Author Topic: Fire Financial advisor question!  (Read 2089 times)

Mcsavesalot

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Fire Financial advisor question!
« on: May 12, 2020, 06:40:01 PM »
Question.
I have an active manager of an investment portfolio. I want to fire my advisor since its costing me 1% (face-punch). I'm currently with Schwab and would like to know how to go about getting this done. I would like to buy VTSAX but there is a laundry list of stocks my advisor has me in. My question is, if I'd like to get into VTSAX what tax implications would this subject me to? Am I best off calling an accountant to facilitate the move or what? My whole goal is to save money so it wouldn't be wise if I got hit with a big tax bill for the move. This has actually delayed me for over a year on the move. Thanks to anyone for any advise you have for me!! 

Tyler durden

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Re: Fire Financial advisor question!
« Reply #1 on: May 12, 2020, 06:48:14 PM »
So to be honest 1% all in including any mutual fund fees isn't terrible. Not great but not terrible. How is the performance ? Is it ahead or behind a blended index benchmark? I can elaborate more on that if its helpful.

To answer your question, yes there is probably a tax bill if these are funds not held in an IRA. Given the recent decline in the market your capital gains probably aren't all that bad. Say if you have 100k in unrealized capital gains and sell it all you would likely have a tax bill of 15k, since long term capital gains are taxed at 15%. Nothing an accountant can help you with here.

If this is a move your really want to make, now is probably the best time.

maizefolk

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Re: Fire Financial advisor question!
« Reply #2 on: May 12, 2020, 07:04:35 PM »
Mcsavesalot, you'd have to realize your capital gains and/or losses to move into index funds. Your statement should show the current value of each position and your original purchase price for each. From this you can figure out if we're talking about hundreds of dollars in taxes or tens of thousands of dollars in tax.

So to be honest 1% all in including any mutual fund fees isn't terrible. Not great but not terrible.

That seems pretty bad to me. It's more than 10x the cost of just holding a couple of broad index funds (whether vanguard, fidelity or schwabs in house low cost index funds). Looking at it another way, the long term CGAR of the stock market is only about 9.1%, so losing a percentage point every year means paying your investment advisor about 11% of the total investment returns (over the super long term).

Telecaster

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Re: Fire Financial advisor question!
« Reply #3 on: May 12, 2020, 07:29:18 PM »
So to be honest 1% all in including any mutual fund fees isn't terrible. Not great but not terrible. How is the performance ? Is it ahead or behind a blended index benchmark? I can elaborate more on that if its helpful.

1% all in a hair-on-fire emergency.   Those costs could grow to the price of a house over a typical investing horizon.   If you follow the 4% rule, a 1% loss to fees means your lifestyle in retirement is reduced by 25%.  Or you must work substantially longer.   Do either of those sound like good options?

As far as taxes, the market is down-ish so it might not be a terrible time to do it.  If you have a big basket of stocks that's sort of like a mutual fund so maybe just keep them.   

Travis

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Re: Fire Financial advisor question!
« Reply #4 on: May 12, 2020, 09:11:38 PM »
I would like to buy VTSAX but there is a laundry list of stocks my advisor has me in.

How much are those costing OP in addition to the 1% AUM?

Tyler durden

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Re: Fire Financial advisor question!
« Reply #5 on: May 13, 2020, 07:33:59 PM »
Just saying OP should evaluate performance and not just go based on fees alone. At a place like Schwab its likely some cookie cutter program and the other posters are right and they are juicing you on fees for sub par performance. But still have a look just in case. Can't go wrong with the vanguard index fund you mentioned.

MustacheAndaHalf

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Re: Fire Financial advisor question!
« Reply #6 on: May 14, 2020, 04:00:47 AM »
Question.
I have an active manager of an investment portfolio. I want to fire my advisor since its costing me 1% (face-punch).
In my view, advisors are salespeople.  The industry has conflicts of interest most commonly found in the high cost funds - there's even "load funds" that charge about 5%, and can give what I view as a kickback for referrals.  The easiest way to avoid conflicts of interest is with low cost mutual funds or ETFs.

