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Old 03-31-2012, 09:07 PM   #21
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There is nothing wrong with keeping half in say, VAnguard and half in Fidelity.
If the market moves sideways, or the market is dull, you may not require a lot of rebalancing.

I would advice "flexibility" in the % of withdrawal. I do 2%, 3% or 3.5%
depending on the market cycle.

I also would keep a total of 6 months in living expenses in a easily access
fund, cash, or CD for emergency situations.
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Old 04-01-2012, 04:50 AM   #22
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I would advice "flexibility" in the % of withdrawal. I do 2%, 3% or 3.5%
depending on the market cycle.

I also would keep a total of 6 months in livingexpenses in a easily access
fund, cash, or CD for emergency situations.
Thanks Birchwood

With the loss of the mortgage payments, the pensions would cover needs and basic entertainment, and a 2% draw would be the real fun stuff, which I could live without (RV travelling). Except for emergencies, the flexibility should be downward to a lesser draw. Anything more should reinvested for growth.

The best laid plans... *grin*

I was considering an 60-80k energency fund: but where to put it for best returns?

My biggest problem at the moment is that DW and I are at odds about whether to stay with an advisor her parents used: DW has helped her Mom with finances for 12 years, and is nervous about investing a large sum without an adviser. It's the typical fee-based setup with 12b-1 commissions.
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Old 04-01-2012, 07:27 AM   #23
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Back to the multiple accounts question, DW has 401Ks at Fidelity and our other accounts are at VG (and I have a TSP). We don't plan to consolidate. It is probably paranoid but I worry about some glitch tying up our entire portfolio - maybe identity theft like ERD mentioned.
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Old 04-01-2012, 08:18 AM   #24
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My biggest problem at the moment is that DW and I are at odds about whether to stay with an advisor her parents used: DW has helped her Mom with finances for 12 years, and is nervous about investing a large sum without an adviser. It's the typical fee-based setup with 12b-1 commissions.
I have used VGs financial planning service numerous times and they are pretty good (though there are some things about their service that bugs me), but what they recommend is usually no-load, no 12b-1 and typically very low ERs. Above a certain amount of investable funds the service is free, at worst they charge $500 IIRC. Might be worth checking out if it would give your DW peace of mind.
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Old 04-01-2012, 10:35 AM   #25
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Multiple vendors and accounts have an advantage when dealing with early redemption fees. It would be rare to make use of this, but here is a "fer-instance":

In your Fidelity account you buy an International Index fund with a 2% early redemption fee for the first 90 days. You also have an international index fund in your Vanguard account bought 90 days ago. A month later you want to sell some international (pick any reason you want: rebalancing, pay off mortgage, go on cruise, bad feeling about Greece, whatever), so you sell the International in the Vanguard account because there is no longer an early redemption fee with it.

Another example: Foreign market crashes 5% in one day because Mubarak goes to jail. You exchange into foreign stock mutual fund. The next day, foreign market recovers 5%. You want to sell those new shares of the foreign stock fund, but it has an early redemption fee, so you sell shares held at another vendor instead. Result: Quick one-day gain of 5%.

So the idea is that your different vendors do not know that you are trading mutual funds among all of them while avoiding restrictions and early redemption fees. Of course, if you are doing this, maybe you want to use ETFs instead?
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Old 04-01-2012, 11:02 AM   #26
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1. Is there any value, in your opinion, to diversifying between two different fund families: such as opening accounts with both Vanguard and Fidelity, then running similar portfolios with both? A risk reduction?
....
1. For me, I've spent some time to consolidate as I get serious/closer to FIRE, still 5 - 7 years away (birthday soon) is my guess, then semi-ER as a landlord. Some things I considered:
a. I did this because I had 5 - 6 accounts and I'm down to 2 (Vanguard and Fido).
b. Account benefits with Vanguard, moving from Voyager to Voyager Select and closing in on Flagship services. Services to include free financial plan and reduced fees.
c. Ease for DW for future consideration.
d. Easier to do math on Asset Allocation (i'm getting lazy)
e. Risk of account lock/access delays

YMMV - no real particular order.
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Old 04-01-2012, 12:02 PM   #27
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...(snip)...
I was considering an 60-80k energency fund: but where to put it for best returns?

