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Old 05-30-2016, 12:20 PM   #21
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Questions for FA:
  1. what do you charge me
  2. what is it based on
  3. what do the underlying investments charge me
  4. are you fee based or hourly based
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Old 05-30-2016, 12:30 PM   #22
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From OP's analysis we know the underlying ER is 1.11% vs according to M* 0.59% average vs less than 0.1% for broad based domestic and international equity index funds.

That is a 1% difference plus any AUM fee to start with.
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Old 05-30-2016, 12:32 PM   #23
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Wow. Just wow. So that's where the 1.08% 'loss to FA' is
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Old 05-30-2016, 12:34 PM   #24
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Good catch guys, I appreciate this help!
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Old 05-30-2016, 12:45 PM   #25
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Originally Posted by dsp0725 View Post
Good catch guys, I appreciate this help!
Just to shed light on why I posted as I did, I run 4 accounts:
  1. IRA set in 50% SPY, 25% SCHA, 25% SCHD
  2. ROTH: 90% SCHD, 10% SCHA
  3. Brokerage : 66% SCHB, 23% Tax free Bond ETF, 10% trading & options
  4. Grandkids : SCHB (They are very young)
I guess I should follow my own advice & simplify but then it really just breaks down to:
  • SCHA
  • SCHB
  • SCHD
  • SPY
  • CXA / PWZ
  • 5% trading / options
break yours down to just 2 ETFs (lowest cost / broadest exposure) until you have time / inclination to do more (if ever)
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Old 05-30-2016, 01:36 PM   #26
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So you're with Schwab (solo 401k) and Vanguard (Roth)? The total is about $80,000.

Is the FA managing the total $80k for you? If so, are the recommended funds he/she put you in based on personal knowledge or an automated fund selection program (a.k.a. robo-advisor). If the latter, fire the advisor because you can get this same slice-and-dice directly at Schwab without an advisor. That doesn't mean you'll get great results, just lots of funds.

With $80k to invest, go with 90% in one fund SCHB (as Gayl suggests), and 10% short term bonds. SCHB is the total stock market. You won't beat the market, but you will match it less about .03% (the expense ratio).

If you have to do this across to accounts, use the same percentage in each account, i.e., Roth 90-10, 401k 90-10. Then get back to doing what you need to do to earn a living.

When you get to $100k in the two accounts - you can slice and dice - read Rick Ferri.
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Old 05-30-2016, 06:02 PM   #27
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Originally Posted by gayl View Post
Questions for FA:
  1. what do you charge me
  2. what is it based on
  3. what do the underlying investments charge me
  4. are you fee based or hourly based
Personally, even though those are good questions, I feel it is a waste of time to ask them of the FA. They are trained sales-people, and will likely have a smooth, yet misleading answer for all of them.

The OP can just do a search the net for "active versus passive investing" and quickly learn (without reading a book) that the "seasoned professionals" rarely do better than the index funds. Seems counter-intuitive, but it is true (and explainable). So why pay an FA and have them put you in expensive funds, when buying a couple broad based index funds will likely do it better, and really take no added work (rebalancing is over-rated - especially in the accumulation phase, you can just 'let it roll' - ez)?

-ERD50
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Old 05-30-2016, 06:16 PM   #28
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Understand but sometimes readers won't believe us bc they bought the line. Actually writing it down, doing 2 minutes of math, and looking at it later can be eye-opening
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Old 06-01-2016, 09:29 AM   #29
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Presenting questions to my existing FA on Monday and included 401k performance report and morningstar xray results. No reply as of yet. I took all of your observations and put those into questions as well.

We'll see what he comes back with.

In the meantime, has anyone had good experiences with fiduciary's?
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Old 06-01-2016, 10:34 AM   #30
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I know you guys are heavy investment DIY'ers, but I question whether that strategy will work for me. I would rather trust in someone that my investments are being handled by a seasoned professional. Plus there would be a learning curve for me vs someone with decades of experience.

My goal is to hit 1mil+ by 45 years old. In order to get there I have to get at least 6% growth.
Might want to read this first, then think about what the "seasoned professional" is focused on - your bank account or his:

Swedroe: Watch Out For Potholes | ETF.com
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Old 06-01-2016, 02:32 PM   #31
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In the meantime, has anyone had good experiences with fiduciary's?
Will be interested in folks comments on this. I have not had any direct experience but not even sure what to expect would change if I did. What I would consider as being in my best interest (fiduciary standard) may be dramatically different that what the FA might suggest....even under the new standard. For example, I feel that any suggestion for a broad mutual fund should be very low cost index fund. FA could suggest a higher cost managed fund and say he believes the return will be better. I might think annuities are a really bad investment for me but FA may consider them a safe way to secure my future. The new law sounds like a positive step in theory but I really struggle with how/if it will impact the FA's advice. There is always a balance between risk and return plus we all make choices based on our best guesstimate of what the future will hold. I'm leaning toward thinking that the new rules don't buy us much except against the really unscrupulous FAs. But time and people's experience will test that theory. BTW - I think the new rules only apply to management of your retirement accounts and not to your taxable accounts. Good to confirm.
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Old 06-01-2016, 03:24 PM   #32
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Do you consider having the exorbitant fees easy to find a 'good' experience?

Why do you need a fiduciary?
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Old 06-01-2016, 04:13 PM   #33
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Originally Posted by pb4uski View Post
You sort of have it backwards asking what to invest in in your Roth.

Your first step is to decide on an asset allocation. This link is what Vanguard uses for their target date retirement funds... for someone your age they would typically recommend 90% equities and 10% fixed income. I actually would recommend 100% equities for someone your age with your ambitious goals but 90/10 wouldn't be the end of the world. I personally didn't have any bonds until I was in my mid to late 40s. So first... decide on your overall target AA.

What is your solo 401k invested in? If it is more than 3 funds or more than 10% fixed income then the first thing you should do is fire your advisor.

Then, after considering the AA in your solo 401k and your overall AA, what do you need to have the AA of the Roth be? Let's say it is 100% equities for discussion purposes. If that were the case, then 70% Total Stock and 30% Total International Stock would be sufficient if you want simple.

While there are not guarantees, Total Stock (VTSAX) returned 11.11%, 10.99% and 7.04% for the last 3, 5 and 10 years, respectively and Total International Stock (VTIAX) returned 0.38%, 0.09% and 1.67% for the last 3, 5 and 10 years so it is likely that the combination will more than meet your 6% minimum target return.

The other thing to consider is expenses. If your solo adviser is charging you 1% AUM fee and the funds he has you in are charging 0.50% ER then 1.5% goes to expenses each year. With the two funds mentioned above the ERs are 0.05% and 0.12% respectively, so a 70/30 blend is a 0.07% so you have a 1.43% head start over your solo 401k funds. That's almost a quarter of your 6% minimum return target.
Great advice ...... keep it simple!!
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