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Advisor Performance versus DIY hands off ETF or MF
Old 08-01-2015, 01:07 PM   #1
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Advisor Performance versus DIY hands off ETF or MF

In a previous thread we got off subject of steak dinner sales. We were discussing the merits of financial management with a bank wealth advisor, a fiduciary advisor, a slimy licensed insurance salesman that states they are fiduciary, CPA/investment manager turned steak dinner salesman, and those suggesting VG Wellesley fund for a perfect balanced portfolio.

Let me restate my investing history in short order;
    • 18 yo-buys first Bankers Acceptance note from a Savings and Loan 19% interest, and collected all funds back before it went into default whew! Lesson learned, risk/reward, got lucky
    • 22 yo-starts 401K investing the max for the next 39 years-worked well except having to give 1/2 to first wife at age 38 (bitter story)
    • 38 yo-Get involved with Dean Whitter Investments, actually had some great 3rd party investment manager, paid fees to both, but returns were very high over 20%/yr for a few years
    • 40 yo-Fire Dean Whitter prior to market downturn, invest on own DYI using mutual funds, not bad, not great
    • 43 yo-try using Louis Nevallier weekly stock buy and stop loss method-got killed by sweeps of stop losses
    • 45 yo-new wife, owns business, need fancy accountant, hire CPA firm to manage wealth and taxes-does OK for 10 years then looses 1/2 in the downturn, then CPA starts Madrona fund AFTER the crash in 2009, proceeds to loose even more than lost in the 2008 down-we run
    • 57 yo-Steak Dinner-RBC bank does OK with 3rd party managers but total fees >2%, but sells DW Jackson Annuity under pressure, and put 50K into a junk rated Citigroup bond like derivitive Performance OK but underperformed market
    • 58 yo-Love those steak dinners, Absolute Return Solutions, 6 months of weekly sales pitch in the form of guiding us to sell us annuities-move our money, wake up, and run away-only after selling the annuity for a 7% loss on top of a negative performance, tipped off by their poor understanding of the Citigroup bond which I would not let them sell. (Only Citigroup has the right to buy, and at what price they set)
    • 59 yo-Found a very mature 75 yo advisor using TD who used to managed an Edward Jones office. Very aggressive, active mutual fund trading, based on real performance, he beat the market after fees, but fees were 1.2% on the first 1M plus average expenses on the funds around .8%, Fixed income balance performance was very poor with MF. We were not comfortable with the small number of clients and AUM, but now we may find the grass is not greener with larger AUM firms.
    • 60 yo-decided we needed a bond ladder, and fresh look at balanced performance, ended up going in depth with Creative Planning-Peter Mallouk's company, but local rep, and looked at Badgley Phelps a local high NetW manager, along with Washington Trust Bank, primarily a wealth manager office in western Washington, but a bank from the other side of the state.
So....we ended up with WTB. They offered (but have yet to support) lawyers for Estate Planning and review of wills, trusts, and directives, Real active money managers, access to many financial services and expertise. Nice sales pitch, they botched the transfer of our accounts in June, charge us a fee for June, lost a good chunk of change in the transition with investment performance, and advised us to liquidate our Citigroup derivative bond.

No one would provide any performance data, but Creative Planning provided us an exact asset allocation plan with ETF's and MF they would have invested in. So I have built two model portfolios, and our last portfolio from June starting values in July 1 to track could of versus should of, versus what is.

Creative Planning has a model that tries to balance risk very similar to WTB, however, they use lower cost ETF's, 3 moderate cost MF. WTB has 66 positions, with 1/3 in stock equities, the rest in MF, no ETF's. Our TD account had a high allocation in Nasdaq related stocks, and large cap through MF and high sector weighting in Health, which lead to very strong returns last year and this year. Primarily in 13 funds.

So judging from performance alone, net of fees, our old TD portfolio, would have been up 1.4%, Creative Planning down 0.5%, and WTB down .23%.

Since we have not gotten any other benefits from the bank to date, we can only judge on performance, and for one month out, it would appear we made a poor move.

Now for this same period VG VWIAX is up 1.15%, but YTD up to July 1, it was down .4%. We have <.25M in another account solely in a Vanguard Target Date 2045 fund. YTD as of June up 3.62%, July 1 to present up another 0.9%.