Plus, most high cost funds have significant overlap in both assets and performance of the S&P 500, so you're not even getting good value for your expense ratio.  For example, here's what Vanguard charges for a classic 3 fund portfolio:
Vanguard Total Stock Market 0.03%
Vanguard Total Bond Market 0.035%
Vanguard Total International 0.08%

That gives you 11,000 stocks from around the world, and an allocation to the U.S. bond market.  Although SPIVA reports are getting harder to find (for free), here's one for end of year 2018:
https://www.spglobal.com/_assets/documents/corporate/us-spiva-report-11-march-2019.pdf#page=9

Notice how the S&P 1500 (total stock market) beats 81% of active funds over 3 years, but 89% over 15 years.  Essentially the longer the time frame, the more passive funds with low fees beat active funds charging high fees.

Andy R

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Re: Fire Financial advisor question!
« Reply #7 on: May 14, 2020, 04:18:20 AM »
So to be honest 1% all in including any mutual fund fees isn't terrible. Not great but not terrible.

LOL.

Thank you Jack Bogle for beginning a movement and education of the public away from people who say things like this to con(vince) people out of their hard earned money.

celerystalks

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Re: Fire Financial advisor question!
« Reply #8 on: May 14, 2020, 05:48:48 AM »
So to be honest 1% all in including any mutual fund fees isn't terrible.

Huh? There are currently index funds that charge 0.01+or .02%. A fee of 1% is 50-100 times higher. Also, under a trinity study/4% rule, 1% is actually 25% of the annual 4% safe withdrawal rate..

Car Jack

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Re: Fire Financial advisor question!
« Reply #9 on: May 14, 2020, 06:22:55 AM »
1% is horrible.  I won't pay 1/10th of that.

Here's how you exit this crap.  Call Schwab and tell them you want out of this management garbage.  That'll get you out of the 1% fee.  Then, get a history of transactions.  You can then start one by one, figuring out investments that have losses and haven't traded for at least 30 days.  Sell those.  Buy VTI....not VTSAX.  They're the same thing, just in ETF form, you can trade it for free at Schwab.  For the rest of your funds/stocks, look to see what is at least a year old.  Sell those.  If you have stuff younger than this with a gain, hold on to them and wait.  What I do is I write on my wall calendar what funds to sell and which.  When you sell with Schwab, you can choose "sell oldest" to sell funds where there may be a number of buys.  The goal of the above is to take the tax loss on the sales (full ordinary income) and pay long term cap gains (lower than ordinary income) on the gains.  So for example, if you lost $1000 and gained $1000 on another, you end up with a net loss on your tax return.

All this is called tax loss harvesting.  I'll add that Schwab is an excellent place to keep your investments.  I have my taxable account there.

Tyler durden

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Re: Fire Financial advisor question!
« Reply #10 on: May 14, 2020, 06:53:09 AM »
So to be honest 1% all in including any mutual fund fees isn't terrible.

Huh? There are currently index funds that charge 0.01+or .02%. A fee of 1% is 50-100 times higher. Also, under a trinity study/4% rule, 1% is actually 25% of the annual 4% safe withdrawal rate..

Right.... I was mentioning this in another thread but itís like a cult around here with the index funds. Index funds are awesome ! Yes! Especially is taxable accounts. There are active managers that consistently beat the index.

In an IRA where would you have rather had your money the last 10 or 15 years ? In a low cost sp500 index fund or in something like FCNTX that has outperformed the index by several 100 basis points. Thatís just one fund I like but it destroys your index argument. Just because you donít have the skill or time to find good active funds doesnít mean other people canít.

Youíve made up your mind settled in your ways and your not letting facts get in your way

Iím not arguing pay high fees no matter what Iím saying evaluate performance.

maizefolk

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Re: Fire Financial advisor question!
« Reply #11 on: May 14, 2020, 07:28:19 AM »
Just because you donít have the skill or time to find good active funds doesnít mean other people canít.

