la principessa wrote:For instance, we used to live in a buy-and-hold environment where there were penalties for redeeming funds. That's a thing of the past given the ever-increasing variety of ETFs. But a bank advisor wouldn't be recommending those...
But not necessarily because of cost. The fact that there are low-cost alternatives doesn't mean that you shouldn't buy and hold.
If you say you want it for a down payment on a house, you'll automatically be directed to money market funds. But you can't get there from here...
It depends on the time frame. If you say that you plan to make the down payment within 5 years, you'll get steered to money market funds. The assumption is that you have the capital and should protect it. If you don't have the capital and want to make a downpayment within five years, you can't get there from here without taking on a great deal of risk. That option isn't available in the questionnaires.
You'll be asked about how comfortable you are with large paper losses, but at the same time, you're tempted by the juicy potential gains the charts show. (This may be where people naturally get greedy and underestimate their tolerance.)
The questions are interconnected. For example, if you say that you do not want to risk capital and then answer all of the following risk/return questions choosing the highest ratio, those answers are ignored. I haven't run through the questionnaires to try and figure out how the cross-checking works but I can guess at some of it. If you say that you have the maximum gross income, you're probably allowed a greater equity bet. If you are also young, you're probably allowed an even bigger equity bet. If you're middle-aged or older, maximum assets and maximum gross income, you may have a slightly aggressive balanced portfolio.
people may buy and sell more frequently to ameliorate the downside.
The downside is ameliorated by constructing a properly
diversified portfolio not by market timing.
Lastly, boomers who have benefited by the real estate market may have more play money and view it differently.
Only if they cash in. Otherwise, it's just a wealth effect unless they have cash flow. If they have the cash, there's nothing to stop them from going through the portfolio construction exercise and having a play money portfolio as well.
These online questionnaires are far from perfect. They don't, for example, take into account that you may have a large and very secure defined benefit pension that would allow you to be 100% in equities. Notwithstanding, they are a better first step than winging it.
Just out of curiosity, what did the questionnaires suggest that you do?