Author Topic: I need a pep talk  (Read 5085 times)

bjack2

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I need a pep talk
« on: June 10, 2014, 02:51:14 PM »
Ok.  So I am now sold that passive investing in appropriately allocated index funds is the way to go after reading the evidence available (outside of MMM since I dont want to biased).  We currently use a broker that charges a large amount to invest in managed funds that cost 2 and sometimes 3 times the expense ratios on top of his managment fees.  I have now set up my employer 401K and 403B accounts for my wife and I to be invested in index funds (mix of large cap, small cap, intl, and bond) through fidelity.  Our 529s, two roth IRAs, and a separate managed account are still with our broker.  I want to break up with him but I am nervous about managing my childrens 529s along.  For some reason the retirement money I dont worry about.  Is this crazy?  Incidentaly I recently spoke with a firm that manages wealth based on the passive, MPT, efficient market, strategy in line with my philosophy but they charge .6 to .88% of ALL OF YOUR ASSETS on a yearly basis to manage it for me.  Seems crazy to have someone else manage my money passively but maybe they will be able to allocate and redistribute better than I can?  I am new to all this and my training is NOT in finance.  The cost to go with this new management team would be 3K/year now and likely up to 20K/year toward retirement but they would manage everything and also help with changes as we get closer to retirement.  Maybe I need a face punch, I dont know.....

waltworks

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Re: I need a pep talk
« Reply #1 on: June 10, 2014, 02:59:39 PM »
Vanguard will run your 529s for you in a variety of ways for the usual next-to-nothing fees, so if you want the usual aggressive-to-safe trajectory as the account matures, that is easy. If you want something weird and complicated... well, stick with your broker and good luck. In general you can just call them and they will walk you through it (including calling up your broker for whatever info is needed). Very painless.

Kill those fees! This is for your family, man - don't wuss out (there's your facepunch, you happy?) Your stockbroker will find some other sucker to leech off, or he/she will have to go get a real job. Not your problem.

-Walt

Frankies Girl

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Re: I need a pep talk
« Reply #2 on: June 10, 2014, 03:05:49 PM »
I am an artist. I am about as "not in finance" as you can get. I manage all my own investments now and took everything over as of last year after doing the reading and research.

You can do this. WITHOUT a manager. If you have your asset allocations figured out for your retirement accounts, then do the same thing for your kids' 529s, and then roll them all over to self-managed as soon as you can. It is (or should be) really easy to do. I just called up my adviser and told him I wanted to self-manage, he walked me through opening the new accounts (they roll everything out of "managed" to a new self-managed account at Fidelity) and my funds/money transferred in a day or two. I sold off the stuff I didn't want and bought the stuff I wanted, and now I just pop in there to look at it periodically.

Most of the philosophy behind passive investing is "set it and forget it" so you shouldn't need someone else to oversee the "forgetting it" for a fee. Same thing with your kids' accounts. No manager is going to do anything differently than you could, other than maybe make some unnecessary trades to rack up some fees and of course charge you more fees just for them doing pretty much nothing.

Read whatever you need to get more comfortable with the idea of taking control, but do get there - paying someone else to manage your accounts when you want to set them up for passive investing is silly. Investing can be VERY simple and easy, or as complicated as you want it to be.

http://jlcollinsnh.com/stock-series/
^just in case you didn't read this... it's what got me to the point where I feel just fine doing it myself

You CAN DO THIS!


MDM

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Re: I need a pep talk
« Reply #3 on: June 10, 2014, 03:45:45 PM »
I am nervous about managing my childrens 529s along.  For some reason the retirement money I dont worry about.  Is this crazy? 
Actually, it appears you have good instincts here.  Assuming your retirement horizon is further away than your children's college years, you should be more conservative with the 529 than the retirement money.  So good for you.

Given your good instincts as a starting point, I can't improve on the previous replies, especially the "set it and forget it" part.





bjack2

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Re: I need a pep talk
« Reply #4 on: June 10, 2014, 04:20:48 PM »
Thanks!  Consider me face-punched and reassured at the same time (funny how that works).  I am going for it although since my work accounts are through Fidelity and my experience with them so far has been good I may just have everything in one place vs. starting a new account in Vanguard.  I am using the lowest fee spartan index funds I could find and they are no-transaction fees / no load.  Is there any other benefits to opening a Vanguard account vs. keeping everything with Fidelity?  Are the expense ratios lower enough to justify having money with two organizations?  Thanks again,
Ben

waltworks

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Re: I need a pep talk
« Reply #5 on: June 10, 2014, 04:45:57 PM »
You can do some background reading on Vanguard if you want more detail but my take is: Vanguard's interests are perfectly aligned with those of it's investors (ie, they only charge enough fees to keep themselves operating, they do not try to push more profitable products vs. less profitable ones, and they will be perfectly happy if you get rich through them and they only earn a measly .15% or whatever.)