Since it is very poor to judge a performance over 30 days, I question the results, but it would appear we should have either stayed with the winner at TD, or moved to either of the two Vanguard funds. Can others chime in on this to confirm any similar history and where they are now comfortable in retirement?
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Old 08-01-2015, 01:20 PM   #2
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Looking at your recent investment history, do you think you have the right temperament for DIY investing?
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Old 08-01-2015, 01:24 PM   #3
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Thanks for your feed back, I can see your opinion is really a value, are you a MD? I will ask that this thread be deleted.
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Old 08-01-2015, 01:30 PM   #4
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Originally Posted by Happyras View Post
In a previous thread we got off subject of steak dinner sales. We were discussing the merits of financial management with a bank wealth advisor, a fiduciary advisor, a slimy licensed insurance salesman that states they are fiduciary, CPA/investment manager turned steak dinner salesman, and those suggesting VG Wellesley fund for a perfect balanced portfolio.

Let me restate my investing history in short order;
    • 18 yo-buys first Bankers Acceptance note from a Savings and Loan 19% interest, and collected all funds back before it went into default whew! Lesson learned, risk/reward, got lucky
    • 22 yo-starts 401K investing the max for the next 39 years-worked well except having to give 1/2 to first wife at age 38 (bitter story)
    • 38 yo-Get involved with Dean Whitter Investments, actually had some great 3rd party investment manager, paid fees to both, but returns were very high over 20%/yr for a few years
    • 40 yo-Fire Dean Whitter prior to market downturn, invest on own DYI using mutual funds, not bad, not great
    • 43 yo-try using Louis Nevallier weekly stock buy and stop loss method-got killed by sweeps of stop losses
    • 45 yo-new wife, owns business, need fancy accountant, hire CPA firm to manage wealth and taxes-does OK for 10 years then looses 1/2 in the downturn, then CPA starts Madrona fund AFTER the crash in 2009, proceeds to loose even more than lost in the 2008 down-we run
    • 57 yo-Steak Dinner-RBC bank does OK with 3rd party managers but total fees >2%, but sells DW Jackson Annuity under pressure, and put 50K into a junk rated Citigroup bond like derivitive Performance OK but underperformed market
    • 58 yo-Love those steak dinners, Absolute Return Solutions, 6 months of weekly sales pitch in the form of guiding us to sell us annuities-move our money, wake up, and run away-only after selling the annuity for a 7% loss on top of a negative performance, tipped off by their poor understanding of the Citigroup bond which I would not let them sell. (Only Citigroup has the right to buy, and at what price they set)
    • 59 yo-Found a very mature 75 yo advisor using TD who used to managed an Edward Jones office. Very aggressive, active mutual fund trading, based on real performance, he beat the market after fees, but fees were 1.2% on the first 1M plus average expenses on the funds around .8%, Fixed income balance performance was very poor with MF. We were not comfortable with the small number of clients and AUM, but now we may find the grass is not greener with larger AUM firms.
    • 60 yo-decided we needed a bond ladder, and fresh look at balanced performance, ended up going in depth with Creative Planning-Peter Mallouk's company, but local rep, and looked at Badgley Phelps a local high NetW manager, along with Washington Trust Bank, primarily a wealth manager office in western Washington, but a bank from the other side of the state.
So....we ended up with WTB. They offered (but have yet to support) lawyers for Estate Planning and review of wills, trusts, and directives, Real active money managers, access to many financial services and expertise. Nice sales pitch, they botched the transfer of our accounts in June, charge us a fee for June, lost a good chunk of change in the transition with investment performance, and advised us to liquidate our Citigroup derivative bond.

No one would provide any performance data, but Creative Planning provided us an exact asset allocation plan with ETF's and MF they would have invested in. So I have built two model portfolios, and our last portfolio from June starting values in July 1 to track could of versus should of, versus what is.

Creative Planning has a model that tries to balance risk very similar to WTB, however, they use lower cost ETF's, 3 moderate cost MF. WTB has 66 positions, with 1/3 in stock equities, the rest in MF, no ETF's. Our TD account had a high allocation in Nasdaq related stocks, and large cap through MF and high sector weighting in Health, which lead to very strong returns last year and this year. Primarily in 13 funds.

So judging from performance alone, net of fees, our old TD portfolio, would have been up 1.4%, Creative Planning down 0.5%, and WTB down .23%.

