Author Topic: Met with an ML financial advisor, he suggests I go 100% equities  (Read 8059 times)

catccc

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Met with an ML financial advisor, he suggests I go 100% equities
« on: November 03, 2016, 01:24:06 PM »
I met with a Merrill Lynch Wealth Management financial advisor today.  They are trying to get us to move our assets to their management.  We currently manage about $685K ourselves, mostly with Vanguard, and also a small chunk with Fidelity.  You know, a very MMM kinda set up.  I told them I was leaning towards continuing to self-manage assets and saving that 1%, but I was interested in what they had to say.

One thing that struck me was how anti-bond this guy was.  I have taxable investments that are 60% stocks, 40% bonds, and he thinks I should make this 100% stocks.  In particular, dividend yielding stocks.  His thinking is that interest rates have no where to go but up, and that will make bonds lose value.  That, combined with the fact that as a relatively young person (37. relatively, I said...) I have the time to ride out any volatility. 

In my retirement accounts, he suggests I replace my current bond holdings with adjustable preferred bonds and REITs.

I'm actually quite intrigued with the thought of having a professionally managed dividend focused stock portfolio of about 15-20 individual stocks.  Is this stupid of me?  The fees are hefty (1-1.3% depending on total assets), and obviously performance can't be guaranteed.  But it just gets be wondering if my money could be working harder for me.  Should I be looking at income equity funds instead?

Any thoughts?  I would appreciate any input y'all have!

NoStacheOhio

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #1 on: November 03, 2016, 01:44:10 PM »
DON'T DO IT.

While I agree, in principle, that 60/40 is conservative for your age, chasing dividends and stock picking isn't the way to build more wealth. Are you indexing? If so, just consider altering your allocations to be more aggressive, and make sure you have plenty of diversification.

edit: this kind of stuff should be pretty boring, basically, you're shooting for boring, average returns. BE BORING.

marty998

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #2 on: November 03, 2016, 02:12:48 PM »
15-20 stocks isn't diversified enough. You are going to be looking at vastly increased volatility and you are reliant on the stock picker's ability not to fuck up.

And the fees will suck up a chunk of your dividends anyway, before you get a chance to reinvest them, thus limiting your portfolio's compounding capability.

Thinkum

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #3 on: November 03, 2016, 05:04:40 PM »
I would not use and will never use an advisor. No one cares as much as you do about your money. 40% in bonds in pretty high, but I'd ask what kind of bonds are you invested in? Is it a broad index or individual? The REIT advice is pretty good, but you can and should do this yourself. Check out Vanguard REIT and Bond Indexes. The management rate is ridiculously low for what you get.

Woody Viet

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #4 on: November 03, 2016, 05:05:40 PM »
If you fancy having a small portfolio of individual stocks then why don't you take a small amount of your stash and build one yourself? That way you can have all the fun without paying the odious fees.

At those rates I'd stay right away. How often is this guy going to turn over your portfolio and generate capital gains? That 1% will quickly turn into 2-3 when you factor in taxes.

I agree with him on bonds though, where exactly is the upside? The only good long run scenario is deflation and is that worth 40% of your portfolio to protect against? If there is so little upside then will they really swing up if stocks tank (especially when the high bond prices are likely down to high levels of fed induced liquidity - something that by definition is low in a stock crash)?

As for dividend stocks, that strikes me as reaching for yield. Everyone wants to own high dividend paying stocks now to compensate for the low yield environment. When everyone is pulling in the same direction is precisely when I like to stay away.

deborah

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #5 on: November 03, 2016, 05:08:10 PM »
The advice is reasonable, but your take away should be to invest more in stock index funds and less in bonds - NOT to go with the Financial Advisor.

Woody Viet

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #6 on: November 03, 2016, 05:09:59 PM »
Forgot to add, there's a whole host of incentive issues even with a fee based adviser. If you hire this person they're going to care very strongly about keeping you as a client. That means they will care as much about loss avoidance as about 'making your money work harder for you.' That strong preference for loss avoidance, even at the cost of lower expected returns, will likely cost you money.

All depends on the adviser of course. He could be a genius and a gem of a person. But how can you know that?

