "Experts"... there be dragons. I do have a special place in my heart for the nutty Fibonacci guys. May they live forever, just not off my money.
    – rhaskett
    Commented Nov 7, 2017 at 4:40
  • Thanks for your input, Shorian. It sounds like you wouldn't fully endorse any of the methods I listed, with Market ETFs being the one that you sounded most positive about. Would you happen to have any specific recommendations that are better than any of the ones I listed?
    – ryan G
    Commented Nov 7, 2017 at 5:14
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    I read his answer as fully endorsing market ETFs, but with extra sarcasm for the readers' entertainment. :)
    – GrandOpener
    Commented Nov 7, 2017 at 10:02
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    @Ryan G Market ETFs are simply the easiest product to understand. Straightforward and simple, no crazy tricks involved. But, that might not necessarily be the product for you. The best plan a person can do is to have an investment plan. Invest what you can afford. Cut costs where you can manage to. Have an emergency fund to handle big expenses. Have a plan if your job gets cut. Have a plan if the market tanks. Have a plan, and then stick to it. Don't obsess over "missing out", and don't forget to enjoy the journey.
    – Shorlan
    Commented Nov 7, 2017 at 22:09
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    @Chris W. Rea thanks for the edit. I agree with your changes, and there are definitely people out there for which a robo-adviser fits perfectly with their needs. I think the problem was that the term robo-adviser can have various meanings. One type, you have the simplified UI, a fund that handles certain things for you: rebalancing or maintaining a certain risk exposure automatically. A completely different sort of robo-adviser might be an automated tweeting: "Buy stock A at X, sell at Y" momentum-based "advisor". Maybe might work for some people, but can be dangerous to follow blindly.
    – Shorlan
    Commented Nov 7, 2017 at 22:16
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Too little information to give any kind of advice. What is your age, goals, other monies, other investments etc... You need to look at the whole thing. Are you investing already in tax-deferred IRA. Spend the time to learn to be your own investment advisor. Many investment professionals may disagree with me on this, but since you can't trust many of them better you do your own research first. Same with Stocks or ETF, you try to be the expert. Better you have the time to follow your own investments ideas, do not depend on a human or robot to tell you when to buy or sell. Their job is to part you from your money. If you do not have the time to this yourself, save yourself the money, and just do something else with it. I have been investing in the Stock Market since 1986, I have made more money than I lost. Good runs and bad. Today it is all about trading, you can not trust the financials given by anyone, or know what is going to happen in the markets in general. So unless you want to play the game every day, don't be in it.

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  • You can be exposed the market without playing it every day. Put your money in a diversified set of low-fee index funds and watch it grow. And if you're unsure of the mix or don't mind paying for the convenience of periodic rebalancing, a robo advisor can set you up with automated deposits from your paycheck. It's simple as dirt and absolutely anyone can do it.
    – Rag
    Commented Nov 8, 2017 at 8:08
  • The question isn't "which of these should i do?", it's "what are some of the advantages and disadvantages?". This is not a response to that question.
    – Tom Anderson
    Commented Nov 8, 2017 at 13:47
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Since I, personally, agree with the investment thesis of [a particular financial broker-dealer], I would take that sum and put it with him in a managed account, and leave it there. Caveat--ask how much it's going to cost you to have them manage it; in some cases the fees can really drag down on the gains. But the amount you have to invest should allow you to be in a class where the fees are lower.

I'm not sure how to find a firm that you like the investment strategy of. I think that it's too complicated to do as a side thing. Someone needs to be spending a lot of time researching various instruments and figuring out what is undervalued or what is exposed to changing market trends or whatever.

I basically just want to give my money to someone and say "I agree with your investment philosophy, let me pay you to manage my money, too."

No one knows who is right, of course. I think Schiff is right, so that's where I would put the amount of money you're talking about. If you disagree with his investment philosophy, this doesn't really make any sense to do.

For that amount of money, though, I think firms would be willing to sit down with you and sell you their services. You could ask them how they would diversify this money given the goals that you have for it, and pick one that you agree with the most.

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Some other suggestions:

  • Index-tracking mutual funds. These have the same exposure as ETFs, but may have different costs; for example, my investment manager (in the UK) charges a transaction fee on ETFs, but not funds, but caps platform fees on ETFs and not funds!

  • Target date funds. If you are saving for a particular date (often retirement, but could also be buying a house, kids going to college, mid-life crisis motorbike purchase, a luxury cruise to see an eclipse, etc), these will automatically rebalance the investment from risk-tolerant (ie equities) to risk-averse (ie fixed income) as the date approaches. You can get reasonably low fees from Vanguard, and i imagine others.

  • Income funds/ETFs, focusing on stocks which are expected to pay a good dividend. The idea is that a consistent dividend helps smooth out volatility in prices, giving you a more consistent return. Historically, that worked pretty well, but given fees and the current low yields, it might not be smart right now. That said Vanguard Equity Income costs 0.17%, and i think yields 2.73%, which isn't bad.

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