Since we have not gotten any other benefits from the bank to date, we can only judge on performance, and for one month out, it would appear we made a poor move.

Now for this same period VG VWIAX is up 1.15%, but YTD up to July 1, it was down .4%. We have <.25M in another account solely in a Vanguard Target Date 2045 fund. YTD as of June up 3.62%, July 1 to present up another 0.9%.

Since it is very poor to judge a performance over 30 days, I question the results, but it would appear we should have either stayed with the winner at TD, or moved to either of the two Vanguard funds. Can others chime in on this to confirm any similar history and where they are now comfortable in retirement?
I cannot tell what your goal here is. Could you state clearly how you think this board can help, and what help toward what goal you are hoping for?

Ha
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Old 08-01-2015, 01:31 PM   #5
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OK, my question above rephrased.
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Old 08-01-2015, 01:38 PM   #6
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Interesting read Happyras. I won't go too deep into my investing history other than to say that my first stock pick was in 1984 when I opened my first of many IRAs at Charles Schwab. Bought 400 shares of Savin Copiers at $5/share. Liquidated it 5 years later for $185.00

Long road from there to my current self managed 3 Fund portfolio. I love no longer worrying about beating the market and just taking what the market gives. I have no doubt you could easily manage your own 3 Fund portfolio at any asset allocation that you're comfortable with. I think you'd benefit tremendously from distancing yourself from these steak dinner salesmen, I mean "wealth managers".
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Old 08-01-2015, 01:41 PM   #7
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Originally Posted by Happyras View Post
In a previous thread we got off subject of steak dinner sales. We were discussing the merits of financial management with a bank wealth advisor, a fiduciary advisor, a slimy licensed insurance salesman that states they are fiduciary, CPA/investment manager turned steak dinner salesman, and those suggesting VG Wellesley fund for a perfect balanced portfolio.

Let me restate my investing history in short order;
    • 18 yo-buys first Bankers Acceptance note from a Savings and Loan 19% interest, and collected all funds back before it went into default whew! Lesson learned, risk/reward, got lucky
    • 22 yo-starts 401K investing the max for the next 39 years-worked well except having to give 1/2 to first wife at age 38 (bitter story)
    • 38 yo-Get involved with Dean Whitter Investments, actually had some great 3rd party investment manager, paid fees to both, but returns were very high over 20%/yr for a few years
    • 40 yo-Fire Dean Whitter prior to market downturn, invest on own DYI using mutual funds, not bad, not great
    • 43 yo-try using Louis Nevallier weekly stock buy and stop loss method-got killed by sweeps of stop losses
    • 45 yo-new wife, owns business, need fancy accountant, hire CPA firm to manage wealth and taxes-does OK for 10 years then looses 1/2 in the downturn, then CPA starts Madrona fund AFTER the crash in 2009, proceeds to loose even more than lost in the 2008 down-we run
    • 57 yo-Steak Dinner-RBC bank does OK with 3rd party managers but total fees >2%, but sells DW Jackson Annuity under pressure, and put 50K into a junk rated Citigroup bond like derivitive Performance OK but underperformed market
    • 58 yo-Love those steak dinners, Absolute Return Solutions, 6 months of weekly sales pitch in the form of guiding us to sell us annuities-move our money, wake up, and run away-only after selling the annuity for a 7% loss on top of a negative performance, tipped off by their poor understanding of the Citigroup bond which I would not let them sell. (Only Citigroup has the right to buy, and at what price they set)
    • 59 yo-Found a very mature 75 yo advisor using TD who used to managed an Edward Jones office. Very aggressive, active mutual fund trading, based on real performance, he beat the market after fees, but fees were 1.2% on the first 1M plus average expenses on the funds around .8%, Fixed income balance performance was very poor with MF. We were not comfortable with the small number of clients and AUM, but now we may find the grass is not greener with larger AUM firms.
    • 60 yo-decided we needed a bond ladder, and fresh look at balanced performance, ended up going in depth with Creative Planning-Peter Mallouk's company, but local rep, and looked at Badgley Phelps a local high NetW manager, along with Washington Trust Bank, primarily a wealth manager office in western Washington, but a bank from the other side of the state.
So....we ended up with WTB. They offered (but have yet to support) lawyers for Estate Planning and review of wills, trusts, and directives, Real active money managers, access to many financial services and expertise. Nice sales pitch, they botched the transfer of our accounts in June, charge us a fee for June, lost a good chunk of change in the transition with investment performance, and advised us to liquidate our Citigroup derivative bond.

