Most financial advisors and RIA (registered investment advisors) charge an annual fee based on AUM (assets under management). Many years ago, the charge was mainly for managing investments, specifically choosing individual stocks and covered commission trading costs which were very high. Back then commissions were charged for trading stocks a base cost plus 1% of the total cost I recall my dad saying he paid $200 to trade 100 shares. Choosing and buying stocks was much more complex and cost intensive.
I remember talking to a brokerage advisor in the 1980s. He said his fee was 3-4%. I passed. It seemed to still be expensive even though there were no commission charges.
When discount brokerages started the commission was lowered to $50 flat fee. I started trading individual stocks. I usually traded 100 share lots to minimize the fee cost per share. Then the commission wars started. Commissions got lower. To $14.95, then $5.95 and now $0.
With the advent of low fee index funds/etfs, with expense ratios less than and around 0.10% and no trading commission costs, I'm now leaning towards only using total market/growth/S&P 500 index funds. Individual stock risk is low, commission costs are zero, expense ratios are low and stonks only go up. What can go wrong?
The answer is short term volatility. There can be bear markets that last a year and of course, a lost decade like 2000 to 2010. However, if one's timeframe is 20-40 years, the risk is much lower and significant gains are in one's favor.
Malkiel, Bogle and Fama are well known advocates of this Efficient Market Hypothesis (EMH) approach. I going with their recommendations for my kids' long term retirement accounts by investing in total market or S&P 500 index funds/ETFs.
This is not financial nor investment advice. Please consult a professional advisor.
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