It has the lowest fees, across the board, of pretty much any similar mutual fund/brokerage company. There are lots of other companies that are quite decent and will do a good job for you; they will all cost more money.

I would just roll *everything possible* to Vanguard, but I am a Vanguard/indexing/set and forget fanatic so you might want to poke around online and find some other opinions. If you're more into active trading, there are probably better options.

-W

Thanks!  Consider me face-punched and reassured at the same time (funny how that works).  I am going for it although since my work accounts are through Fidelity and my experience with them so far has been good I may just have everything in one place vs. starting a new account in Vanguard.  I am using the lowest fee spartan index funds I could find and they are no-transaction fees / no load.  Is there any other benefits to opening a Vanguard account vs. keeping everything with Fidelity?  Are the expense ratios lower enough to justify having money with two organizations?  Thanks again,
Ben

ephillipsme

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Re: I need a pep talk
« Reply #6 on: June 11, 2014, 10:47:58 AM »
I move all my funds, 529 and 401k rollovers to vangaurd.  The fees are lower then the industry and there is not load.  As for the 529 plan there are target funds or age based portfolios that adjust the investment mix based on the students age and time until the funds will be used. 

rmendpara

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Re: I need a pep talk
« Reply #7 on: June 11, 2014, 11:58:50 AM »
Ok.  So I am now sold that passive investing in appropriately allocated index funds is the way to go after reading the evidence available (outside of MMM since I dont want to biased).  We currently use a broker that charges a large amount to invest in managed funds that cost 2 and sometimes 3 times the expense ratios on top of his managment fees.  I have now set up my employer 401K and 403B accounts for my wife and I to be invested in index funds (mix of large cap, small cap, intl, and bond) through fidelity.  Our 529s, two roth IRAs, and a separate managed account are still with our broker.  I want to break up with him but I am nervous about managing my childrens 529s along.  For some reason the retirement money I dont worry about.  Is this crazy?  Incidentaly I recently spoke with a firm that manages wealth based on the passive, MPT, efficient market, strategy in line with my philosophy but they charge .6 to .88% of ALL OF YOUR ASSETS on a yearly basis to manage it for me.  Seems crazy to have someone else manage my money passively but maybe they will be able to allocate and redistribute better than I can?  I am new to all this and my training is NOT in finance.  The cost to go with this new management team would be 3K/year now and likely up to 20K/year toward retirement but they would manage everything and also help with changes as we get closer to retirement.  Maybe I need a face punch, I dont know.....

An adviser is good for people who don't have a good understanding of financial principles (or people who don't have the determination and drive to learn it for themselves). 0.6-0.88% management fees are very reasonable. If they allocate wisely into low-cost funds and product a reasonable investment return based on your risk/earning targets, the fees are worthwhile.

If you are the type of person who will sell things when the prices go down, then definitely get an adviser. They will keep you straight. The biggest challenge is to find one who is trustworthy.. that's up to you to find.

rmendpara

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Re: I need a pep talk
« Reply #8 on: June 11, 2014, 12:03:23 PM »
Thanks!  Consider me face-punched and reassured at the same time (funny how that works).  I am going for it although since my work accounts are through Fidelity and my experience with them so far has been good I may just have everything in one place vs. starting a new account in Vanguard.  I am using the lowest fee spartan index funds I could find and they are no-transaction fees / no load.  Is there any other benefits to opening a Vanguard account vs. keeping everything with Fidelity?  Are the expense ratios lower enough to justify having money with two organizations?  Thanks again,
Ben

How much do you anticipate having by the time you retire in assets? If you think you'll have over $1 million, it's not a bad idea to split your investments between more than one company.

You could do a lot worse than Fidelity (they also offer many good index funds at low fees).

