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

[Kathryn48]

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).

I've expressed my dissatisfaction to the relationship officer and have gotten the usual standard responses - rebalancing it, cannot consult me before every move, etc, etc. Prior to turning it over it was doing very well, but I was 85% in stocks and with the volatility of the market, just decided to have them manage it. Now I am stuck with this portfolio that is going down.

My current situation is that I had hoped to find a way to "drop out," and I have done so for five years, but now after reading a lot of these threads I just don't have enough to continue not working. My house is paid for, car is paid for and I have no other debt. Still, what I do have isn't enough and I'd like to avoid losing more.

I guess this means I go back to work although I just cannot see myself going back into an office environment, so I am trying to completely switch careers. I won't make much, but if I go back to school for another master's degree, I could make a bit more going forward but I am talking about years here.

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.

[haha]

Quote:

Originally Posted by Kathryn48 I guess this means I go back to work although I just cannot see myself going back into an office environment, so I am trying to completely switch careers. I won't make much, but if I go back to school for another master's degree, I could make a bit more going forward but I am talking about years here. 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.

You know that you will have to go to work. Fidelity did what they would always do- 6 months ago my relationship manager asked me to come in for a chat with him and his manager, because I owned too many oil related equities and they were worried about my exposure. They are asset allocators, not exactly stock pickers, and what they did for (to) you was by the book.

Now that oil and other commodities have done so spectacularly, they stay off my back (my portfolio is self managed), and indeed I have cut back on E&P and driller exposure.

What does Fidelity charge for managing your account?

Ha

[Kathryn48]

Quote:

Originally Posted by haha You know that you will have to go to work. Fidelity did what they would always do- 6 months ago my relationship manager asked me to come in for a chat with him and his manager, because I owned too many oil related equities and they were worried about my exposure. They are asset allocators, not exactly stock pickers, and what they did for (to) you was by the book. Now that oil and other commodities have done so spectacularly, they stay off my back (my portfolio is self managed), and indeed I have cut back on E&P and driller exposure. What does Fidelity charge for managing your account? Ha

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. I wish I would have just gone with their under 300K PAS, as I would have been able to carve out that oil stock and hold onto it. Instead they are managing it for the tax consequences but, to me, growth and having kept that oil stock should have been the way to go. Do you agree? Maybe I should just pull the plug on what they are doing and save their fee? Thanks.

And yes, I know I have to go back to work

[haha]

Quote:

Originally Posted by Kathryn48 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. I wish I would have just gone with their under 300K PAS, as I would have been able to carve out that oil stock and hold onto it. Instead they are managing it for the tax consequences but, to me, growth and having kept that oil stock should have been the way to go. Do you agree? Maybe I should just pull the plug on what they are doing and save their fee? Thanks. And yes, I know I have to go back to work

I would look into your tax position after these moves, and whatever losses you may have in your new portfolio. One percent of $250,000 is $2500. You could get considerably cheaper management via some of the funds or ETFs that board memebers are familiar with.

I am sure they will chime in with ideas- I know next to nothing about this area myself.

Ha

[Kathryn48]

Quote:

Originally Posted by haha I would look into your tax position after these moves, and whatever losses you may have in your new portfolio. One percent of $250,000 is $2500. You could get considerably cheaper management via some of the funds or ETFs that board memebers are familiar with. I am sure they will chime in with ideas- I know next to nothing about this area myself. Ha

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 I don't feel like I can go back to my former life and the only alternative I see to what I was doing is going into a field where the pay is low but at least my age won't be such a negative, as it would be if I were trying to return to the corporate workforce. I'm afraid that in five years I've just gotten so used to controlling my own time and not having to be anywhere and it's going to be awfully tough to set that alarm and take orders from those on high. Moral of the story - never underestimate just how much it really costs to retire or quit working and I wish I would have stumbled across this board five years ago, but better late than never.

[FIREd]

Hi Kathryn,

It is my opinion that at this point you should do nothing (I am going to assume that fidelity set an asset allocation that fits your situation and invested your money in good mutual funds). It would have been very hard to make any money on most investments in the past 6 months given the current market conditions (especially if a majority of your portfolio is invested in stocks). I think that you should do what most of us here are doing: wait for the market to recover. It's always painful to see you account balances dwindle, but panicking could make it much worse in the long run. If you are going back to work, see it as an opportunity to invest new money at relatively low prices. Plus right now CDs offer rates that are quite low (they will probably start going up soon), so I am not sure that the best thing to do is sell all your equities (while the market is at a low point) and put all your money in CDs. Also you may want to use Morningstar X-ray tool to check the composition of your current portfolio. Mine for example turned out to be overweight energy stocks and I didn't even know about it!

[saluki9]

Wow, Fido charges 1% for what they do?