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frugal_c

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #8 on: November 03, 2016, 08:11:51 PM »
Moving into dividend stocks is not the worst idea but I would still keep 10% in short to mid-term bonds.  I am just conservative that way.   For the portion you move over to dividend stocks, I would just use a dividend ETF to avoid the fees.

Mighty-Dollar

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #9 on: November 03, 2016, 08:20:48 PM »
Quote
I met with a Merrill Lynch Wealth Management financial advisor today.  They are trying to get us to move our assets to their management.  We currently manage about $685K ourselves, mostly with Vanguard, and also a small chunk with Fidelity.  You know, a very MMM kinda set up.  I told them I was leaning towards continuing to self-manage assets and saving that 1%, but I was interested in what they had to say.
Are you aware that the people at Merrill Lynch are commission based "advisors" or they charge management fees or both? In other words they are nothing more than salesmen who are for example going to try to drum up transactions. They don't make money unless they convince you to shift money around. Otherwise they want to set up a wrap account so that they charge you 1% per year. That will shave off 18.2% from the value of your portfolio after 20 years. And trust me it will cost you more than that if you invest in the securities that they recommend.
Why not just use a free RoboAdvisor if you need help on allocation ratio?
https://www.blackrock.com/wte/core-builder/us?refType=fi
https://personal.vanguard.com/us/funds/tools/recommendation?reset=true
https://gps.ricedelman.com/
http://www.vanguard.com/nesteggcalculator
I would not put 100% in stocks. Mark Hulbert released an article last week about how you don't miss out on that much upside when you diversify into bonds.
I would go at least 20% bonds for an aggressive investor.
Quote
In my retirement accounts, he suggests I replace my current bond holdings with adjustable preferred bonds and REITs.
Just stop listening to these SALESMEN! You should be indexing -- not buying individual securities. Not surprisingly it's the INDIVIDUAL securities that pay Mr. Broker the high commissions. And you take on more risk with individual securities and you'll wind up trading them down the road (index funds are meant to be held). Oh! Mr. Broker conveniently forgot to mention that?
« Last Edit: November 03, 2016, 08:25:46 PM by Mighty-Dollar »

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #10 on: November 03, 2016, 09:50:35 PM »
I am indexing, yes.

40% in bonds in pretty high, but I'd ask what kind of bonds are you invested in? Is it a broad index or individual?
Well, keep in mind this is in my taxable account, which is only $150K, and it had been earmarked for potentially soon-ish use (down payment on a house) which is why I kept is so conservative.  But the possibility that we'd use it as a down payment source seems to have diminished over the last couple years, so I could stand to make the allocation more aggressive.  It's just VBTLX in this particular account.  So a broad index?

If you fancy having a small portfolio of individual stocks then why don't you take a small amount of your stash and build one yourself? That way you can have all the fun without paying the odious fees.
...
That 1% will quickly turn into 2-3 when you factor in taxes.
...
Everyone wants to own high dividend paying stocks now to compensate for the low yield environment. When everyone is pulling in the same direction is precisely when I like to stay away.

Unless tax laws change, we won't be losing anything to taxes, though, because we pay 0% capital gains tax since we are in the 15% tax bracket.  (hooray for being poor in the eyes of the IRS!) But I could see the dividend yielding stocks being overvalued right now for their dividend paying properties... didn't think of that.  I don't know if I have the time or expertise to do it on my own, but maybe it isn't such a hot idea, after all.

For the portion you move over to dividend stocks, I would just use a dividend ETF to avoid the fees.
I need to look into ETFs and better understand them.  I don't know much about them except that they are like mutual funds, but traded like stocks.  IDK if there is more to it than that.  But now that our Vanguard accounts have all gone brokerage, I think they are an option I previously did not have.

...If you hire this person they're going to care very strongly about keeping you as a client. That means they will care as much about loss avoidance as about 'making your money work harder for you.' That strong preference for loss avoidance, even at the cost of lower expected returns, will likely cost you money.

All depends on the adviser of course. He could be a genius and a gem of a person. But how can you know that?

Also very good points!

