Should I put my money into CDs? Not happy with Fidelity

[clifp]

E-RHarmony.org?

Once again my keyboard narrowly escape a diet coke bath. Damn that was funny.

 

[Nords]

Welcome to the board, Kathryn.

I have a portfolio at Fidelity and six months ago turned control of it over to their Portfolio Advisory Services. They sold off all my oil stock which did NOT make me happy and have now moved me into other investments and most are in the red.
I am not good at finances and have no idea what to do and am hoping someone can help me out (I inherited it and have always been better at real estate than portfolio management).
At any rate, I want to get a handle on this so I can preserve what I have and start adding to my portfolio instead of spending it. I'm 48, single, no kids, and have around $250k currently in it.
Thanks in advance. Any and all thoughts are appreciated.

If you genuinely are bad at finances and have no idea what you're doing (which is rarely the case), then perhaps it's a bit harsh to criticize Fidelity for six months' performance at what is intended to be a long-term relationship. If oil prices had crashed to $50/barrel last month then you'd be praising these guys to high heaven. Conventional wisdom claimss that the average advisor will underperform the market 30% of the time and that it takes two decades to perceive whether their performance is just random luck or actual skill.

Eventually your portfolio is going to grow to the point where you'd withdraw 4% per year (the safe withdrawal rate) for your living expenses. At that point you'll be paying yourself 4% and Fidelity 1%. In other words, Fidelity gets a quarter of what you get plus they still charge all the expense ratios of the funds they put you in. If you're not happy with this relationship then you'll be even more unhappy with that ratio.

It might be worth your time to improve your knowledge of asset allocation and long-term investment returns by reading books like Dimson & Marsh's "Triumph of the Optimists", the Bogleheads Guide, Bernstein's "Four Pillars", or Siegel's "Future for Investors". At that point you'll have the comfort factor to take back the reins (and save yourself quite a bit of money) while not sweating the volatility.

Because if you're unhappy with this little air pocket, then I can only imagine how unhappy you'll be if the market returns to 2001-2... let alone 1966-82. What you're experiencing now is barely even on the volatility radar, let alone "bad".

If you tell Fidelity that you want to "preserve" then they'll feel obligated to put you into long-term bonds, CDs, and Treasuries. Yet this is exactly the time to start dollar-cost averaging (or value averaging) into the market and to get those reinvested dividends working for you. Even if you don't intend to start managing your own account again, you should at least familiarize yourself with the hidden meanings behind the everyday vocabulary... because Fidelity and every other advisor out there will certainly use it [-]against you[/-] for your own good.

While you're job searching, Bob Clyatt's "Work Less, Live More" is particularly good for combining ER with part-time work.

 

[Helena]

They charge 1% of the portfolio to manage it. I just got off the phone with the relationship officer and they told me the same again - that they are doing what they are doing for long term growth and that I am losing 4% less than what the market is doing.

As far as the CD question in my part of the country CD rates are not great and would hate to see someone locked in for any lenght of time at these rates

I am out of this market and a lot of my cash is in CDs.

Better to gain 3 to 4 percent in a CD, than lose "4% less than what the market is doing"
plus pay 1% to stupid managers who use a computer program.


~

 

[saluki9]

Yeah, it turns out DIY is more expenseive than you think............

No, I got contacted by a recruiter about a PM job there about a year ago. You'd never guess by what they're paying that they are charging a full point. The money must go into advertising, or the Johnson family's yacht.

 

[DayDreaming]

Thanks, ha. Maybe I will just sit tight. I am feeling a bit overwhelmed after reading some of these threads. It's like a big dose of reality smacking me upside the head ...

Kathryn, I'm not sure where you are in your learning curve, but I just wanted to mention that I found the book "The Bogleheads Guide to Investing" to be extremely useful. (In spite of the silly title!) Not too long ago, investing was a very confusing and mysterious world to me. I thought that I had to pay a financial advisor to guide me through. After reading this book, I now realize that managing one's own finances can be pretty simple and you can easily do just as good or better than many financial advisors. I also realized that under my financial advisor, a lot of my money was being eaten up by fees that I wasn't even aware of. I've since pulled all of my money out from that advisor, and I manage my own money with a few index funds at Vanguard.

Your money is probably doing ok at Fidelity. My advice would be to leave it there for the time being, but do some reading so that you fully understand what Fidelity is doing with your portfolio - then you can decide if you want to do something else.

 

[FinanceDude]

No, I got contacted by a recruiter about a PM job there about a year ago. You'd never guess by what they're paying that they are charging a full point. The money must go into advertising, or the Johnson family's yacht.

