NYT article: Investment advice for small fry

[Focus]

Hard for me to see how you get your money's worth for forking over 0.3-0.9 of portfolio (Betterment) or $199 a month (Flat Fee Portfolios).

New York Times: Investment Advice for Small Fry

 

[haha]

Hard for me to see how you get your money's worth for forking over 0.3-0.9 of portfolio (Betterment) or $199 a month (Flat Fee Portfolios).

New York Times: Investment Advice for Small Fry

All the married people who have been stressing about what wil happen to their spouses when they kick can stop worrying, for $2400/year, IMO a blazing bargain, the survivor will get it taken out of his or her hands in what sounds like a very transparent way.

However, for people who feel that everything should be free, this is perhaps not the way to go.

Ha

 

[walkinwood]

Excellent article. I agree with Ha - worth it if you don't have any interest in managing your portfolio.

 

[DblDoc]

Excellent article. I agree with Ha - worth it if you don't have any interest in managing your portfolio.

Actually those without interest and just leave the d%@n thing alone are probably better off than those who change course repeatedly depending on the noise generated in the media. For the latter this approach would be very helpful and money well spent.

DD

 

[Nords]

Hard for me to see how you get your money's worth for forking over 0.3-0.9 of portfolio (Betterment) or $199 a month (Flat Fee Portfolios).
New York Times: Investment Advice for Small Fry

Thanks, great link. I feel a blog post coming on for those who "just can't be bothered" to handle their own portfolios.

 

[mh]

Thanks, great link. I feel a blog post coming on for those who "just can't be bothered" to handle their own portfolios.

Yes, that would be a worthy topic.

 

[thefinancebuff]

Excellent article. I agree with Ha - worth it if you don't have any interest in managing your portfolio.

What's wrong with putting it all in a Vanguard target date fund? These other products don't seem to offer anything more than a target date fund.

 

[nun]

I'd like to see a firm charge a one time fee to teach someone how to manage their money....the "give someone a fishing pole" approach. For the fee the customer would get a suitable portfolio for their current situation, help in implementing it with someone like Vanguard, guidance on how to adjust it with time and a thorough schooling in low cost passive index investing.

 

[pimpmyretirement]

A flat fee financial advisor will do just that. At least, mine did.

 

[Focus]

What's wrong with putting it all in a Vanguard target date fund? These other products don't seem to offer anything more than a target date fund.

My thoughts exactly.

 

[meierlde]

What's wrong with putting it all in a Vanguard target date fund? These other products don't seem to offer anything more than a target date fund.

To take it a bit further following on Boogle. If you are long term then you decide if you want to bet on US companies then the US S&P500 or total US market index fund is the ticket, or on the whole world with a total world index fund (again such as vanguard has). Now if your over 50 you do need to look at fixed income, but first start with a 1-2 year emergency fund/I don't need to tap the market during this downturn fund. (Ideally 2 years) this should be in CDs and the like. IMHO I wish states would pass an addition to a GO bond to provide that if you put the bond to the state it can be used to pay property taxes and other state taxes at par even if the agency is in default. This would make local muni bonds an ideal investment for safety as you could use it to pay property taxes.

 

[Bestwifeever]

With a nest egg > $1.5 million invested in the Flat Fee portfolio, the $2400/year fee is better than the .0016 that Vanguard's target funds carry, I think (numbers is hard but wouldn't the Vanguard target funds' cost be $2400/year for $1.5 million?).

 

[REWahoo]

(numbers is hard but wouldn't the Vanguard target funds' cost be $2400/year for $1.5 million?).

Sorry, I'm no help...

 

[haha]

With a nest egg > $1.5 million invested in the Flat Fee portfolio, the $2400/year fee is better than the .0016 that Vanguard's target funds carry, I think (numbers is hard but wouldn't the Vanguard target funds' cost be $2400/year for $1.5 million?).

As I mentioned earlier, the problem for these gents is not that it isn't inexpensive, but that it isn't free.