Thanks all for your input, it is much appreciated.  And nice that it's all on the same side of sticking with the current set up.  The guys did say in the meeting we were doing really well and if we just kept on doing what we were doing, we'd be fine.  But they also had our financial plan they'd created assuming I was retiring at 55.  I know some people can't wrap their head around someone retiring in their 40s, so I didn't bother pointing it out. 

So, my husband left the meeting hoping it made sense to go with them.  I handle our finances primarily on my own, and I think he really appreciated the way they laid it all out.  I'd actually love for him to be more involved, so it's on me to be proactive about sharing the info in a concise manner.  But we certainly aren't going to shell over almost 7K a year for a little bit of initial good advice, or for some pretty graphs that DH liked.  So it's looking like we'll stick with what we've got.

I will go into our vanguard accounts and make the proper changes to adjust for the not so hot bond selections.  I've got 40% in the taxable account that can be exchanged.  And in the retirement accounts, about 10% across various accounts to swap out.  Actually, a lot of the retirement accounts are target date.  I should break that up into my own index and fund mix, probably.  The fees on the target date funds are higher than total across the more granular components.  Oh!  And the mix in my current fidelity 401K!  Lots to update.  I politely decline the adviser invitation and thank them for their time and suggestions.



catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #11 on: November 03, 2016, 09:55:31 PM »
I would not put 100% in stocks. Mark Hulbert released an article last week about how you don't miss out on that much upside when you diversify into bonds.
I would go at least 20% bonds for an aggressive investor.

GAH!  I just read that article, and now I don't know what to do...  I mean, the all stocks still did out perform the mix, so...maybe I'll still do it?  From the article: "The exception would be if you have many years until retirement or if you actually have the intestinal fortitude to stick with stocks no matter what."  I think I have the latter.  The former is debatable.  FI is 5 years away, RE might not happen for a while after that.  How many years is many?!

2Birds1Stone

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #12 on: November 04, 2016, 06:36:39 AM »
While 60/40 is very conservative at 37 years old I would not go 100% equities.

Maybe 75/25 would better suite you. Bonds can definitely help with the emotional rollercoaster of the next big market crash.

They also allow you to rebalance and reap the reward of tax loss harvesting.


Retire-Canada

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #13 on: November 04, 2016, 07:21:08 AM »
FI is 5 years away, RE might not happen for a while after that.  How many years is many?!

I'm probably 6 - 7 years from FIRE, but at 47 I've still got a 40yr+ investing time horizon. I'm not pulling out all my $$ when I FIRE.  I've also got gov't benefits which kick in 12yrs and then again in 17yrs for a subset of essentially guaranteed income. Personally I am 100% stocks.

All that to say time to retirement isn't your investing time horizon. It's not like you are socking away money for a house that you will need to pull out on a specific date.


GreatLaker

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #14 on: November 04, 2016, 07:45:36 AM »
Hi catccc, You have done really well! I see three themes in your posts: 1) getting your money "working harder" through professional management with an advisor, 2) asset allocation, 3) planning issues around how to structure your accounts and when you can retire.

1) Consider the impact of a 1% fee over the long term. At your age you could live another 50 years. Say you had $100k invested, the advisory fee at 1% is $1000 per year. Over 50 years that adds up to $50,000, or half of the initial investment. How much harder will your money have to work to overcome that? If the market gains 5-8% annually, 1% eats up somewhere between 12.5% and 20% of the annual gains. Jack Bogle said "in investing you get what you don't pay for." I.e. the less fees you pay the more money you have working for you. https://www.vanguard.com/bogle_site/sp20050202.htm

2) Regarding asset allocation, "stocks let you eat well, bonds let you sleep well". Lots of people have 100% stocks, but you need to understand how market work and the level of volatility you will have to endure. Dividend stocks are not bonds. If interest rates rise, bond prices (and bond funds) will drop, but then as older bonds mature or are sold and replaced with newer higher rate bonds, yields will go up again, so it is not all bad news. This paper from Vanguard explains it well: https://personal.vanguard.com/pdf/s807.pdf. Asset allocation is all about what is comfortable for you. Rick Ferri wrote a great book called All About Asset Allocation. Also this Bogleheads link is a good discussion of asset allocation. https://www.bogleheads.org/wiki/Asset_allocation

