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Market economies have delivered enormous returns to investors, yet many people have recognized only a fraction of them. A dominant reason, which the financial industry rarely publicizes, is fees. Quietly, in places that are hard to see and understand, fees grind away at your investments and diminish your retirement.
As financial advisors, we drive the fund and other financial fees you pay down. Currently, if you are paying 1% or more, and many people are, we believe you are paying too much and the compounding drag on your net worth over time will be enormous.
Because we have taken no external financing, we have the freedom to price our services low without agitating our own shareholders. Our objective is to operate a financial firm at the lowest rate possible for clients while still attracting top-tier financial advisors.
A large corpus of academic work, as well as industry experience, shows that investors in low-fee index funds, practicing what is called "passive" investing, outperform almost all active mutual funds, stock pickers, annuity products, and whole-life insurance concepts (1). This work originated at Princeton, MIT, and the University of Chicago and has been verified repeatedly over the past 50 years. We have extended it with insights from the Yale University endowment as well as others.
We focus on the capital performance of your investments as well as the dividends and interest they pay. Careful attention is given to minimize taxes. Our financial advisors help clients think about their investments as a business that pays them every quarter.
We encourage clients to view investments on an after-tax, after-fee, after-inflation, after-risk-adjusted basis. That is the correct way to analyze performance.
1. Swensen, D.F. (2005). Unconventional Success. New York: Free Press.
To do this, true diversification is needed, so that assets are "uncorrelated" with each other. This means they do not all move in the same direction at the same time. Generally, we buy indexes of United States Treasury bonds to provide downside risk protection. In 2008 and 2020, these indexes were among a handful of investments that saw gains. Corporate bonds and state bonds were not as safe as investors had believed.
Simplicity drives risk reduction. By distilling investments and accounts to their simplest form, our financial advisors reduce the risk inherent in complexity. Our firm is built on stable pillars in finance: we use Vanguard and iShares index funds, among others, and client money is held at Charles Schwab and other established firms. We primarily purchase ETFs but hold mutual funds and other securities as well.
Clients trust One Day In July Financial Advisors with safeguarding their financial future. Trust starts with being transparent about fees (see our fee table here). We aim to eliminate common conflicts of interest and invest our own money primarily in low-cost index funds.
One Day In July is a 100% independent investment firm - no one pays us other than the client. Our financial advisors act as fiduciaries all the time, across all accounts. One Day In July financial advisors do not cross-sell annuities, insurance, or other financial instruments that would pay us commissions and cause a conflict of interest. We do not answer to bosses in New York demanding sales quotas be met. Although we use products from Vanguard, iShares, and Schwab, we do not work for them.
Clients work with a dedicated financial advisor with access to that financial advisor's cell phone. We are not a call-center firm: we believe there are significant benefits, both in investment returns and stress reduction, to a long-term advisory-client relationship. In-person meetings, where possible, are welcome. We use computers behind the scenes but do not let algorithms trade client accounts. We do not outsource investment decisions to other firms.
Overwhelmingly, mutual funds extract enormous sums from investors in exchange for providing a shocking disservice.
When our financial system - essentially our money managers, marketers of investment products - put up zero percent of the risk yet receive fully 80 percent of the return, something has gone terribly wrong in our financial system.
These days everyone has the same data regarding the present and the same ignorance regarding the future.
The expense ratio is the most proven predictor of future fund returns. The findings worked for every category over every time period.
There is no investment product so great that a fee cannot make it bad.
Most investors, both institutional and individual, will find that the best way to own common stocks (shares) is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) of the great majority of investment professionals.
The stock market serves as a relocation center at which money is moved from the active to the patient.
Paying the least for a haircut or for tacos usually is not a great way to go. But mutual funds are a very unusual market; it's one of the only types where price and performance are inversely correlated. That's hard to get your head around. Unlike most products, fees are what ruin performance.
It is surely arguable that when the average equity-fund investor earns one-twelfth of the stock market's return, that could itself be regarded as a scandal.
Burlington, VT Financial Advisor
Burlington, VT 05401
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