Ha

 

[rgarling]

With a nest egg > $1.5 million invested in the Flat Fee portfolio, the $2400/year fee is better than the .0016 that Vanguard's target funds carry, I think (numbers is hard but wouldn't the Vanguard target funds' cost be $2400/year for $1.5 million?).

Even if it is, you are comparing Vanguards total expenses with the additional expenses charged by the advisors. Even though the ETF have lower fees than Vanguard's funds, you probably don't have the correct total cost.

 

[Focus]

Even if it is, you are comparing Vanguards total expenses with the additional expenses charged by the advisors. Even though the ETF have lower fees than Vanguard's funds, you probably don't have the correct total cost.

Right. This is from the Flat Fee Portfolios site:

"Outside of our monthly management fee, mutual funds and exchange trade funds also have their own internal expenses. Additionally, there are separate transaction costs charged by the custodian to place trades in the accounts. Many of the mutual funds and ETFs in our models do not have transaction costs; however some do. Where possible these trades will be executed at a discounted rate with the custodian. Please note that our advisors do not receive any portion of these additional fees."

 

[Bestwifeever]

Even if it is, you are comparing Vanguards total expenses with the additional expenses charged by the advisors. Even though the ETF have lower fees than Vanguard's funds, you probably don't have the correct total cost.

That's my mistake, interpreting "flat fee" as meaning "total fee" (my bad). From the Flat Fee website: "Are these the only fees? Outside of our monthly management fee, mutual funds and exchange trade funds also have their own internal expenses. Additionally, there are separate transaction costs charged by the custodian to place trades in the accounts. Many of the mutual funds and ETFs in our models do not have transaction costs; however some do. Where possible these trades will be executed at a discounted rate with the custodian. Please note that our advisors do not receive any portion of these additional fees."

 

[ERD50]

With a nest egg > $1.5 million invested in the Flat Fee portfolio, the $2400/year fee is better than the .0016 that Vanguard's target funds carry, I think (numbers is hard but wouldn't the Vanguard target funds' cost be $2400/year for $1.5 million?).

EDIT - NEVERMIND, already covered!

If I'm reading it right, the $2400 would be over and above the expenses of the funds they suggest. It looks like their suggestions are all low cost funds, but the Vanguard Target fund is very low.

I glanced, and the 2015 Target is 0.16%, while Vanguard's total Bond and total Stock funds are 0.22% and 0.18%. So it looks to me that you'd be paying some blend of the .22 and .18 type expenses, and another 0.16% on top of that to these managers (which isn't bad at all, if this is of use to a person).

-ERD50

 

[nvestysly]

Betterment.com...

Maybe it is better for some people. For instance, there are many people in my extended family that just don't get it - somehow they think somebody else (their employer, Uncle Sam, etc.) is going to take care of them. They also feel overwhelmed when it comes to saving and investing.

Like many on this forum I take an active interest in our (me and DW) portfolio. So Betterment is probably not for me. But I do like their approach.

There are many (very many) people that want something more straightforward than Fidelity, Schwab, e-Trade. They want investing to be simple. They also want to think they are involved but they don't want to spend much time.

For that crowd I think the Betterment.com approach may offer a good solution. Look at their home page www.betterment.com click on the Watch Video Tour. While this is not the solution for most people on this forum I think it satistfies what many people think they want in an investing "tool."

Here's a message from Betterment founder Jonathan Stein.

I know my post sounds like an endorsement for Betterment but it's not. I just think they've found the key to reaching a market that was previously untapped. Maybe this will lead to a higher savings rate in the U.S. For that I give them credit.

 

[gerntz]

I don't know that there's one right answer. But there are some bad answers. I think paying over 0.5% to an adviser is likely a bad answer. Hard to convince me the return benefits would be worth it.

I do think an adviser can be worth something regardless of how simple & easy many here think DIY is. Some folks aren't wired for it mentally and/or emotionally. The emotional part is my personal reason for one. Not confident I would always make good decisions on my own or at some point will be able to. Also, reduces risk of family disputes with a professional leading.

And lowest internal fund costs aren't necessarily the best answer either. The risks taken to achieve a given return counts too.