"How many years is many?!" Markets can deviate from fundamentals for a long time. After the great depression stocks did not get back to pre-crash levels until the 1950s. Stocks hit a peak in the mid 1960s, then crashed in the early 1970s and did not attain the pre-crash highs until early 1980s - 16 years later. That's what you need to withstand if you want to go 100% stocks. Dividends can help, especially if  you get enough to live on and don't have to withdraw principal... but dividends can (and have) been cut during bad economic times. My preference is build a portfolio that can withstand a broad range of economic conditions.

3) As far as planning issues, if you feel the need for a more detailed plan (how much to save, how much you need to retire, what you can spend in retirement, tax efficient savings and withdrawals, etc), consider using a fee only planner that is not paid on commissions or a % of assets. That way the planner works for you and has less reasons to be biased to their own needs.

Spork

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #15 on: November 04, 2016, 07:58:50 AM »
*IF* you do want an advisor... talk to Vanguard.  Their fees are 0.30%. 

And whatever you do... don't go with ML.  They are the most expensive of all the financial management companies.  With $500k invested, you'll be charged $1M more in fees than the average investor.

This is an ad for Personal Capital.  I don't use them.  But it is a nice comparison of various management companies and their fees.  Note that it does not include Vanguard (because Vanguard is cheaper than PC!)

https://www.personalcapital.com/assets/whitepapers/PC_Fees_WhitePaper.pdf

DrF

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #16 on: November 04, 2016, 09:39:38 AM »
Have a chat with Vanguard if you want another set of eyes looking at your nest egg.

https://investor.vanguard.com/financial-advisor/financial-advice

They may charge you for the initial consultation, but they are less likely to bullshit you.

nereo

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #17 on: November 04, 2016, 09:51:25 AM »
catccc - I had a ML financial advisor, and I include that as one of my biggest financial mistakes to date.  ML "financial advisors" have some of the highest fees in the industry, and most fail to beat the broader index funds (mine certainly didn't).  ML's monthly and quarterly statements seem chalk-full of information about your portfolio, but they are cleverly deceptive about the fees invovles for all teh buying and trading of stocks and bonds they do for you.
Mine would talk about "downside risk management" and other complex-sounding terms to get me to continue to stick with him - but after a decade of sub-par returns I gave him the boot and couldn't be happier.

In your position I would have no problem going 100% equities (I'm about 95/5), but it's not for everyone.  It's dirt simple to set up an allocation to your liking with Vanguard or Fidelity buying a broad-based index fund or two and a bond fund.

Avoid ML!!

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #18 on: November 04, 2016, 10:08:09 AM »
Thanks for the continued input, everyone!  I will be calling up vanguard to speak with them about some of this stuff.  Since we hold over 500K with them, we can talk to a financial advisor if we have specific questions for free.

The ML guys' presentation was certainly compelling.  But that bit from John Bogle "in investing you get what you don't pay for..."  that speaks to me. (thanks greatlaker!)  I mean, the way we've gotten to almost $700K as a nearly one income family is basically because of all the things we didn't pay for!

I think I'll still reduce my bond position.  I know you aren't supposed to time the market (ha, how many statements in MMM land start with this...), but I think I'm going to wait until after the election to make any asset allocation changes.  Is that a decent idea?  I feel like no matter what happens with the election, people will freak out.  And I'm not going to be one of them, except to trade some bonds for stocks should stocks go down and bonds act in an opposite direction.  Sell high, buy low, right?  Or just do it now?!

I have spoken with a Personal Capital advisor before.  They didn't really bring anything new to the table for me, so I wasn't at all tempted to engage with them.  (Beyond using their software to check my NW more often than necessary.)

MustacheAndaHalf

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #19 on: November 04, 2016, 10:20:48 AM »
Many people overestimate their ability to face harsh loses.  Consider how much one salesperson convinced you they're an expert on the market - and imagine if lots of people, including friends, were all telling you to save your money and get out.  A financial panic won't have many friends reassuring you, which is where bonds come in - especially near or during retirement.  You could push your bonds down to 30% and still retain a similar portfolio.  Check out "Vanguard nest egg calculator" to see various withdrawal rates, and various bond percentages. 

