(The following is the fourth of a special five part series meant to be shared by professionals and non-professionals alike. This particular series covers
only one of the 7 Deadly Sins Every ERISA Fiduciary Must Avoid.)
When the market as a whole goes down, people who own mutual funds that are “diversified” lose money (in general). This includes most people who have an IRA or 401k through their employer, due to the fact that most institutional IRA’s or 401k’s are invested in mutual funds.
A true self directed retirement account lets you invest in individual stocks, precious metals, real estate, foreign markets, and more.
Large institutional banks advertise that they offer self directed accounts. This is a sham. These supposed self directed accounts only allow you to buy products that the bank that set it up for you sells – so that they can make money off of selling that product. To me this represents a break in fiduciary responsibilities.
A Chevy dealer does not want to sell you a new Ford, even if the new Ford has better fuel mileage, better reliability, and costs less. The Chevy dealer will sell you a Chevy, because that’s how he makes money – he makes a commission off of every Chevy he sells. In fact the Chevy salesman is not allowed to sell a new Ford.
Similarly, a Fidelity guy will only sell products that he makes a commission off of – Fidelity products. There may be an investment that he knows is a better fit for you, but if he makes no commission off of that sale, he won’t sell it. In fact the Fidelity salesman (lets call him what he is) is not allowed to sell you a competitor’s product.
You are the only person in the world who has your best interest in mind when making decisions. You may not always be right, but at least you are not trying to skim a small percentage of your savings, under the guise of “managing” it.