Finding actively managed funds that DID outperform the market in the past is relatively easy. There are so many active funds out there that some are always going to come out ahead in any given time interval. As MustacheAndaHalf pointed out above, the longer the window, the fewer funds consistently outperform the market.

Finding actively managed funds that WILL outperform the market in the future, that's a lot harder. I've yet to see it consistently done. The problem here is that anyone can claim to be able to pick future winners, but the only way to know is to ask them to make the predictions today and wait ten or fifteen years to see how things turned out.

The most famous recent example of this is the Buffett/Seides bet. Seides thought he could find actively managed funds which could outperform a simple stock index. He put his money where his mouth was. It turned out he hadn't in fact identified such funds. If you're like to make those predictions, have at it, and we can continue this conversation in 2030 once we know the outcome of your selections.

This isn't something specific to people on the MMM forum. Or even to advocates of index funds. It sounds like your argument is with the efficient market hypothesis generally.

maizefolk

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Re: Fire Financial advisor question!
« Reply #12 on: May 14, 2020, 07:29:42 AM »
@Mcsavesalot sorry your post is getting dragged off topic. Read Car Jack's post. They've put together all the information you need to do what you want to do in the most efficient way possible.

MustacheAndaHalf

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Re: Fire Financial advisor question!
« Reply #13 on: May 14, 2020, 10:00:14 AM »
https://www.spglobal.com/_assets/documents/corporate/us-spiva-report-11-march-2019.pdf#page=9
Notice how the S&P 1500 (total stock market) beats 81% of active funds over 3 years, but 89% over 15 years.  Essentially the longer the time frame, the more passive funds with low fees beat active funds charging high fees.

Right.... I was mentioning this in another thread but itís like a cult around here with the index funds. Index funds are awesome ! Yes! Especially is taxable accounts. There are active managers that consistently beat the index.
Insulting others (as a "cult") does not prove your argument.  I provided factual information while you haven't.

cool7hand

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Re: Fire Financial advisor question!
« Reply #14 on: May 14, 2020, 10:13:19 AM »
1% fees are a crime. Here's the harm they cause: https://www.tonyrobbins.com/wealth-lifestyle/401k-fees-matter-video/. The only people who can consistently find the managers who beat the market are those with a crystal ball to see the future.

Shane

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Re: Fire Financial advisor question!
« Reply #15 on: May 14, 2020, 10:51:14 AM »
Since OP hasn't responded, it's difficult to know how to answer their question. If OP is asking about selling investments in a tIRA or Roth, then there will be no tax implications. You can just sell everything and buy VTI (the ETF version of VTSAX, which you can buy directly from your Schwab account) with the proceeds. If you are talking about investments in a taxable account, then you should be able to fairly easily figure out what the cost basis is for each of the individual stocks your advisor had you purchase. If you can't figure that out yourself by looking at Schwab's website, just give them a call, and somebody at Schwab should be able to help you to understand how much capital gains, if any, you have in the positions you are holding.

Tyler durden

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Re: Fire Financial advisor question!
« Reply #16 on: May 14, 2020, 10:59:13 AM »
https://www.spglobal.com/_assets/documents/corporate/us-spiva-report-11-march-2019.pdf#page=9
Notice how the S&P 1500 (total stock market) beats 81% of active funds over 3 years, but 89% over 15 years.  Essentially the longer the time frame, the more passive funds with low fees beat active funds charging high fees.

Right.... I was mentioning this in another thread but itís like a cult around here with the index funds. Index funds are awesome ! Yes! Especially is taxable accounts. There are active managers that consistently beat the index.
Insulting others (as a "cult") does not prove your argument.  I provided factual information while you haven't.


Maybe cult is the wrong word. In my opinion FCNTX is a great fund compared to something like VTSAX. (and you know what they say about opinions) Or anything that tracks the SP 500. I mean I did say cost matters or meant to but performance matters more. Facts you say !! Here are some


As to the facts, because facts matter and are stubborn things...