Consider aiming for low fees in whatever you do.  You have a salesman/rep saying they charge 1%, why not look at Vanguard Dividend Appreciation Index that has just 0.09% annual fees?  I don't invest in this fund, but I'm pointing out alternatives that cost less than using ML.  You could also peek at Vanguard and Fidelity's target retirement funds, to see how they are allocated across international stocks, US stocks, and bonds.  John Bogle also emphasized "costs matter".

Spork

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #20 on: November 04, 2016, 10:41:18 AM »

I have spoken with a Personal Capital advisor before.  They didn't really bring anything new to the table for me, so I wasn't at all tempted to engage with them.  (Beyond using their software to check my NW more often than necessary.)

The link wasn't intended as an endorsement for Personal Capital.... It is just a good comparison of fees throughout the industry (except that it leaves out all the fees that are cheaper than Personal Capital. LOL.)

Mighty-Dollar

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #21 on: November 04, 2016, 03:15:07 PM »
The ML guys' presentation was certainly compelling
You can't rebalance 100% stocks after a market crash.

2Birds1Stone

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #22 on: November 04, 2016, 04:12:57 PM »
*IF* you do want an advisor... talk to Vanguard.  Their fees are 0.30%. 

And whatever you do... don't go with ML.  They are the most expensive of all the financial management companies.  With $500k invested, you'll be charged $1M more in fees than the average investor.

This is an ad for Personal Capital.  I don't use them.  But it is a nice comparison of various management companies and their fees.  Note that it does not include Vanguard (because Vanguard is cheaper than PC!)

https://www.personalcapital.com/assets/whitepapers/PC_Fees_WhitePaper.pdf

Hilarious that they omitted Vanguard which would make them look terrible in comparison so I understand the reasoning.

moof

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #23 on: November 04, 2016, 04:40:36 PM »
If you can't stomach wild gyrations up and DOWN in the market, your 60/40 split probably gives you piece of mind, especially if you are within a few years of pulling the rip cord and retiring.

Over a long term you will not be able to take out as high of equal value withdrawals, but that can be OK too if you plan on it.  Similarly 100% stock people need to avoid going completely spend crazy during upswings, and be ready to tighten their belt a bit and not panic sell during crashes.

If you are a mostly index fund person, there is no reason to pay a manager 1% a year.  If you are not mostly an index fund guy, you probably should be.  Robo-advisers are probably the next logical step up if you want some of the perceived benefits without the high fees.

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #24 on: November 07, 2016, 09:22:51 AM »
I would say I'm pretty good at stomaching market swings - I've never once sold because of a scare.  Actually, I've only once in my life sold because I felt something was at a high, and it was small beans- maybe $3,000- back when I first started investing (14 years ago) and thought I was being smart.  I was being kinda smart, but now I am smarter and just buy and hold.  I have sold anything since then, with the exception of once harvesting losses for tax purposes last year.  Basically I just keep pumping money into my investments regularly, and ride out the ups and downs by leaving everything alone.

I'll have a look at a VG dividend focused fund that mustacheandahalf provided, thanks for that tip.  I do already invest heavily in target date funds, something I'm thinking about changing to save a little on the expense ratio.  A bulk of our retirement investments are in Vanguard's 2045 fund.

Thanks for the clarification on your personal capital post, spork.  That document has lots of good visual presentations of what you stand to lose when you invest with a fee-based 'advisor.'

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #25 on: November 07, 2016, 09:25:02 AM »
The ML guys' presentation was certainly compelling
You can't rebalance 100% stocks after a market crash.

Sorry, Mighty-Dollar... at the risk of (me) sounding stupid, I'm going to ask you to elaborate...  Do you just mean rebalancing to stocks after a crash doesn't make sense because in a crash everything is down?!  Or do you mean something else?