My biggest problem at the moment is that DW and I are at odds about whether to stay with an advisor her parents used: DW has helped her Mom with finances for 12 years, and is nervous about investing a large sum without an adviser. It's the typical fee-based setup with 12b-1 commissions.
Right now cash is earning a negative real rate of return. So I'd minimize that and maybe put some of the emergency fund into a short term bond fund like, for instance, VBIRX or VFSUX (ST index or ST investment grade). Both have around a 2 year duration. If rates go up rather suddenly you will loose a bit a first but over 2 years this should work out fine.

Eventually cash will yield a better real return and you can change that strategy. Maybe CD's or even Prime Money Market.

Regarding the advisor, maybe you should compute your annual ER (expense ratio) using them. If it's 1% and you are living on 4% of the portfolio, that is quite a hit. With Vanguard index funds you can get it down to 0.2% relatively easily. That will give you an additional 0.8% to spend every year. Maybe this line of reasoning will help with your DW. She may also be more reception to a low ER fund like Lifestrategy or Target Retirement offerings from Vanguard. Maybe check out the balanced fund offerings there.
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Old 04-01-2012, 12:46 PM   #28
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@LOL!

That's a bit too complicated for me at this stage *grin*. Mostly looking at simple indexing - a lazy portfolio - to keep costs down. Once I get things straightened out, I can learn more in-depth strategies and play around - if my wife will let me.

BTW, I started Bogles boo last night, as you recommended. The second chapter is getting very informative, with P/E ratios, etc. It's appreciated.
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Old 04-01-2012, 12:49 PM   #29
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Eventually cash will yield a better real return and you can change that strategy. Maybe CD's or even Prime Money Market.

Regarding the advisor, maybe you should compute your annual ER (expense ratio) using them. If it's 1% and you are living on 4% of the portfolio, that is quite a hit. With Vanguard index funds you can get it down to 0.2% relatively easily. That will give you an additional 0.8% to spend every year. Maybe this line of reasoning will help with your DW. She may also be more reception to a low ER fund like Lifestrategy or Target Retirement offerings from Vanguard. Maybe check out the balanced fund offerings there.
Thanks - I aprreciate the good advice. I've gone over the old accounts, and most of what he's selling has .75 to1.5 ERs. He also gets 1% based on the assets. As I've mentioned elsewhere, he's been involved in three FINRA disputes. I'm not sure of the severity of such disputes, but several people have advised it's something to be cautious about.
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Old 04-01-2012, 03:50 PM   #30
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Thanks - I aprreciate the good advice. I've gone over the old accounts, and most of what he's selling has .75 to1.5 ERs. He also gets 1% based on the assets. As I've mentioned elsewhere, he's been involved in three FINRA disputes. I'm not sure of the severity of such disputes, but several people have advised it's something to be cautious about.
This is a jaw dropping no-brainer. Sounds like a total ER = 2%. I'd personally get my assets out of his clutches as quick as possible.
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Old 04-01-2012, 04:43 PM   #31
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Right now cash is earning a negative real rate of return. So I'd minimize that and maybe put some of the emergency fund into a short term bond fund like, for instance, VBIRX or VFSUX (ST index or ST investment grade). Both have around a 2 year duration. If rates go up rather suddenly you will loose a bit a first but over 2 years this should work out fine.
Eventually cash will yield a better real return and you can change that strategy. Maybe CD's or even Prime Money Market.
I'm not a fully-versed student of the markets or of investing, but I can only think of one period of modern history when cash had a positive real rate of return: the Great Depression.

So I'd never invest in cash for a rate of return. I'd invest in cash for liquidity.
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Old 04-01-2012, 04:57 PM   #32
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I'm not a fully-versed student of the markets or of investing, but I can only think of one period of modern history when cash had a positive real rate of return: the Great Depression.