10 year Contra Fund perfomrance vs Sp 500 - Contra = 13.49% ( NET OF FEE ) SP 500 = 11.67%

10 years not long enough for you? How about 15 ?

15 year performance Contra fund = 11.00% ( NET OF FEE ) vs SP 500 = 8.47%

These numbers are through 4/30/2020 from Morningstar

VTSAX also lags FCNTX over 1 yr 3 yr 5 yr 10 yr 15 yr as well. And since VTSAX is like the holy grail around here its worth pointing out.
(pasted from another thread )

Shane

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Re: Fire Financial advisor question!
« Reply #17 on: May 14, 2020, 11:04:22 AM »
https://www.spglobal.com/_assets/documents/corporate/us-spiva-report-11-march-2019.pdf#page=9
Notice how the S&P 1500 (total stock market) beats 81% of active funds over 3 years, but 89% over 15 years.  Essentially the longer the time frame, the more passive funds with low fees beat active funds charging high fees.

Right.... I was mentioning this in another thread but itís like a cult around here with the index funds. Index funds are awesome ! Yes! Especially is taxable accounts. There are active managers that consistently beat the index.
Insulting others (as a "cult") does not prove your argument.  I provided factual information while you haven't.


Maybe cult is the wrong word. In my opinion FCNTX is a great fund compared to something like VTSAX. (and you know what they say about opinions) Or anything that tracks the SP 500. I mean I did say cost matters or meant to but performance matters more. Facts you say !! Here are some


As to the facts, because facts matter and are stubborn things...

10 year Contra Fund perfomrance vs Sp 500 - Contra = 13.49% ( NET OF FEE ) SP 500 = 11.67%

10 years not long enough for you? How about 15 ?

15 year performance Contra fund = 11.00% ( NET OF FEE ) vs SP 500 = 8.47%

These numbers are through 4/30/2020 from Morningstar

VTSAX also lags FCNTX over 1 yr 3 yr 5 yr 10 yr 15 yr as well. And since VTSAX is like the holy grail around here its worth pointing out.
(pasted from another thread )
As others have pointed out above, Tyler, it's easy to identify actively managed funds that have outperformed their indexes in the past. There's no question that some funds outperform. The more difficult trick is to identify which funds will outperform their index(es) in the future, and that's not possible to do consistently without a crystal ball. Hint: the funds that will outperform the index in the future usually aren't the same funds that outperformed in the past.

Tyler durden

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Re: Fire Financial advisor question!
« Reply #18 on: May 14, 2020, 11:19:22 AM »
I feel bad weíve completely derailed this thread

Anywho - youíve got a fund manager with 20 plus years of outperforming the index. That is personally enough evidence for a simple man like myself to have confidence in the fund. Assuming one watches for fund manager changes.


frugalnacho

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Re: Fire Financial advisor question!
« Reply #19 on: May 14, 2020, 01:40:49 PM »
https://www.spglobal.com/_assets/documents/corporate/us-spiva-report-11-march-2019.pdf#page=9
Notice how the S&P 1500 (total stock market) beats 81% of active funds over 3 years, but 89% over 15 years.  Essentially the longer the time frame, the more passive funds with low fees beat active funds charging high fees.

Right.... I was mentioning this in another thread but itís like a cult around here with the index funds. Index funds are awesome ! Yes! Especially is taxable accounts. There are active managers that consistently beat the index.
Insulting others (as a "cult") does not prove your argument.  I provided factual information while you haven't.


Maybe cult is the wrong word. In my opinion FCNTX is a great fund compared to something like VTSAX. (and you know what they say about opinions) Or anything that tracks the SP 500. I mean I did say cost matters or meant to but performance matters more. Facts you say !! Here are some


As to the facts, because facts matter and are stubborn things...

