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Old 10-17-2013, 11:07 AM   #61
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I have to ask this question.

Is Vanguard connected to this forum in some way? From when I joined over a year ago I read a lot about Vanguard. Just checking to make sure it is not Vanguard personnel pushing Vanguard.
Not to my knowledge. I think there are just a lot of people on here that like Vanguard and other places where you can get low fee index funds. Fidelity would be another place that ranks high with the forum members, IMO.
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Old 10-17-2013, 11:08 AM   #62
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Originally Posted by reubenray View Post
I have to ask this question.

Is Vanguard connected to this forum in some way? From when I joined over a year ago I read a lot about Vanguard. Just checking to make sure it is not Vanguard personnel pushing Vanguard.
No, but a fair number of members also post on the Boglehead forums. To your point, most Vanguard reps don't push Vanguard either, because they are not licensed to do so.........
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Old 10-17-2013, 11:43 AM   #63
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I'll give this a first shot (telling all so 20 people don't spend time on this hand-typing, etc)
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Old 10-17-2013, 12:45 PM   #64
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reubenray,
There is no "JBFFX", but I found an "IBFFX".
Your overall weighted expense ratio for the funds you are in is 0.75%. As some folks have estimated before, this is about 0.50% or more than you'd be paying if your advisor had put your money into less expensive funds. When you do the math, you'll see that's a lot of money, and is in addition to the 1%- 1.3% that it appears you are paying to your financial advisor. The performance of these alternate lower-cost funds (at Vanguard, Fidelity, etc) would be about the same as the performace you can expect from the more expensive funds your advisor has picked. Depending on how much is in your 401(K) and the options available in that plan, there may be some limits on your flexibility right now on that money, but those will go away if you decide to roll it over to an IRA.

More to follow in a few minutes.
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Old 10-17-2013, 01:21 PM   #65
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Reubenray,
Okay, maybe the attached document will be of some use. It's a little ugly, but contains screen captures of a Morningstar Instant X-Ray report on your holdings.

No, I'm not connected to Vanguard. They are a very good company, though. You can find low cost funds (and ETFs) with other companies, but Vanguard does have the biggest selection.

Unsolicited comments:
The overall asset allocation seems fairly typical, and I'd say it's probably okay. Your heavy weighting in large growth stocks is something I'd change if this were my portfolio. Depending on your other sources of income and your risk tolerance, your bond holdings (43% of your portfolio) may be high. Depending on their duration (Morningstar couldn't find info on the type of bonds in some of your funds) you could be in for a decline in your portfolio's value when rates go up. The number of funds in which you are invested is excessive-- a fund that constitutes 0.9% of your holdings is absolutely not going to contribute anything meaningful. You could probably achieve the same result with far fewer funds, making everything simpler.

I'm sure your FA will have a great explanation about how this degree of micro-management and attention to detail is the only possible way to produce outstanding investment results. "I've got access to a lot of research information that lets me fine-tune the portfolios of my clients" etc, etc. Hogwash. If any advisor could consistently outperform the market by even 1% the world would beat a path to his door and he'd be worth millions of dollars. He wouldn't be pushing himself on small retail investors (like you and me).

You are paying more in fees (to your FA directly and in fund expenses) than you need to. It looks like these fees will reduce your sustainable annual withdrawals, every year, by about 40-50% compared to what you would achieve by doing this yourself with low-cost funds. That's as simple and direct as I can say it. It was good that you noticed this when you did, now you need to decide if you want to do something about it.
Attached Files
File Type: pdf ReubenRayPDF.pdf (1.55 MB, 26 views)
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Old 10-17-2013, 02:05 PM   #66
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Originally Posted by reubenray View Post
I have to ask this question.

Is Vanguard connected to this forum in some way? From when I joined over a year ago I read a lot about Vanguard. Just checking to make sure it is not Vanguard personnel pushing Vanguard.
I am personally not connected with Vanguard other than having an account there. I have been very satisfied with their service and their index funds. I freely recommend them over everyone else. I am a former Merrill Lynch, Dean Witter, Fidelity, and many other mutual fund companies. This was all prior to 2000. I still have an ETrade account that I use primarily for brokered CDs and online banking.

When my DW took over her parents finances, Vanguard was one of the few places that would allow us to open a POA account in their names. This greatly simplified our lives when dealing with their abysmal finances.

I'm not aware of anyone that regularly posts here ever identifying themselves as a Vanguard employee.
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Old 10-17-2013, 02:47 PM   #67
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Not a Vanguard employee, and I'm not aware of any forum members who are. I suppose we are cult-ish, but I think their record speaks for itself. Do the research on their fees and how close their index funds match the indices they track, and how well those index funds do vs. actively managed funds, and decide for yourself.
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Old 10-17-2013, 03:25 PM   #68
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No, I'm not a Vanguard employee and not aware of anyone here being one. I think a lot of people here are focused on fees and believe that low cost investment funds are the way to go. Samclem's post is really good and makes the point well about FAs and about fees.

I see no point in paying extra fees when I don't feel I get anything in return for it. Right now I'm in a S&P fund at Fidelity that has a .50 expense while similar funds at Vanguard are a fraction of that (I have the Fidelity fund because this is a 401k and the fund in question is my cheapest option). Why would I pay .75 for a found that I could get for 1/3 of the cost or even less? (And no it isn't that the more expensive fund gets better results).

I think a lot of people here got here because they focused on getting value for many during their adult life and don't look to spend more for something than they think it is worth.