Well, Vanguard doesn't pay well either, and most of the reps aren't licensed. Probably a great job for a kid just out of college, $25-$30K a year with benefits. The reps at Fido are lucky if they make $45-$50K a year.............

 

[haha]

Well, Vanguard doesn't pay well either, and most of the reps aren't licensed. Probably a great job for a kid just out of college, $25-$30K a year with benefits. The reps at Fido are lucky if they make $45-$50K a year.............

At what level? How much to the Private Access Group managers at the regional branches make? Usually at a good sized branch office there are 4 or 5 of them, with staff too.

Ha

 

[FinanceDude]

At what level? How much to the Private Access Group managers at the regional branches make? Usually at a good sized branch office there are 4 or 5 of them, with staff too.

Ha

Maybe $50000- or so base, with a performance bonus if you hit numbers. How do I know? I was recruited for Fido locally but wasn't up for taking a massive pay cut..........

 

[Kathryn48]

I am out of this market and a lot of my cash is in CDs.

Better to gain 3 to 4 percent in a CD, than lose "4% less than what the market is doing"
plus pay 1% to stupid managers who use a computer program.


~

Helena, I feel as you do. Why shouldn't I take my money out and plop it into CDs and not lose money? This market is not good and all indicators, IMHO, point to it not getting better anytime soon. Maybe I am a pessimist, but I don't buy into the "this is just a downturn" in the market. I think this time is different, but then I believe in peak oil and that this country has sustained an enormous amount of damage (that's all I'll say) in the past seven plus years. I truly think we are beyond all those charts I was shown at Fidelity - the ones that historically document the ups and downs. I only see downs ahead, which is why I guess I asked my initial question.

Now, maybe I am given to emotion and I know that is a no-no in investing, but still...

 

[Marquette]

Helena, I feel as you do. Why shouldn't I take my money out and plop it into CDs and not lose money? This market is not good and all indicators, IMHO, point to it not getting better anytime soon. Maybe I am a pessimist, but I don't buy into the "this is just a downturn" in the market. I think this time is different, but then I believe in peak oil and that this country has sustained an enormous amount of damage (that's all I'll say) in the past seven plus years. I truly think we are beyond all those charts I was shown at Fidelity - the ones that historically document the ups and downs. I only see downs ahead, which is why I guess I asked my initial question.

Now, maybe I am given to emotion and I know that is a no-no in investing, but still...

Well, if that's how you feel, then I'd question CDs as well. If the economy dives and the government collapses, then the FDIC isn't going to be able to cover all of the defaults. Another option might be to increase your foreign exposure and / or hard asset exposure.

 

[Kathryn48]

Welcome to the board, Kathryn.


If you genuinely are bad at finances and have no idea what you're doing (which is rarely the case), then perhaps it's a bit harsh to criticize Fidelity for six months' performance at what is intended to be a long-term relationship. If oil prices had crashed to $50/barrel last month then you'd be praising these guys to high heaven. Conventional wisdom claimss that the average advisor will underperform the market 30% of the time and that it takes two decades to perceive whether their performance is just random luck or actual skill.

Eventually your portfolio is going to grow to the point where you'd withdraw 4% per year (the safe withdrawal rate) for your living expenses. At that point you'll be paying yourself 4% and Fidelity 1%. In other words, Fidelity gets a quarter of what you get plus they still charge all the expense ratios of the funds they put you in. If you're not happy with this relationship then you'll be even more unhappy with that ratio.

It might be worth your time to improve your knowledge of asset allocation and long-term investment returns by reading books like Dimson & Marsh's "Triumph of the Optimists", the Bogleheads Guide, Bernstein's "Four Pillars", or Siegel's "Future for Investors". At that point you'll have the comfort factor to take back the reins (and save yourself quite a bit of money) while not sweating the volatility.

Because if you're unhappy with this little air pocket, then I can only imagine how unhappy you'll be if the market returns to 2001-2... let alone 1966-82. What you're experiencing now is barely even on the volatility radar, let alone "bad".

If you tell Fidelity that you want to "preserve" then they'll feel obligated to put you into long-term bonds, CDs, and Treasuries. Yet this is exactly the time to start dollar-cost averaging (or value averaging) into the market and to get those reinvested dividends working for you. Even if you don't intend to start managing your own account again, you should at least familiarize yourself with the hidden meanings behind the everyday vocabulary... because Fidelity and every other advisor out there will certainly use it [-]against you[/-] for your own good.

While you're job searching, Bob Clyatt's "Work Less, Live More" is particularly good for combining ER with part-time work.