10 year Contra Fund perfomrance vs Sp 500 - Contra = 13.49% ( NET OF FEE ) SP 500 = 11.67%

10 years not long enough for you? How about 15 ?

15 year performance Contra fund = 11.00% ( NET OF FEE ) vs SP 500 = 8.47%

These numbers are through 4/30/2020 from Morningstar

VTSAX also lags FCNTX over 1 yr 3 yr 5 yr 10 yr 15 yr as well. And since VTSAX is like the holy grail around here its worth pointing out.
(pasted from another thread )

You are falling prey to survivorship bias.  https://en.wikipedia.org/wiki/Survivorship_bias

If you create a thousand different funds all with varying proportions of different stocks in them, some of them will inevitably outperform the market.  Unless every single stock from every sector performs the exact same (they won't), then a natural consequence is that there will be a distribution of performances, which will average out to the market average, by definition.  The ones that perform poorly are shut down.  The ones that perform better (even if just by pure luck) will stick around.  Picking the winners in retrospect is easy, it's the ones that have survived.  Picking the future winners is significantly harder, and as has pointed out almost no one has demonstrated any ability to consistently do this. 

Tyler durden

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Re: Fire Financial advisor question!
« Reply #20 on: May 14, 2020, 02:45:57 PM »
https://www.spglobal.com/_assets/documents/corporate/us-spiva-report-11-march-2019.pdf#page=9
Notice how the S&P 1500 (total stock market) beats 81% of active funds over 3 years, but 89% over 15 years.  Essentially the longer the time frame, the more passive funds with low fees beat active funds charging high fees.

Right.... I was mentioning this in another thread but itís like a cult around here with the index funds. Index funds are awesome ! Yes! Especially is taxable accounts. There are active managers that consistently beat the index.
Insulting others (as a "cult") does not prove your argument.  I provided factual information while you haven't.


Maybe cult is the wrong word. In my opinion FCNTX is a great fund compared to something like VTSAX. (and you know what they say about opinions) Or anything that tracks the SP 500. I mean I did say cost matters or meant to but performance matters more. Facts you say !! Here are some


As to the facts, because facts matter and are stubborn things...

10 year Contra Fund perfomrance vs Sp 500 - Contra = 13.49% ( NET OF FEE ) SP 500 = 11.67%

10 years not long enough for you? How about 15 ?

15 year performance Contra fund = 11.00% ( NET OF FEE ) vs SP 500 = 8.47%

These numbers are through 4/30/2020 from Morningstar

VTSAX also lags FCNTX over 1 yr 3 yr 5 yr 10 yr 15 yr as well. And since VTSAX is like the holy grail around here its worth pointing out.
(pasted from another thread )

You are falling prey to survivorship bias.  https://en.wikipedia.org/wiki/Survivorship_bias

If you create a thousand different funds all with varying proportions of different stocks in them, some of them will inevitably outperform the market.  Unless every single stock from every sector performs the exact same (they won't), then a natural consequence is that there will be a distribution of performances, which will average out to the market average, by definition.  The ones that perform poorly are shut down.  The ones that perform better (even if just by pure luck) will stick around.  Picking the winners in retrospect is easy, it's the ones that have survived.  Picking the future winners is significantly harder, and as has pointed out almost no one has demonstrated any ability to consistently do this.

Not sure what kind of bias I am falling prey to but your absolutely right that I'm biased. I like FCNTX and have read quite a bit from what the fund manager put out. I've held that fund and another one in my 401k for decades, Fidelity Growth Company that have done amazing. year after year after year beating their benchmark. the growth company fund outperforms its Russell 3000 growth index by 300 basis points over the life of the fund. I've read and been told for years that I should dump these because index funds are better. Do you realize how much money I would have left on the table had I done that?

"I can't be done" ? I am doing it. and im not that smart - lol

marty998

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Re: Fire Financial advisor question!
« Reply #21 on: May 14, 2020, 03:12:53 PM »
I know of an emerging markets fund manager who outperformed his benchmark market index by 5% annualised for 25 years. The all in fee was about 1.4% but who cares when you turn $100k in 1990 into $2.5m in 2015..

