Author Topic: Where to invest?  (Read 694 times)

expressfin

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Where to invest?
« on: November 03, 2018, 10:17:21 AM »
If I'm looking to open a (fairly long-term) investment account, should I open one directly with Vanguard? Like buy VTSAX directly from them? Or should I open an account with one of the robo advisors like Betterment/Wealthfront or Robinhood? I want to minimize the fees involved and I know Betterment/Wealthfront have about 0.25% management fees, so would Vanguard not have those fees if I just opened an account directly with them?

pecunia

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Re: Where to invest?
« Reply #1 on: November 03, 2018, 10:23:52 AM »
Fidelity currently offers no fee accounts as a loss leader.  I guess they are trying to draw business away from Vanguard.

From what I've read, Vanguard is owned by its investors.  Its investors are its owners.  However, they do not deliver the same support as others.  You pay for that support with higher fees.  Personally, I really like the idea that Vanguard does not serve two master's it's owner and the customer.

MDM

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Re: Where to invest?
« Reply #2 on: November 03, 2018, 10:25:39 AM »
I want to minimize the fees involved and I know Betterment/Wealthfront have about 0.25% management fees, so would Vanguard not have those fees if I just opened an account directly with them?
Correct - no Assets Under Management fee if you simply buy directly within a Vanguard account.

flipboard

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Re: Where to invest?
« Reply #3 on: November 03, 2018, 10:39:19 AM »
I'd recommend any of Schwab or Fidelity - I'd only consider Vanguard as a backup. The first 2 have actual customer service. All of them offer similarly cheap reputable total world or "total stock market" funds and ETF's. Schwab are good for customers in many countries across the world, Fidelity or Vanguard generally ignore non-USA residents (Vanguard tell even some USA residents to get lost in certain scenarios).

The Vanguard being owned by their customers trope keeps getting trotted out regularly in these forums, but all I keep seeing is reports customer service issues, which is why I'd put them last in the list for new investors.

dalekeener

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Re: Where to invest?
« Reply #4 on: November 04, 2018, 08:38:42 AM »
I use Schwa platform. Easy to use, many choices of investment ideas, great customer service.

MustacheAndaHalf

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Re: Where to invest?
« Reply #5 on: November 04, 2018, 09:08:30 AM »
I'd recommend any of Schwab or Fidelity - I'd only consider Vanguard as a backup. The first 2 have actual customer service. All of them offer similarly cheap reputable total world or "total stock market" funds and ETF's. Schwab are good for customers in many countries across the world, Fidelity or Vanguard generally ignore non-USA residents (Vanguard tell even some USA residents to get lost in certain scenarios).

The Vanguard being owned by their customers trope keeps getting trotted out regularly in these forums, but all I keep seeing is reports customer service issues, which is why I'd put them last in the list for new investors.
Schwab allows international ATM withdrawals is that's of interest - they seem good for those who move internationally.

Schwab and Fidelity would prefer to take your money, for example, both have expensive target date funds.
Schwab has Schwab Target 2040 with an 0.68% expense ratio
Fidelity has Fidelity Freedom 2040 Fund with an 0.75% expense ratio
You might be able to find cheaper funds if you try, but the above funds are for their shareholders at the expense of their clients.  Vanguard's Target Retirement 2040 Fund costs 0.15%, and they don't offer anything more expensive.  So that's a real effect from the conflict of interest when shareholders and clients aren't the same.  It's not a trope - people lose real money because of it.

flipboard

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Re: Where to invest?
« Reply #6 on: November 04, 2018, 09:52:53 AM »
Schwab allows international ATM withdrawals is that's of interest - they seem good for those who move internationally.

Schwab and Fidelity would prefer to take your money, for example, both have expensive target date funds.
Schwab has Schwab Target 2040 with an 0.68% expense ratio
Fidelity has Fidelity Freedom 2040 Fund with an 0.75% expense ratio
You might be able to find cheaper funds if you try, but the above funds are for their shareholders at the expense of their clients.  Vanguard's Target Retirement 2040 Fund costs 0.15%, and they don't offer anything more expensive.  So that's a real effect from the conflict of interest when shareholders and clients aren't the same.  It's not a trope - people lose real money because of it.

OP is looking for total stock market funds. Fidelity are 0.015%, Schwab are 0.03%, Vanguard are 0.04%.