With This Herring

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #26 on: November 07, 2016, 10:14:42 AM »
40% in bonds in pretty high, but I'd ask what kind of bonds are you invested in? Is it a broad index or individual?
Well, keep in mind this is in my taxable account, which is only $150K, and it had been earmarked for potentially soon-ish use (down payment on a house) which is why I kept is so conservative.  But the possibility that we'd use it as a down payment source seems to have diminished over the last couple years, so I could stand to make the allocation more aggressive.  It's just VBTLX in this particular account.  So a broad index?

*snip*

I will go into our vanguard accounts and make the proper changes to adjust for the not so hot bond selections.  I've got 40% in the taxable account that can be exchanged.  And in the retirement accounts, about 10% across various accounts to swap out.  Actually, a lot of the retirement accounts are target date.  I should break that up into my own index and fund mix, probably.  The fees on the target date funds are higher than total across the more granular components.  Oh!  And the mix in my current fidelity 401K!  Lots to update.  I politely decline the adviser invitation and thank them for their time and suggestions.

I don't know if I'm misunderstanding this, but your 60% stocks + 40% bonds allocation is only in one account?  When most people talk about your asset allocation, they are referring to your overall asset allocation (Bogleheads: Asset allocation in multiple accounts).  So, you wouldn't just tell us that your one account is 60-40.  You would look at all of your accounts, retirement and normal brokerage plus any large savings accounts or CDs, and tell us that your overall asset allocation is, say, 80% stocks, 15% bonds, and 5% cash.

Also see Bogleheads: Tax-efficient fund placement, which gives good advice about where to put those stocks, bonds, and maybe cash if you start running into taxes.  :)

NoStacheOhio

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #27 on: November 07, 2016, 10:36:25 AM »
The ML guys' presentation was certainly compelling
You can't rebalance 100% stocks after a market crash.

Sorry, Mighty-Dollar... at the risk of (me) sounding stupid, I'm going to ask you to elaborate...  Do you just mean rebalancing to stocks after a crash doesn't make sense because in a crash everything is down?!  Or do you mean something else?

If you only hold equities, you can't rebalance because there's nothing else in the account. You would need to add new money to buy shares at the lower price, which most people call "timing the market."

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #28 on: November 07, 2016, 10:38:10 AM »

I don't know if I'm misunderstanding this, but your 60% stocks + 40% bonds allocation is only in one account?  When most people talk about your asset allocation, they are referring to your overall asset allocation.


I get that people typically talk overall asset allocation, except that I am asking about making changes specifically in this account, which is a 60-40 split.  Which is why I specified that this was in one account, to clarify that I was talking 'not-overall.'  The reason is because the taxable investments were earmarked with a purpose at one point.  We go back and forth on the plan for this money, so I treat it differently than I do other assets, because of the likelihood (although that likelihood is diminishing... maybe?) that it will be used differently.

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #29 on: November 07, 2016, 10:44:35 AM »
The ML guys' presentation was certainly compelling
You can't rebalance 100% stocks after a market crash.

Sorry, Mighty-Dollar... at the risk of (me) sounding stupid, I'm going to ask you to elaborate...  Do you just mean rebalancing to stocks after a crash doesn't make sense because in a crash everything is down?!  Or do you mean something else?

If you only hold equities, you can't rebalance because there's nothing else in the account. You would need to add new money to buy shares at the lower price, which most people call "timing the market."

Ah, that makes sense.  IDK why, but I was somehow interpreting rebalancing as changing my "asset allocation" (in quotes now since someone was giving me a hard time about talking asset allocation in a single account) from 60/40 to 100/0.  Yes, got it, no rebalancing opportunities when you are already 100% in something!

nereo

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #30 on: November 07, 2016, 10:52:05 AM »

Ah, that makes sense.  IDK why, but I was somehow interpreting rebalancing as changing my "asset allocation" (in quotes now since someone was giving me a hard time about talking asset allocation in a single account) from 60/40 to 100/0.  Yes, got it, no rebalancing opportunities when you are already 100% in something!

Saying you can't rebalance if you are 100% equities is false. 
What you can't do is rebalance if you have just one single holding (e.g. one single stock). 
If you are 100% stocks but (for example) 20% US small cap, 40% US large cap, 20% foreign emerging markets and 20% foreign large cap you can (and should!) rebalance this AA periodically.

