I am sometimes asked this question. I find it difficult to answer. People find out that I have an interest in investing and personal finance and they want me to share information with them. They don’t want information about the history, philosophy, operational details, or risk assessment mind you. They want to be told exactly what to invest in. This strikes me as absurd. I often pause and mumble. At that point, they decide I’m either incompetent or am withholding information in order to enrich myself at their expense.
I would need to know a lot more about them as a person to give useful advice. I am all for being a do-it-yourselfer. I don’t think everyone needs an investment manager or financial planner by any means. And I think there are a lot of principles that apply universally across the board. For example, the number of transactions should be minimal. Your portfolio should have diversification. You should focus on costs. You should prefer index funds for the bulk of your investments. You should take advantage of tax advantaged accounts when available to you, etc.
On the other hand, many decisions such as the timing of investments and payouts -as well as asset allocation- depend on the specifics of you as an individual. Some of those factors include:
- Your current age?
- Whether you want to plan on a complete retirement at some point?
- At what age may you retire?
- How many liquid assets you have currently?
- What is your current spending level and savings percent?
- How do you react emotionally in a market crash?
- Do you have dependents?
- How experienced are you as an investor?
- Do you consider yourself a value investor?
- What do you think is your risk tolerance level?
- Is it important to you to leave an inheritance to your children?
- Is charitable giving a large part of your life currently? Do you have philanthropic aspirations eventually?
These are just a few of the many questions I would need to ask to tailor a reasonable personal financial plan. If I begin asking some of these questions the person who wanted a quick answer will soon begin to tune out. They will either shut down and become defensive or embarrassed regarding their personal details (like the minuscule amount set aside for retirement) or their eyes will glaze over out of sheer boredom. They will scan the room and look for someone more interesting to talk to. Thankfully for me it doesn’t take long for them to find someone else and off they go.