For those target date funds however: you aren't comparing like for like. The passive index target date funds are actually cheaper at Schwab, Fidelity are a touch more expensive:
Schwab Target 2040: SWYGX: 0.12%
(Vanguard: 0.15%)
Fidelity Index 2040 FBIFX: 0.19

You probably looked at SWERX and FFFFX which hold a mix of passive and active funds, explaining their expenses (plus international, which redeems it a little, also influences expenses).
« Last Edit: November 04, 2018, 09:54:24 AM by flipboard »

Dicey

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Re: Where to invest?
« Reply #7 on: November 04, 2018, 09:57:18 AM »
First, A Story: My parents had a Fidelity account, among others. I am co-executor of their estate. There were some complications. Fidelity was the best to deal with so we are consolidating everything there. So far, so good. All done but one hard-ass bank.

A month ago, I met with their biggest hotshot (Not at my request, just a random appointment. Normally, I just work with whoever is at the desk). My two goals were 1. To try to claw the funds out of the last account at the hard-ass bank, and 2. To move my portion of the inherited IRAs (that had been previously consolidated to Fidelity) into equities, specifically the new Zero Fee Total Stock Market Fund. Zip, zam, zowie, paperwork was completed, paperwork signed and I was shown out of his office post-haste*.

A week or three later, I received a letter from the hard-ass bank. It seems the hotshot mis-typed a digit, but the hard-ass bank was coy as to what the error was, so I had to go back to Fidelity to try to figure it out. Now I have to re-do the request, send it to my co-executor, he has to get a Medallion signature, and mail it back to Fidelity, who will then try again. WTF? I asked the person at the counter to check on the account transfer hotshot has been instructed to initiate (and yes, papers were signed, too). Holy shit, he hadn't done it! Okay, the market has gone down, so his error should work in my favor, but WTF Fidelity Hotshot?

Then, A Moral: Everyone and anyone can make mistakes. Ultimately, the responsibility to double-check and follow up is your responsibility, not the investment company you choose.

*Funny post-script: While I was at the counter, Hotshot came out. Counter person asked him a question about my account. Hotshot didn't recognize me. This was before we figured out part two of his fuck-up. It solidified what I was thinking at the time he originally hustled me out of his office: if he had any inkling of my total NW, he'd have been singing a totally different tune. But he didn't ask, and I didn't tell. The amount of inherited money is fairly small, so he made his judgement based on that. Can't help but think of that shopping scene in "Pretty Woman". Big mistake.

MDM

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Re: Where to invest?
« Reply #8 on: November 04, 2018, 10:16:20 AM »
It solidified what I was thinking at the time he originally hustled me out of his office: if he had any inkling of my total NW, he'd have been singing a totally different tune.
Flying under the radar, so to speak, does provide a certain satisfaction.... :)

expressfin

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Re: Where to invest?
« Reply #9 on: November 04, 2018, 12:24:23 PM »
Thanks everyone for the advice!

I was looking at first for more of a hands-off approach since I'm just starting to learn about investing. I hadn't considered target funds, but I'll definitely look into them. Thanks especially for the company recommendations - I wanted to get a sense of reputations before I started putting money in.

lhamo

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Re: Where to invest?
« Reply #10 on: November 04, 2018, 12:52:10 PM »
If you are primarily a buy and hold investor, then you don't really need to worry all that much about customer service.  I have never had an issue with Vanguard, but maybe that is because I can do everything I need with them on line.

That being said, I just put a bunch of money into the new Fidelity no-fee total market index, and it will be interesting to track how it does in comparison to the money I already have in Vanguard.  Figure it doesn't hurt to spread things out a bit. And I like Fidelity's on-line tools (especially the Retirement Income Planner or whatever they call it these days).

MustacheAndaHalf

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Re: Where to invest?
« Reply #11 on: November 05, 2018, 08:05:54 AM »
Schwab allows international ATM withdrawals is that's of interest - they seem good for those who move internationally.

Schwab and Fidelity would prefer to take your money, for example, both have expensive target date funds.
Schwab has Schwab Target 2040 with an 0.68% expense ratio
Fidelity has Fidelity Freedom 2040 Fund with an 0.75% expense ratio
You might be able to find cheaper funds if you try, but the above funds are for their shareholders at the expense of their clients.  Vanguard's Target Retirement 2040 Fund costs 0.15%, and they don't offer anything more expensive.  So that's a real effect from the conflict of interest when shareholders and clients aren't the same.  It's not a trope - people lose real money because of it.

OP is looking for total stock market funds. Fidelity are 0.015%, Schwab are 0.03%, Vanguard are 0.04%.