Also, many index funds are automatically rebalanced, though some are not.

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #31 on: November 07, 2016, 10:56:29 AM »


Saying you can't rebalance if you are 100% equities is false. 
What you can't do is rebalance if you have just one single holding (e.g. one single stock). 
If you are 100% stocks but (for example) 20% US small cap, 40% US large cap, 20% foreign emerging markets and 20% foreign large cap you can (and should!) rebalance this AA periodically.

Also, many index funds are automatically rebalanced, though some are not.

True, 100% in stocks can still mean more at a granular level.  thanks for pointing this out!

With This Herring

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #32 on: November 07, 2016, 12:50:46 PM »

I don't know if I'm misunderstanding this, but your 60% stocks + 40% bonds allocation is only in one account?  When most people talk about your asset allocation, they are referring to your overall asset allocation.


I get that people typically talk overall asset allocation, except that I am asking about making changes specifically in this account, which is a 60-40 split.  Which is why I specified that this was in one account, to clarify that I was talking 'not-overall.'  The reason is because the taxable investments were earmarked with a purpose at one point.  We go back and forth on the plan for this money, so I treat it differently than I do other assets, because of the likelihood (although that likelihood is diminishing... maybe?) that it will be used differently.

*snip*
Ah, that makes sense.  IDK why, but I was somehow interpreting rebalancing as changing my "asset allocation" (in quotes now since someone was giving me a hard time about talking asset allocation in a single account) from 60/40 to 100/0.  Yes, got it, no rebalancing opportunities when you are already 100% in something!

I wasn't trying to give you a hard time.  :(     I was just trying to clarify.  You said "one account" (which is fine!), but everyone else with the advice of "oh, that looks too conservative, you need more stocks" is acting like you were referring to your entire portfolio.  I didn't know if I had just missed something else you said, misinterpreted what you said, or if other people were missing that you were referring to just the one account.

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #33 on: November 07, 2016, 01:54:56 PM »
I wasn't trying to give you a hard time.  :(     I was just trying to clarify.  You said "one account" (which is fine!), but everyone else with the advice of "oh, that looks too conservative, you need more stocks" is acting like you were referring to your entire portfolio.  I didn't know if I had just missed something else you said, misinterpreted what you said, or if other people were missing that you were referring to just the one account.

Sorry, that was my error to jump to that conclusion.  I had just gotten out of a slightly contentious meeting at work that left me in a feisty form, I think.  Yeah, I think some people just missed the detail that it was a single account as I got multiple responses that 60/40 was rather conservative.  I mean, not to say that my actual overall AA isn't rather conservative, I hold a little too much cash, too.  It's a good reminder to examine my AA overall and make sure it lines up with my investment plan.

NoStacheOhio

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #34 on: November 08, 2016, 07:23:39 AM »
I wasn't trying to give you a hard time.  :(     I was just trying to clarify.  You said "one account" (which is fine!), but everyone else with the advice of "oh, that looks too conservative, you need more stocks" is acting like you were referring to your entire portfolio.  I didn't know if I had just missed something else you said, misinterpreted what you said, or if other people were missing that you were referring to just the one account.

Sorry, that was my error to jump to that conclusion.  I had just gotten out of a slightly contentious meeting at work that left me in a feisty form, I think.  Yeah, I think some people just missed the detail that it was a single account as I got multiple responses that 60/40 was rather conservative.  I mean, not to say that my actual overall AA isn't rather conservative, I hold a little too much cash, too.  It's a good reminder to examine my AA overall and make sure it lines up with my investment plan.

I think the first decision you need to make is what you want the money in this account to be, from there, you can determine a reasonable allocation for your needs.