No one would provide any performance data, but Creative Planning provided us an exact asset allocation plan with ETF's and MF they would have invested in. So I have built two model portfolios, and our last portfolio from June starting values in July 1 to track could of versus should of, versus what is.

Creative Planning has a model that tries to balance risk very similar to WTB, however, they use lower cost ETF's, 3 moderate cost MF. WTB has 66 positions, with 1/3 in stock equities, the rest in MF, no ETF's. Our TD account had a high allocation in Nasdaq related stocks, and large cap through MF and high sector weighting in Health, which lead to very strong returns last year and this year. Primarily in 13 funds.

So judging from performance alone, net of fees, our old TD portfolio, would have been up 1.4%, Creative Planning down 0.5%, and WTB down .23%.

Since we have not gotten any other benefits from the bank to date, we can only judge on performance, and for one month out, it would appear we made a poor move.

Now for this same period VG VWIAX is up 1.15%, but YTD up to July 1, it was down .4%. We have <.25M in another account solely in a Vanguard Target Date 2045 fund. YTD as of June up 3.62%, July 1 to present up another 0.9%.

Since it is very poor to judge a performance over 30 days, I question the results, but it would appear we should have either stayed with the winner at TD, or moved to either of the two Vanguard funds. Can others chime in on this to confirm any similar history and where they are now comfortable in retirement?
Here ya go:

The Three Fund Portfolio - Bogleheads
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Old 08-01-2015, 02:40 PM   #8
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Looking at your recent investment history, do you think you have the right temperament for DIY investing?
No, and this is why my DW has mandated that we use a money manger of some type. We chose a low cost approach to this with WTB, which is not really feeling like a good fit, not just from performance.

Even Fidelity wanted to make a buck to sell us on Blackrock funds with commodity exposure rather than using the Bogle head 3 fund method. Obvious not a true Fiduciary to be found at Fidelity.

Our objective remains balanced growth performance going forward. My question to the forum was answered by a few. Similar history, where did you end up, are you comfortable with it. It looks like a consensus is the three fund portfolio. All the rest of the investment world wants you to invest in multiple funds, with conflicting objectives to balance risk, get 0 performance, and pay them a fee.
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Old 08-01-2015, 03:00 PM   #9
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Quit performance chasing.

Wellesley has a stellar past record. I wouldn't use it as a benchmark. Broad index funds would be more fair.

My mom had a traditional brokerage account. They charged her a 3% management fee. They picked individual stocks, one set domestic and one set developed country international. Their performance was worse than very simple total market index funds. Very hard not to be bad when you're taking 3% off the top.


I have her in this now:

25% FUSVX S&P 500 index
25% FSEVX Total US ex-S&P 500
25% FSDGX Total World ex-U.S.
25% FSITX U.S. bond index

You can get even simpler using a total U.S. index, but this setup gives us a mid/small cap tilt that has done well for many years.

Every active portfolio has some weighting that does not match whatever you want to benchmark it with. There can easily be years of underperformance or overperformance. That's normal, not a bad thing. If my mom only compares her equity performance with the S&P 500 (actually, she's more likely to follow the Dow), it's likely that if the S&P 500 is doing very well, her equity portfolio will lag behind a bit. However, if international or mid/small U.S. stocks are doing well, her equity portfolio can beat the S&P 500. Long term I hope we end up a little better. But 30 days doesn't give any useful information. Luckily, Mom's patient enough not to worry about the fluctuations. And she's even doing better than my active portfolio... for now.
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Old 08-01-2015, 03:51 PM   #10
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Originally Posted by Happyras View Post
Quote:
Originally Posted by REWahoo View Post
Looking at your recent investment history, do you think you have the right temperament for DIY investing?
No, and this is why my DW has mandated that we use a money manger of some type. We chose a low cost approach to this with WTB, which is not really feeling like a good fit, not just from performance.
I honestly don't think hiring a money manager is going to solve your problem. You are chasing performance, chasing gurus, chasing fees. As Animorph alluded in the previous post 'just stop chasing...'.