The problem with that is that his fund got so big it was getting hard to nimbly move in and out of the stock positions that he wanted to without actually moving the market in those stocks, and that became a drag on performance. He retired, the fund went through a few management changes but still has the problem of ďbignessĒ.

Something to watch out for with successful funds.... you can easily become a victim of that success. A big fund canít help but replicate the market.

Shane

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Re: Fire Financial advisor question!
« Reply #22 on: May 14, 2020, 03:39:29 PM »
I know of an emerging markets fund manager who outperformed his benchmark market index by 5% annualised for 25 years. The all in fee was about 1.4% but who cares when you turn $100k in 1990 into $2.5m in 2015..

The problem with that is that his fund got so big it was getting hard to nimbly move in and out of the stock positions that he wanted to without actually moving the market in those stocks, and that became a drag on performance. He retired, the fund went through a few management changes but still has the problem of ďbignessĒ.

Something to watch out for with successful funds.... you can easily become a victim of that success. A big fund canít help but replicate the market.

^^This is a good point. Funds that, year after year, beat the indexes inevitably attract more capital, assuming they remain open to new investors. The bigger a fund gets, the harder it becomes for it to trade without moving the market, basically, against itself.

MustacheAndaHalf

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Re: Fire Financial advisor question!
« Reply #23 on: May 15, 2020, 03:50:13 AM »
You are falling prey to survivorship bias.  https://en.wikipedia.org/wiki/Survivorship_bias
Not sure what kind of bias I am falling prey to but ...
You don't know, but you won't follow the link to wikipedia?

I like that you're using morningstar data (better than trusting Vanguard or Fidelity's data), but it sounds like explanations won't work.  So I pick Vanguard Information Technology Index Fund Admiral Shares (VITAX) with 19%/year for 5 years and 17%/year for 10 years.  Clearly beats the S&P 500, the Total Stock Market, Vanguard Large Growth, and Fidelity Contrafund.
https://investor.vanguard.com/mutual-funds/profile/performance/vitax

Shane

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Re: Fire Financial advisor question!
« Reply #24 on: May 15, 2020, 06:01:51 AM »
I feel bad weíve completely derailed this thread

Anywho - youíve got a fund manager with 20 plus years of outperforming the index. That is personally enough evidence for a simple man like myself to have confidence in the fund. Assuming one watches for fund manager changes.

Wouldn't worry too much about derailing OP's thread. It's been three days, now, and OP hasn't returned.

Tyler durden

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Re: Fire Financial advisor question!
« Reply #25 on: May 15, 2020, 08:20:53 AM »
You are falling prey to survivorship bias.  https://en.wikipedia.org/wiki/Survivorship_bias
Not sure what kind of bias I am falling prey to but ...
You don't know, but you won't follow the link to wikipedia?

I like that you're using morningstar data (better than trusting Vanguard or Fidelity's data), but it sounds like explanations won't work.  So I pick Vanguard Information Technology Index Fund Admiral Shares (VITAX) with 19%/year for 5 years and 17%/year for 10 years.  Clearly beats the S&P 500, the Total Stock Market, Vanguard Large Growth, and Fidelity Contrafund.
https://investor.vanguard.com/mutual-funds/profile/performance/vitax

All good. Boars like this are incredible at keeping people from the big big mistakes like high advisory fees with loaded funds and things like that. As I scanned some of the other threads there are many investors posting about market timing but trying to convince themselves and others that's not what they're doing :)

If someone wants to get crazy and throw 10% of their money into an active fund, not a big deal. Much better than the prevalent market timing im reading about. But to stay on message newer investors are likely best to start with most if not all in simple index funds.

TomTX

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Re: Fire Financial advisor question!
« Reply #26 on: May 16, 2020, 08:30:29 AM »
"fire my advisor" and "sell my stocks" are two separate items.