Keeping all your assets at 1 house vs 2 has only a slight advantage. If you have high balances, you can qualify for Admiral shares at Vanguard (which have lower fees) for the same fund (e.g. large cap investor shares vs large cap admiral shares). I think Fidelity probably has some like that too, but I'm not positive.

Erica/NWEdible

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Re: I need a pep talk
« Reply #9 on: June 11, 2014, 12:36:26 PM »
Our 529s are all set up to automatically reallocate based on age of child, getting more conservative the closer they get to 18. This is how Vanguard does it, should you opt for this approach: https://personal.vanguard.com/us/whatweoffer/college/vanguard529#page=1

Frankies Girl

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Re: I need a pep talk
« Reply #10 on: June 11, 2014, 12:51:33 PM »
Thanks!  Consider me face-punched and reassured at the same time (funny how that works).  I am going for it although since my work accounts are through Fidelity and my experience with them so far has been good I may just have everything in one place vs. starting a new account in Vanguard.  I am using the lowest fee spartan index funds I could find and they are no-transaction fees / no load.  Is there any other benefits to opening a Vanguard account vs. keeping everything with Fidelity?  Are the expense ratios lower enough to justify having money with two organizations?  Thanks again,
Ben

How much do you anticipate having by the time you retire in assets? If you think you'll have over $1 million, it's not a bad idea to split your investments between more than one company.

You could do a lot worse than Fidelity (they also offer many good index funds at low fees).

Keeping all your assets at 1 house vs 2 has only a slight advantage. If you have high balances, you can qualify for Admiral shares at Vanguard (which have lower fees) for the same fund (e.g. large cap investor shares vs large cap admiral shares). I think Fidelity probably has some like that too, but I'm not positive.

Fidelity does have 2 level investor/advantage levels just like Vanguard.

Don't get me wrong - I know Vanguard is awesome and it's the leader in low cost and index investing... so you won't be wrong to choose them.

I have all my accounts with Fidelity, and I like them, so I'm sticking there (better tools, customer service, website). The Spartan series of funds are their "loss leaders" to compete with Vanguard. In most cases, they're within .01% of Vanguard's comparable funds, and in a few cases, they beat Vanguard. As long as you avoid their professional management (with associated fees) and high expense ratio funds, Fidelity is a perfectly fine place to throw your money into. ;)

I am at a level where I am considered a premium investor. I pay nothing extra for this, but because I have so much in there, I have a personally assigned rep I can call and discuss anything - so I can bug him with questions or explanations about how stuff works. He has never pressured me and in fact told me that self managing with index investing is a very solid move. I usually just call the main line if it's a quick question, because they all are pretty nice about just answering the questions I have and not doing the sales pitch crap.

http://www.bogleheads.org/wiki/Fidelity
^ what helped me figure out how to make a boglehead/Vanguard portfolio at Fidelity


milesdividendmd

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Re: I need a pep talk
« Reply #11 on: June 11, 2014, 03:27:18 PM »
I one hundred percent agree that you will do very well to manage your own assets.

Your advisor is probably providing nothing of value to you, and unfoubtedly doing harm with his fees.

If you want a completely hands-off strategy then Betterment might be something to look into.

But you would be even better served to do a bit of reading and come up with your own asset allocation strategy yourself.

One area I would like to pushback on a little bit is this idea that you should invest your 529 conservatively.

Aside from state specific tax breaks, the only advantage of a 529 over a taxable account is the lack of taxes On the growth of your investments.

This means that The more you make the more you will save. Furthermore saving for college is quite unlike saving for retirement. Even if you fail to meet your goals your kids will still be able to go to college. No one ends up under a bridge eating dog food as William Bernstein likes to evoke.

Here's a nice piece on setting up your 529 aggressively:

http://whitecoatinvestor.com/3-reasons-why-you-can-take-more-risk-with-a-529/

Enjoy,

Alexi




AssetGrinder

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Re: I need a pep talk
« Reply #12 on: June 11, 2014, 03:39:41 PM »
If you are going with an idex fund approach there is no need for a manager. Those fees are your profits so you want to retain them. Best route to go with is low cost index ETF,s. Browse Vangaurd and Ishares to see there options as they are the most popular.

There is nothing wrong with seeing a finance professional but there is a problem when they charge you outrageous fees to hold index funds where any blind person can see and buy. If you still want advice hire a fee based adviser for a one time fee and it would be much cheaper in the long run. Start learning more about finance and read a few books. In no time you will be comfortable maintaining your own portfolio.