I don't think your problem will be solved until you realize the markets will do what they will do, and stop chasing things. A simple portfolio of 2, 3, or 4 low cost index funds will very likely do better overall than anything any 'guru' can come up with. Especially if you keep changing gurus every season.

Google 'active versus passive investing' and you will find the studies. The gurus mostly under-perform over a 5 year period, and the ~ 20% who do better are rarely in the same class over the next 5 years. In fact, it may be a contrary indicator (they just bet right for that time period, and that time period only). See 'regression to the mean'.


Quote:
Even Fidelity wanted to make a buck to sell us on Blackrock funds with commodity exposure rather than using the Bogle head 3 fund method. Obvious not a true Fiduciary to be found at Fidelity.
A simple portfolio of 2, 3, or 4 low cost index funds .... (see above)

Quote:
Our objective remains balanced growth performance going forward. My question to the forum was answered by a few. Similar history, where did you end up, are you comfortable with it. It looks like a consensus is the three fund portfolio.
A simple portfolio of 2, 3, or 4 low cost index funds .... (see above)

Quote:
All the rest of the investment world wants you to invest in multiple funds, with conflicting objectives to balance risk, get 0 performance, and pay them a fee.
Of course they do. We all want people to give us money. Stop playing their game.

I had a few more comments, but they might be too close to what REWahoo decided to edit. But seriously, just stop it! That is the answer. If you can't, no one on this forum can help you.

Good Luck!

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Old 08-01-2015, 04:03 PM   #11
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Thank you for the detailed history.
I similarly have a tinkering urge. The thing is... Track the fees relative to the performance of "boring" investing over time and your temperament will change. What you show is how well different individuals performed over time... But how did they perform vs. the market after fees over time?

I'd look at that and I bet what you will see is market results and fees had more impact than the person doing the action.

Once you see that happening you choose your FP based on fee structure (and eventually then dint have one probably ).

At the most extreme this gets really interesting.

Using vanguards etf vs mutual fund calculator...if you did total market (VTi) vs total stock market mutual fund (VTSMX) and invested 10k for 30 years the result is 42,533 vs 41,078. That's on a few difference of 0.05% vs 0.15%. You can imagine what 1% or 1.2% would do.

Maybe looking at it in terms of maximizing the % of your investment return on risk YOU get may help?

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Old 08-01-2015, 06:04 PM   #12
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There was no mention in the history detailed by the OP about taxes, but it looks to me like any gains got taken away by taxes … maybe even more lost in taxes than to the first wife.

A lot is now known and published about asset allocation and asset location. Advisors don't seem to care much about either, but they are two of the big ways to make things work well for folks.
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Old 08-01-2015, 06:22 PM   #13
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My suggestion exactly.

See also, The Millionaire Teacher by Andrew Hallam and other similar books.
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Old 08-01-2015, 06:33 PM   #14
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Old 08-01-2015, 07:53 PM   #15
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I cannot tell what your goal here is. Could you state clearly how you think this board can help, and what help toward what goal you are hoping for?

Ha
I agree. It just isn't clear what the OP is looking for. Advice? Sympathy? Something else?

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Old 08-01-2015, 08:13 PM   #16
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I honestly don't think hiring a money manager is going to solve your problem. You are chasing performance, chasing gurus, chasing fees. As Animorph alluded in the previous post 'just stop chasing...'.
+3
Notice how Vanguard does not list "beating the market" as anything that a manager does.
https://pressroom.vanguard.com/conte...3.10.2014.html
  • Being an effective behavioral coach. Helping clients maintain a long-term perspective and a disciplined approach is arguably one of the most important elements of financial advice. (Potential value add: up to 1.50%.)

  • Applying an asset location strategy. The allocation of assets between taxable and tax-advantaged accounts is one tool an advisor can employ that can add value each year. (Potential value add: from 0% to 0.75%.)

  • Employing cost-effective investments. This critical component of every advisor’s tool kit is based on simple math: Gross return less costs equals net return. (Potential value add: up to 0.45%.)

  • Maintaining the proper allocation through rebalancing. Over time, as its investments produce various returns, a portfolio will likely drift from its target allocation. An advisor can add value by ensuring the portfolio’s risk/return characteristics stay consistent with a client’s preferences. (Potential value add: up to 0.35%.)