Call up Schwab today and fire the advisor. Tell them you want self directed, no fee investing.

Then figure out what you want to do with the investments themselves.

Mcsavesalot

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Re: Fire Financial advisor question!
« Reply #27 on: June 03, 2020, 01:26:06 PM »
1% is horrible.  I won't pay 1/10th of that.

Here's how you exit this crap.  Call Schwab and tell them you want out of this management garbage.  That'll get you out of the 1% fee.  Then, get a history of transactions.  You can then start one by one, figuring out investments that have losses and haven't traded for at least 30 days.  Sell those.  Buy VTI....not VTSAX.  They're the same thing, just in ETF form, you can trade it for free at Schwab.  For the rest of your funds/stocks, look to see what is at least a year old.  Sell those.  If you have stuff younger than this with a gain, hold on to them and wait.  What I do is I write on my wall calendar what funds to sell and which.  When you sell with Schwab, you can choose "sell oldest" to sell funds where there may be a number of buys.  The goal of the above is to take the tax loss on the sales (full ordinary income) and pay long term cap gains (lower than ordinary income) on the gains.  So for example, if you lost $1000 and gained $1000 on another, you end up with a net loss on your tax return.

All this is called tax loss harvesting.  I'll add that Schwab is an excellent place to keep your investments.  I have my taxable account there.

Thanks so much for the advice!!! Thanks to you I got out of the 1% fee. Quick questions when selling losses. Do short term losses vs long term losses have any negative tax implications for me or should I just sell all the losses first. I'm taking a step by step approach just how you explained it. The idea of setting dates on a calendar when stocks hit a year is genius! 

MustacheAndaHalf

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Re: Fire Financial advisor question!
« Reply #28 on: June 04, 2020, 12:00:25 AM »
@Mcsavesalot - You're already asking that question in the taxes area, which is the right place to ask:
https://forum.mrmoneymustache.com/taxes/short-term-vs-long-term-cap-loss-difference/

There are a number of good total stock market ETFs.  Both VTI (Vanguard) and ITOT (iShares) hold over 3,500 stocks and charge 0.03%/year in expenses.  Schwab has a broad market ETF (SCHB) which has very similar performance with about 2,500 stocks.

I believe any ETF should be $0/trade at Schwab.  Last year Vanguard dropped all ETF and stock trades to $0/trade, and it's competitors quickly made the same change (Fidelity, Schwab, TD Ameritrade).

MustacheAndaHalf

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Re: Fire Financial advisor question!
« Reply #29 on: June 04, 2020, 12:17:44 AM »
All good. Boars like this are incredible at keeping people from the big big mistakes like high advisory fees with loaded funds and things like that. As I scanned some of the other threads there are many investors posting about market timing but trying to convince themselves and others that's not what they're doing :)
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Other threads are not the topic of this thread.


You are falling prey to survivorship bias.  https://en.wikipedia.org/wiki/Survivorship_bias
Not sure what kind of bias I am falling prey to but ...
You don't know, but you won't follow the link to wikipedia?

I like that you're using morningstar data (better than trusting Vanguard or Fidelity's data), but it sounds like explanations won't work.  So I pick Vanguard Information Technology Index Fund Admiral Shares (VITAX) with 19%/year for 5 years and 17%/year for 10 years.  Clearly beats the S&P 500, the Total Stock Market, Vanguard Large Growth, and Fidelity Contrafund.
https://investor.vanguard.com/mutual-funds/profile/performance/vitax
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If someone wants to get crazy and throw 10% of their money into an active fund, not a big deal. Much better than the prevalent market timing im reading about. But to stay on message newer investors are likely best to start with most if not all in simple index funds.
You started by saying 1% expense ratios are not terrible, but here you're clarifying that limiting active funds to 10% is reasonable (I think we agree Fidelity Contrafund, 0.85% expense ratio, would be an active fund).  For new investors reading this thread, I'd agree with a 10% limit on active funds / play money that gets market timed.
 