Vanguard is talked about a lot because it is notable for its low costs and it is a really big company. It is the largest mutual fund company in the US by assets:

Largest Mutual Fund Companies By Assets - Gajizmo.com

Fidelity is second and it also has a lot of low cost funds and many people prefer it. My 401(k) is at Fidelity and I will probably eventually roll it to an IRA there while DH's IRA and our taxable account is at Vanguard. I think they are both really good companies and they both have enough low cost funds available to meet my needs so I have no need to buy other more expensive funds.
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Old 10-17-2013, 04:04 PM   #69
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I am not a Vanguard employee and do not know any Vanguard employees. I like their low fees, literature and their help when moving IRA's to them.
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Old 10-17-2013, 04:10 PM   #70
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I am not a Vanguard employee and do not know any Vanguard employees. I like their low fees, literature and their help when moving IRA's to them.
Not a Vanguard employee but I own the company along with all the others who hold Vangard funds, as it is client owned.

Good luck to the OP.
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Old 10-17-2013, 05:03 PM   #71
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I may be one of the biggest chicken investors here. Never wanted to take on any risk, only FDIC insured CDs for me!

From what I learned on this forum and from my son (a young but very wise investor) I took the plunge and opened a Roth IRA at Vanguard a few years ago. I chose Vanguard because of the website, low fees and large assortment of all kinds of funds.

But I mostly picked Vanguard because they had a fund with a minimum investment of $1000 to open. I've added money every year to the Roth IRA, sometimes in the same fund, sometimes in a new fund.

I'm not so chicken anymore!
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Old 10-17-2013, 07:21 PM   #72
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Another Vanguard non-employee here. I chose Vanguard because they are built around the concept of low-fee, index-based investing. Low fees = higher proportion of returns go to the investor. There are other very good products available, but that is their bread and butter.

Disclaimer: We also have smaller amounts of money in Fidelity, Schwab, UBS, PERS, I-bonds, and a couple credit unions. Previously also BoA, Dean Witter, ETrade, Smith-Barney, and a few others.
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Old 10-17-2013, 08:13 PM   #73
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If I was to take some of my $$ and put it into a Vanguard Index fund how soon would I be able to get monthly dividends?
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Old 10-17-2013, 09:30 PM   #74
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If I was to take some of my $$ and put it into a Vanguard Index fund how soon would I be able to get monthly dividends?
Different funds have different distribution schedules for their dividends. It's the same with Vanguard as with most fund companies (including where you have your money now). What many people do is have them all sent to a "holding" money market account, since they will be very "lumpy" (lots of dividends from stock funds in Sep and Oct of each year, but some on the last day of the year, etc). If you want a more steady month-to-month flow, just set 1/12th of the annual amount to be transferred to you every month. If you need to provide monthly income between now and when this "buffer" account builds up, just sell some of your assets. You'll still be >well< ahead after dumping your FA.

Here's the distribution schedule for Vanguard funds. Most funds just paid their dividends (which makes it a good time to buy them if you have any taxable accounts)

Dividends are just one source of income from your portfolio, you'll want to look at interest and capital appreciation as well.

There are lots of good books written on how to do all this. The FAQs at this site are a good place to start.
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Old 10-17-2013, 10:58 PM   #75
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If they are charging 3%, and that is $4,000, you have about $135,000? You are generating $12,000 AFTER the $4,000 fee, meaning you are getting about 12% in dividends and interest? If your advisor is really doing this, either: they are really good; they have a Madoff scheme going; or something is wrong with this info or my understanding of it.
12% this year or last has not been hard to get. It's been a banner year for stock funds. My simplistic TRowe 401 k is at almost 14% for the year over a very basic 8 fund allocation. My other accounts are over double digit this year also. All have at least 70% equity MFs.
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Old 10-17-2013, 11:11 PM   #76
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Don't overlook the fact that most FAs will send you a yearly birthday card.
It better have lots of glitter and sing a tune when you open it for $4k!
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Old 10-18-2013, 11:23 AM   #77
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While discussing this with the wife she brought up taxes. I am assuming I would have to pay taxes on the $$ if I draw it out and put it in something else on my own.
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Old 10-18-2013, 11:42 AM   #78
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While discussing this with the wife she brought up taxes. I am assuming I would have to pay taxes on the $$ if I draw it out and put it in something else on my own.
You'd pay no taxes for selling/buying you do with your IRA or 401K funds. For your other funds you would pay taxes on any capital gains you have (and if you have losses in those funds, the losses would actually reduce your taxes.) Most of your money is in 401Ks and IRAs according to one of your earlier posts.
Even with your non-IRA/Non-401K funds, you could still transfer your MF holdings to a new broker. You wouldn't be selling them, just transferring them to another company to keep them for you. Thus, there's no tax on them and you also immediately avoid paying your FA's 1% fee on that money every year. You'd still pay the expenses that these funds charge to their investors (like we said before, that's about 0.5% more on average for your funds than you'd pay for low-cost index funds), but you could gradually get out of them and get into cheaper funds so you wouldn't have to pay the taxes all at once.
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Old 10-18-2013, 01:10 PM   #79
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I would agree that 12% total return the past year would not be unusual. But that is different from a 12% in dividends and interest. Not likely in my experience.
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Old 10-18-2013, 11:18 PM   #80
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If I was to take some of my $$ and put it into a Vanguard Index fund how soon would I be able to get monthly dividends?
If you time it right you won't miss a thing. If you own shares on the day the dividend is given, you get it. So the only problem would be if the new fund and old fund have different dividend dates, or the transfer between brokers keeps you out of either fund when dividends occurred. If either case happens, just sell a few shares for cash to make up the difference. It won't kill you .

When transferring a retirement account (401k/IRA) have the financial institutions handle the transfer instead of doing it yourself. That ensures you don't get hit with taxes. You can do it yourself, but there are a few hoops to pay attention to.
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