  • Implementing a spending strategy. As the retiree population grows, an advisor can help clients make important decisions about how to spend from their portfolios. (Potential value add: up to 0.70%.)
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Old 08-02-2015, 08:03 AM   #17
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Happy, I agree with some others that it seems that you are in search of the holy grail of investing. Keep it simple.

If I were in your shoes I would move everything to Vanguard and have them make the investment recommendations for you. You can make an excellent portfolio with just a handful of funds. Once you set that up, stay the course for at least one year, preferable three.

Also, create an investment policy statement for yourself defining what you will invest in. See Investment policy statement - Bogleheads
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Old 08-02-2015, 08:49 AM   #18
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No, and this is why my DW has mandated that we use a money manger of some type. We chose a low cost approach to this with WTB, which is not really feeling like a good fit, not just from performance.

Even Fidelity wanted to make a buck to sell us on Blackrock funds with commodity exposure rather than using the Bogle head 3 fund method. Obvious not a true Fiduciary to be found at Fidelity.

Our objective remains balanced growth performance going forward. My question to the forum was answered by a few. Similar history, where did you end up, are you comfortable with it. It looks like a consensus is the three fund portfolio. All the rest of the investment world wants you to invest in multiple funds, with conflicting objectives to balance risk, get 0 performance, and pay them a fee.
I think part of the difficulty is that you are quick to take a recommendation and run with it. In addition to accepting the words of various advisors over the years, you quickly went to the conclusion that a 3-fund portfolio is the consensus. And you're ready to run with that? Is it doable given the location of accounts you have? Can you fit the right percentage of fixed income investments into non-taxable accounts, for example? If not then you'll have to go beyond a three fund portfolio.

If you really need to dump the current advisor after only one month, it really causes me to throw a flag on your behalf. Take time to understand what you have, where you've been, where you are now. For example, can you present a 1-page table that presents your investments in a way that someone can understand where you are now? Long narratives are entertaining, but not many will go to various posts to piece together your profile of investments.

That's work you have to do if you want to move forward while being in command of a growth strategy.

Get out a piece of paper or your spreadsheet program and list every account, account type, every investment and symbol, and totals. Then calculate percentages.

Even if you call Vanguard tomorrow, you need to present what you have in an understandable way.

It also helps to know what is in taxable accounts. You don't want to make moves that cause un-necessary taxation.

IMO you could do equally well at Vanguard, Fidelity, Schwab. With the latter two you may have an office nearby where you can talk face to face with an advisor before you get started.

Most of our assets are at Vanguard. But also use Schwab.
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Old 08-02-2015, 10:05 AM   #19
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Happy (and apparently his spouse) has made it clear that he isn't a DIY type, so I question whether recommending Vanguard, Fidelity, etc. is really practical in his case.

My recommendation to Happy would be to do as target2019 suggests - put together a concise list of your current investment assets and if you aren't comfortable with your current set of advisors, contact someone like Rick Ferri and see what you think about his relatively low-cost (for an advisor) Portfolio Solutions investment service which focuses on index funds.

Then leave your investments the hell alone...
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Old 08-02-2015, 10:31 AM   #20
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I had typed a response really late last night that I deleted. It was much about what I did with giving a FA (used by my in laws) $600k to invest and compared my performance to the FA's. Really I don't think my experience with this directly will help you. It may be something you want to try in the future.
I will get the evil eye for this, but I do believe there are time where shifting your AA can be a good thing. For me I've done this twice... but to be fair, I did not shift back at the best time. This is one of the downsides to doing timing. The other is reacting to very short term events. Remember the down grade in US debt? I reallocated more to stocks near the bottom of that short term dip. The problem with trying a lot of timing is that you usually have to react opposite of how you feel. The other... reacting in large scale to short term events will often have you on the wrong side of the trade. From your discussion, I'm not sure you can separate the emotion.
Second, when you have a nicely diversified portfolio and the S&P goes up 25%... you look at your portfolio and you may only be up say 15%, so why did you invest in this? One invests in a diversified portfolio to improve the risk verse return metric. You may never get all the S&P upside in a really good year, but you will likely not fall as bad on the really bad years. Diversification is not just owning a bunch of investments... but looking for investments that are not well correlated... or so we hope.
First things first... you have some pile of money (remaining)... how much?....What do you need it to do? The first thing is to plan. Know where you are and where you need to be. Start there. Then I would bet this group will be able to help.
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