Thanks for your post, Nords, and I really appreciate your input. The only thing I take issue with is reference to oil stock. I told Fidelity last December I wanted to maintain control of that stock, but because my portfolio was worth over $300K at that time, I qualified for their tax-managed PAS. In retrospect, I would have preferred to just go with their non tax-managed PAS, as I could have retained that stock. My prediction today (not that it matters) is that oil will hit $150. At $150 I would have sold. And my thought was to sell in August or September, after the summer vacation season. But this doesn't matter much now.

Anyway, I will check out those books you mentioned.

 

[Kathryn48]

Well, if that's how you feel, then I'd question CDs as well. If the economy dives and the government collapses, then the FDIC isn't going to be able to cover all of the defaults. Another option might be to increase your foreign exposure and / or hard asset exposure.

Aren't CDs insured? My thinking would be (if I were to do this) to put no more than $100K in one bank. Also, I've been advised to buy physical gold, but this does seem a bit strange to me, but maybe not. I don't know. As far as foreign exposure, I am all for that. Maybe this is part of my less than stellar satisfaction with Fidelity, as I think there are some fundamental changes underway and that the US is headed for "unknown" territory. I don't want to turn this into a political discussion, but I just believe that so much of what is going on has to do with what is going on internationally (the fall of the dollar and all), so it's hard for me to not think in those terms.

 

[Marquette]

Yes, they're insured, but as I said, if things collapse, then the FDIC isn't going to be able to cover all of the obligations. So, it'll probably first help if you size up what your fundamental fears are and then decide how much it's worth addressing those fears.

The desire for physical assets like gold is that they might have a negative correlation to stocks and a positive correlation to fear. Of course, on the flip side, they might do nothing but lie flat (premise is that gold is properly valued and a good store of value). There's also a general belief around the chaos and anarchy crowd that gold will see them through goverment collapse. My counter is that I don't see what good gold would do me as I can't eat it. It's also worth noting that gold hasn't always been a monetary exchange standard... so who knows what the future will hold, we could even go back to salt.

I'll go first with the fear and doubt part of the program. I believe in the idea of peak oil but I don't know about the timing. I'm also sure that we'll see a pandemic in my lifetime and possibly even the fall of the US goverment (I've made a couple Sulla jokes on here). But, I also know that I know nothing about the future and the only thing in life I'm marginally good at is programming.

 

[Helena]

If the government [including FDIC] collapsed... there would be
panic and violence in the streets and all bets are off... including
foreign investments and gold. It would be a survival situation...
and the best investments would be guns and ammo.. but TPTB
are not going to let it get that bad.

 

[saluki9]

At what level? How much to the Private Access Group managers at the regional branches make? Usually at a good sized branch office there are 4 or 5 of them, with staff too.

Ha

That is very similar to the offer I was contacted about

$110K base with max bonus being $27.5K (This was to run an office)

I imagine from my other experiences that the regular Private Access reps make about $60K base.

 

[Zoocat]

Thanks so much FIREdreamer. This is a positive way of looking at things and I guess I've resigned myself to working another 20 years, unless I get into some other circumstances (marry someone rich - doubtful, win the lottery - even more doubtful since I do not play).

My house went up way in value (along with everyone else's) but even if I keep what I paid for it, it puts me at a net worth (today) of $600K, so I should not complain. Everything is still relative and I figure if I just put my nose to the grindstone, not spend any unnecessary money and work my way up, maybe I too can be a FIRE someday, or at least not just work until I drop dead.

Hi Kathryn,
Will your house keep its value, do you think? Is there any possibility you could sell it now and buy something else (condo, townhome) for about half the proceeds, invest the rest? That's what I'd do, I think. The housing market values are still too high in lots of areas and could very likely decline. That solution would give you a good nest egg to invest and grow until you decide to retire. But I realize that's a rather unpleasant solution.

 

[Kathryn48]

Hi Kathryn,
Will your house keep its value, do you think? Is there any possibility you could sell it now and buy something else (condo, townhome) for about half the proceeds, invest the rest? That's what I'd do, I think. The housing market values are still too high in lots of areas and could very likely decline. That solution would give you a good nest egg to invest and grow until you decide to retire. But I realize that's a rather unpleasant solution.

Thanks, Oldbabe. I'm not worried about my house value, as I live in an upscale neighborhood in Scottsdale,AZ (a lot of retirees here) and there is only so much land here to develop. I don't want to move into a condo, townhouse, however, as I really like my house and have a large lot in an area which isn't building anymore large lots. It really is a gem of a property. After all is said and done, and in light of what's going on in our country and the world, I am going to just have to bite the bullet and go back to work. I see this as the only way to preserve what I have and build on it. I am super risk averse so I guess this is what I will do, until at least economic indicators go in a somewhat positive direction. Thanks!