My earlier point was that anyone can pick a great active fund now, and claim the 10 year past performance represented their past performance.  What I haven't seen is someone start a thread / experiment, say their pick will beat the market for the *next* 10 years, and then track that performance for 10 years.

shah8

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Re: Fire Financial advisor question!
« Reply #30 on: June 04, 2020, 10:35:59 PM »
@Mcsavesalot - You're already asking that question in the taxes area, which is the right place to ask:
https://forum.mrmoneymustache.com/taxes/short-term-vs-long-term-cap-loss-difference/

There are a number of good total stock market ETFs.  Both VTI (Vanguard) and ITOT (iShares) hold over 3,500 stocks and charge 0.03%/year in expenses.  Schwab has a broad market ETF (SCHB) which has very similar performance with about 2,500 stocks.

I believe any ETF should be $0/trade at Schwab.  Last year Vanguard dropped all ETF and stock trades to $0/trade, and it's competitors quickly made the same change (Fidelity, Schwab, TD Ameritrade).

@MustacheAndaHalf Is it better to have ETF (SCHB) instead of index fund (SWTSX) in taxable account?
« Last Edit: June 04, 2020, 10:54:50 PM by shah8 »

MustacheAndaHalf

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Re: Fire Financial advisor question!
« Reply #31 on: June 06, 2020, 02:01:13 AM »
... Schwab has a broad market ETF (SCHB) which has very similar performance with about 2,500 stocks.
@MustacheAndaHalf Is it better to have ETF (SCHB) instead of index fund (SWTSX) in taxable account?
They have identical expense ratios (0.03%) and their 10-year performance matches 99.7%, so either one seems fine.

You might search for discussions comparing the capital gains of ETFs vs mutual funds if you want to learn more about that.  I think ETFs would be favored if those claims are true, but I'm not clear about it either way.

Shane

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Re: Fire Financial advisor question!
« Reply #32 on: June 06, 2020, 02:13:42 AM »
... Schwab has a broad market ETF (SCHB) which has very similar performance with about 2,500 stocks.
@MustacheAndaHalf Is it better to have ETF (SCHB) instead of index fund (SWTSX) in taxable account?
They have identical expense ratios (0.03%) and their 10-year performance matches 99.7%, so either one seems fine.

You might search for discussions comparing the capital gains of ETFs vs mutual funds if you want to learn more about that.  I think ETFs would be favored if those claims are true, but I'm not clear about it either way.

ETFs vs mutual funds

MissPeach

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Re: Fire Financial advisor question!
« Reply #33 on: June 18, 2020, 02:11:58 PM »
One other thing I didn't see mentioned here since MMM seems to be very pro Vanguard. If you want to remain at Schwab and just not with this adviser, Schwab has a lot of low cost index funds too. I actually moved my Vanguard account over because the ones I was interested were beating Vanguard's rates in my case. SCHB and SCHX are two to look into. I haven't looked at these lately compared to something like VTSAX but they were lower at the time I was researching it and commission free.

Mcsavesalot

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Re: Fire Financial advisor question!
« Reply #34 on: June 18, 2020, 10:29:17 PM »
I've been investing with Schwab. I've been slowing getting rid of the losers and buying VTI with the proceeds. I did get rid of the bonds that my advisor had me in. One had an expense ratio of 1.45% which seems super high since I'm already paying him 1% but I sold that and bought VBTLX with an expense ratio of 0.05 I believe. I'm at the point where I'm holding onto all my capital gain holdings. After doing the math it looks like a Tax bill of 7k If I was to sell these. None of these holdings seem to be too bad. A lot of ETF's and about 10 different holdings of individual stocks. I'm planning on selling these next year or two and hopefully get our income into the 0% long term tax bracket. This might take a couple years to transfer into VTI this way, but it seems like a better decision than to jump right into VTI and pay the Tax. I'm I over looking anything? I don't mind the current holdings too much. I'd just like to get into VTI for the sake of a more simple portfolio.