 

[ERD50]

I do think an adviser can be worth something regardless of how simple & easy many here think DIY is.

In my view, I can't see how picking the 'right' advisor is any less difficult than picking something like a Target Retirement fund, or a blend of Total Stock and Total Bond index funds. I actually think picking the funds is easier.

Not confident I would always make good decisions on my own or at some point will be able to.

But you had to decide on an advisor - so this is actually two decisions. You choose an advisor that will choose the right funds. It doesn't really change the picture as I see it. is

Also, reduces risk of family disputes with a professional leading.

Never underestimate the power of family disputes They will say you picked the wrong advisor!

And lowest internal fund costs aren't necessarily the best answer either. The risks taken to achieve a given return counts too.

And how are these advisors going to change that? From what I saw, they were picking the low cost index funds. Is there a better answer?

-ERD50

 

[haha]

I think one or the other of these ventures might be quite useful to very many people, though likely not many here. ( Not even sure of this last part!)

It is easy for us to say that everyone should learn about investing, but everyone is not going to, anymore than everyone is going to exercise and eat more health foods or follow safe sex. Just not going to happen.

Look at cigarette smoking. If anything should be both clear and simple, it is don't start smoking. But a walk down the street shows me that plenty of young, well dressed people smoke.

It may even be easier for many people to start a savings program if they feel confident that having savings will not just present them with another frustrating and anxiety arousing problem of what to do with these savings. Also, as Gerntz said, having a third party do it may head-off family disputes. Being a member here gives us the idea that the world is made of of utility maximizing, rationally investing high dollar savers who never have conflict with their spouses over money. This is true only at ER.org. and heaven.

Ha

 

[DblDoc]

Being a member here gives us the idea that the world is made of of utility maximizing, rationally investing high dollar savers who never have conflict with their spouses over money. This is true only at ER.org. and heaven.

Ha

My wife and I fight over whether to invest or pay off the mortgage. Can I still post here?

DD

 

[ERD50]

I think one or the other of these ventures might be quite useful to very many people, though likely not many here. ( Not even sure of this last part!)

It is easy for us to say that everyone should learn about investing, but everyone is not going to, anymore than everyone is going to exercise and eat more health foods or follow safe sex. Just not going to happen. ...

Ha

I agree with that, but I'm looking from a different viewpoint.

I don't consider picking a Target Fund the same as 'learning about investing'. So let's take a typical Joe/Joan who does not want to learn about investing. It seems to me that their odds of connecting with one of these low cost managers who do a basic diversification into index funds for a low fee, is maybe lower than coming across a recommendation to just buy a Target Fund or a simple index blend and be done with it.

Another way to say that is, there is a decision to be made in either case. They very likely had to do some basic 'learning about investing' to decide that a low cost manager might be better than going with a high cost manager. That high cost manager will imply that the fancy desks and printouts will help them to do better, but most of us think those fees are a drain and they will actually do worse. But our Joe/Joan don't know that - they probably have to educate themselves to get past the marketing hype of the higher-fee guys/gals.

By the time you get far enough to identify a low-cost manager from a high-fee manager, the battle is over. I think it becomes pretty obvious that you can do it yourself, and that it isn't a lot of work (how hard is it to buy a Target Fund and forget about it?). But if you never get that far, you'll probably get in-line for the high-priced guys that are looking for you.

I agree that many will never get that far. But I'd say the decision is not between low-cost manager and DIY for these people, I think the decision is do you learn enough (not much learning needed) to DIY or do you go with the high-fee players?

-ERD50

 

[Gone4Good]

By the time you get far enough to identify a low-cost manager from a high-fee manager, the battle is over. I think it becomes pretty obvious that you can do it yourself, and that it isn't a lot of work (how hard is it to buy a Target Fund and forget about it?). But if you never get that far, you'll probably get in-line for the high-priced guys that are looking for you.

That seems right to me. It takes a fair amount of thinking about the topic to get your head around the counter-intuitive idea that you should pay somebody to not manage your money.