For those target date funds however: you aren't comparing like for like. The passive index target date funds are actually cheaper at Schwab, Fidelity are a touch more expensive:
Schwab Target 2040: SWYGX: 0.12%
(Vanguard: 0.15%)
Fidelity Index 2040 FBIFX: 0.19

You probably looked at SWERX and FFFFX which hold a mix of passive and active funds, explaining their expenses (plus international, which redeems it a little, also influences expenses).
I think you missed this line of my post: "You might be able to find cheaper funds if you try, but the above funds are for their shareholders at the expense of their clients."

To put it another way, where are clients at Schwab putting most of their money?  Not in SWYGX - just over $100 million in assets.  The Schwab fund I mentioned has almost $1 billion in assets.

Same with Fidelity: the fund I mentioned has $21 billion in assets (0.75% expense ratio) while FBIFX holds $3.5 billion (0.14% according to both Fidelity and Morningstar, not 0.19%).  Most of the investors at Schwab and Fidelity are paying high expense ratios.

So in general, I feel Vanguard is a safer choice for new investors who don't know which funds to avoid.

specialkayme

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Re: Where to invest?
« Reply #12 on: November 05, 2018, 12:24:20 PM »
So in general, I feel Vanguard is a safer choice for new investors who don't know which funds to avoid.

I second this, for what little value it provides the conversation.

Vanguard's customer service has never been stellar to me, but I don't need much customer service to deposit money, log on and buy VTSAX. In fact, I really don't want customer service for that. The reduced customer service reduces (in theory) Vanguard's operating expenses, which (again, in theory) keeps their expense ratios down on the funds I own. If I needed help picking things out, I probably wouldn't go with Vanguard. But at that point I'd be prepared to pay higher expense ratios and other service fees in exchange for the assistance.

Fidelity's no-fee index funds look interesting, but as many have mentioned, they are loss leaders. Those funds are trying to pull you away from Vanguard. Once you're away from Vanguard, Fidelity has every incentive in the world to convince you not to use their no-fee index funds. They make money when you pull out of those index funds, not when you're sitting in them.

The inherent conflict that exists with most investment banks makes my stomach turn. All the big banks have owners and shareholders that expect a profit. That profit has to come from somewhere, and it comes from you the customer. They all make it sound like they're on your side, but in the end the need to siphon money away from you. By doing so, the individual that convinces you gets a bonus, and the owners get increased profits. You get a smaller return on your investment. I've personally seen no less than 5 of the top 10 financial firms rip off their customers, by opening "ficticious" accounts, or convincing their customers to make trades to hit certain account management performance goals, or convincing their customers to invest in certain stocks based on again account management personal performance goals. In one such instance, I saw an account manager "actively manage" a client's account, buying and selling stock, taking fees left and right, getting bonuses for opening accounts and turning around and closing them, and at the end of a 10 year decade the client had less money in the account then when they started. Meanwhile my personal SPY holdings I purchased in 2010 is up 128%.

But that isn't true with Vanguard. Which is why I'm comfortable leaving my IRA with them. But that doesn't mean I leave all my eggs in any one basket. I still have taxable accounts at 3 other financial institutions.

But everyone has to decide their own ethical stance, and their own comfort level.

TFT

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Re: Where to invest?
« Reply #13 on: November 05, 2018, 01:22:00 PM »
If OP does know which type of funds he wants, and his primary concern is to cut fees, then I think going with Fidelity and investing in FZROX (their no fee total market index) makes a lot of sense.

Boofinator

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Re: Where to invest?
« Reply #14 on: November 05, 2018, 01:32:33 PM »
I am a satisfied Vanguard customer. One additional point in Vanguard's favor beyond those previously mentioned: If you want to tax loss harvest, which I almost guarantee you will at some point, you will need to find substantially similar asset classes to invest in (or have your money sitting on the sidelines for a month, which isn't a good idea in my opinion, though others may point to momentum and disagree). As far as I know, only Vanguard has funds that meet this criteria with low fees. So even though Vanguard doesn't have the absolutely lowest fees, you should still come out ahead if you TLH.

(I haven't delved deep into Fidelity and Schwab, so if I'm mistaken, somebody please let me know.)

Telecaster

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Re: Where to invest?
« Reply #15 on: November 05, 2018, 06:55:02 PM »
For some reason, I have accounts at both Fidelity and Vanguard.  For the vast majority of stuff, they are essentially the same.  For the OP who is just starting out, either one should work perfectly fine.