So I'd never invest in cash for a rate of return. I'd invest in cash for liquidity.
I think you are right that the first job of cash is liquidity. If one is building up an emergency fund and stashing 1 year of spending in it I'd think it would be nice to get some decent return on it. I personally keep about 4 months in cash at the moment, mostly in a 0.3% interest rewards checking account (first $10k at 2.5% interest). The rest of my "liquid" money is in ST Investment Grade. My short term CD strategy has played out unfortunately (we could always do what-ifs) ... I did not anticipate such low rates for such a long period.

Right now inflation is running maybe 2.5% while cash in the form of Prime Money Market (Vanguard) is almost 0%. Back in 2007 Prime MM was paying out 5% or so, a bit ahead of inflation then, so not as painful to watch.
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Old 04-04-2012, 04:52 AM   #33
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Same thing I've notice: looking at the Blackrock MMs the old FA has been using, they haven't had a return for two years, but it appears he just used them for temporary holding until there was enough for another investment: mostly annuities at this point (MIL was in her mid-eighties and in special care). It seems to me I could get a better return from the credit union's savings account - on the taxable accounts.

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I'd invest in cash for liquidity.
Yes, but I'm getting the impression I was thinking about too much liquidity. Asset allocation is the big thing on my mind at the moment: specifically, if I invest in - for a simple example - an index fund which is based on the entire market (equity and bonds) but want to draw 20K a year to supplement pensions, how should I draw that money each year? Dividends to a money market?

I'm learning theory like crazy lately, but haven't hit the practical nuts and bolts education, and I have about $120K taxable funds (disbursed in the past week) sitting in an 'investment account' MM at the moment. Even if I go ahead and use 68K to pay off the mortgage, I need to get something established soon.
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Old 04-04-2012, 01:37 PM   #34
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1. Is there any value, in your opinion, to diversifying between two different fund families: such as opening accounts with both Vanguard and Fidelity, then running similar portfolios with both? A risk reduction?

2. Just checking to see if I have a handle on basic reallocation: suppose I plan to draw 30k a year from a 1M portfolio. Keep 30k in a checking/MM and replenish yearly from stocks or bonds. About a 60/40 split between equities and bonds, drawing from bonds when stocks are low, through the bear markets, and reallocating from stocks to bonds when stocks are high?

I know my questions are jumping around, but I'm just trying to fill in the blanks lol.
I say yes, but it's kind of an "Armageddon" situation. Think of the very worst thing that could ever happen...let's say you have all your money in FIDO...and the CEO is found embezzling and running a ponzi scheme a-la Bernie Madoff...and they've been falsifying statements to customers (VERY unlikely). Your money may ALL be gone. If you split, you'd have half of it left.

The downside? Your doubling your chances that a company in which you have assets will suffer such an event...as you have it in TWO places rather than ONE.

I will keep mine together....but I do understand some people wanting to follow what you mention.

As far as AA, you are distinguishing between where you withdraw from and where you reallocate to...which I think is a bit overcomplicating it. The idea is that you withdraw at some point (makes no difference from where), and immediately after that, you rebalance to your target AA.

I suppose you could use your withdraws to accomplish your rebalancing if you like...there's nothing wrong with that...just remember your goal is to end up with a given AA.
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Old 04-04-2012, 06:21 PM   #35
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Thanks Dave. You've cleared up the issue on the withdrawal.
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Old 04-04-2012, 08:11 PM   #36
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I say yes, but it's kind of an "Armageddon" situation. Think of the very worst thing that could ever happen...let's say you have all your money in FIDO...and the CEO is found embezzling and running a ponzi scheme a-la Bernie Madoff...and they've been falsifying statements to customers (VERY unlikely). Your money may ALL be gone. If you split, you'd have half of it left.
The "good" news is that SIPC would insure some of it. What's that these days, $500K per account, or total per person at that brokerage?
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