Car Jack

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #35 on: November 08, 2016, 08:26:32 AM »
If you want to learn about ETFs, check out the bogleheads wiki.  I'll give you the short description.  ETFs work just like stocks, only better.  They buy and sell when you push the buy/sell button.  This is different from mutual funds which tend to buy/sell at the end of the day at NAV.  You want to buy/sell ETFs only when the market is open.  Look at the bid/ask prices.  During the day, they're almost the same, meaning that you don't have to pay a huge premium for off hours trading.  If you buy/sell/hold them in a broker who offers ntf (no transaction fee) for their in house ETFs, then you are paying only the ER.  The ER (expense ratio) tends to follow the Admiral fund costs of Vanguard, thus you can literally buy one share of an ETF and the ER is the same as a fund that Vanguard makes you buy at least $10k of to attain that low fee.

TDAmeritrade has some ntf Vanguard ETFs.  I have my taxable account at Schwab because their ntf ETFs are in my opinion the best there are.  SCHB is their US broadmarket stock fund and has lower costs than anything offered by Vanguard.  They have good international and bond ETFs as well.  I do also have accounts at Fidelity and Vanguard but only for my tax advantaged accounts.

With regard to going with a financial clown like ML, my definition of Wealth Management is "Wealth Transfer".  Their goal (really) is to transfer as much of your wealth into their pocket.  They do this with a staggering amount of funds, stocks, illiquid instruments invested in things like private real estate holdings and private equity investments where you're stuck for years.  The liquid investments?  They'll swap them around periodically to keep you as confused as possible while collecting more fees in the meantime.  Their explanations are typically phrases that would fit appropriately in a Dilbert balloon.  I am not a fan of these thieves and expect that as the fiduciary rules take effect, their numbers are going to dwindle because they'll no longer be able to line their pockets by baffling and confusing their clients while robbing them blind.

Oh.....60/40 is fine.......70/30 is fine.  Staying the course is more important than the actual numbers here.  Bonds aren't there to make you more money....they're there to reduce volatility.

spokey doke

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #36 on: November 08, 2016, 08:39:39 AM »
I just wanted to chime in here on how you were tempted by a (at least partially) compelling presentation by the ML advisors...as I just got (another) offer from my Fidelity advisor to meet and discuss my investments, and I just declined (again) as every time I have a conversation with him, I come away feeling that I am missing out on something...so then I do some investigating, ask questions which are never answered to my satisfaction, then stress out about what to do.

This was not the case early on when we really weren't on track, but now that we are, it seems to make the most sense to tune out that particular source of noise.

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #37 on: November 08, 2016, 09:11:48 AM »
40% in bonds in pretty high, but I'd ask what kind of bonds are you invested in? Is it a broad index or individual?
Well, keep in mind this is in my taxable account, which is only $150K, and it had been earmarked for potentially soon-ish use (down payment on a house) which is why I kept is so conservative.  But the possibility that we'd use it as a down payment source seems to have diminished over the last couple years, so I could stand to make the allocation more aggressive.  It's just VBTLX in this particular account.  So a broad index?

Then 40% is NOT your bond allocation because it is earmarked for a specific near term'ish need so preservation of capital is most important....high yield cash account such as CapOne might actually be a better place for it.  Subtract out the "house" fund and then determine your AA.

Separately, if you do want to keep it in bonds then it would better to exchange the bonds in the taxable account to equities and vice-versa in the non-taxable so you are not paying any taxes on the interest (or hits to MAGI/AGI/EITC, etc).  When it is time to buy the house just reverse out the exchanges. 

catccc

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Re: Met with an ML financial advisor, he suggests I go 100% equities
« Reply #38 on: November 09, 2016, 10:47:50 AM »
Then 40% is NOT your bond allocation because it is earmarked for a specific near term'ish need so preservation of capital is most important....high yield cash account such as CapOne might actually be a better place for it.  Subtract out the "house" fund and then determine your AA.

It's tough to call it near term ish when we've been home shopping for going on 8 years now.  It was about 180K all in HYS until 2014, about 6 years into said home search.  At that point I was like, wth, this needs to be doing more.  So I moved maybe $130K of it.  I'm glad I moved it.  I'll move it out later if I need to.  I'm going to leave it as is since I'm still not sure what the future holds.  And we still have another 40-50K in cash in what I formally call the house fund.  IDK what we are going to do, so I have to remain flexible.  It's worked so far because we haven't made any big moves...