[Finance Dave]

Quote:

Originally Posted by FIREdreamer Hi Kathryn, It is my opinion that at this point you should do nothing (I am going to assume that fidelity set an asset allocation that fits your situation and invested your money in good mutual funds). It would have been very hard to make any money on most investments in the past 6 months given the current market conditions (especially if a majority of your portfolio is invested in stocks). I think that you should do what most of us here are doing: wait for the market to recover. It's always painful to see you account balances dwindle, but panicking could make it much worse in the long run. If you are going back to work, see it as an opportunity to invest new money at relatively low prices. Plus right now CDs offer rates that are quite low (they will probably start going up soon), so I am not sure that the best thing to do is sell all your equities (while the market is at a low point) and put all your money in CDs. Also you may want to use Morningstar X-ray tool to check the composition of your current portfolio. Mine for example turned out to be overweight energy stocks and I didn't even know about it!

I agree. The last thing you want to do is try to time the market and sell now...at a potentially low point. However, I'm confused about FIDO's position...can't you just say "send all my money to Vanguard where I can do with it what I want?". You seem to imply that they won't let you do what you want....which I don't understand.

If you want to really get out...then at least remove money slowly...maybe 10% per year to CDs...so that over time you get to a less volatile position. But at age 48, I don't see how anyone can retire on $250k unless you have other income you've not mentioned.

Good luck. Dave

[Waddell]

The 1% is not bad for the industry if they are managing to your risk and not killing you with taxes. I agree with Dave, I hope there is more than $250k there. 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

[nwsteve]

Quote:

Originally Posted by Finance Dave I However, I'm confused about FIDO's position...can't you just say "send all my money to Vanguard where I can do with it what I want?". You seem to imply that they won't let you do what you want....which I don't understand.

The OP has hooked upwith Fido's Porfolio Advisory Service. If she wants to manage it herself, she has only to "fire" them and resume managing her positions herself. No more fees.
BTW, as a stock investor (vs mutual fund) if she moves to Vanguard, I think (IMHO) she will be disappointed with the level of brokerage services and costs vis a vis Fido. Rates are higher and executions slower.
nwsteve

[FinanceDude]

Quote:

Originally Posted by saluki9 Wow, Fido charges 1% for what they do?

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

[REWahoo]

Hey, there is DIY and then there is DITY...(to).

[Finance Dave]

Quote:

Originally Posted by nwsteve The OP has hooked upwith Fido's Porfolio Advisory Service. If she wants to manage it herself, she has only to "fire" them and resume managing her positions herself. No more fees. BTW, as a stock investor (vs mutual fund) if she moves to Vanguard, I think (IMHO) she will be disappointed with the level of brokerage services and costs vis a vis Fido. Rates are higher and executions slower. nwsteve

Thanks for the insights Steve.

I only mentioned Vanguard as one example....just saying she can "fire" them if she really wants to. I happen to be familiar with Vanguard because they handle my company's 401-k plan.

Dave

[Kathryn48]

Thanks all. I am going to just sit tight for right now and not do anything (except get a job!) All I have is that $250K plus my house which is paid for (reverse mortgage anyone? Still, I cannot do that until 62), car paid for, no debts, no income - PLUS this new acquired frugality I find myself getting overnight. I kind of wish I hadn't dropped out of the rat race, but I did and here I am. I have to start all over in a new career. I guess this means starting at the bottom and then working my way up, plus going back to school. At my ripe old age, all I can say is that I'm glad I plan to go into something where age isn't held against one (too much).

I'll probably never have your millions (for sure), but at least I have a better idea as to where I am in the pecking order. Compared to y'all, I'm broke.

[Marquette]

Quote:

Originally Posted by Kathryn48 I'll probably never have your millions (for sure), but at least I have a better idea as to where I am in the pecking order. Compared to y'all, I'm broke.

It's not about pecking order or anything like that, it's about portfolio survivability. It's been fairly well established (in academic papers at least) that a portfolio has a 95% survivability rate with a 4% withdrawal rate. That's $10,000 a year for a $250k portfolio.

Obviously, your personal mileage may vary, but most people would say that $10k / year isn't enough. However, as you know, getting even a part time job will greatly enhance survivability... even more so if it comes with health insurance coverage of some sort. Living cheap is the other big factor with getting by on less, but you'll need to understand your personal inflation rate and track your spending closely if you don't plan for a lot of fluff spending in your expenses.

[FIREd]

Cheer up Kathrin!

Not all is lost. You are only 48, you are still young and you have plenty of time to build more wealth! And think about it, you have a house paid for, no debt and 250K in the bank, gosh, you are better of than the vast majority of people your age!

From the washington post:
Household net worth (for 2006, including home equity):
For people age 40-49, the median household networth was $117,800! To be in the top 25% of your age group you need to have $338,100 (which you probably exceed when you include your home equity). So you probably have more money than 80% of people your age.

[Texas Proud]

Quote:

Originally Posted by nwsteve The OP has hooked upwith Fido's Porfolio Advisory Service. If she wants to manage it herself, she has only to "fire" them and resume managing her positions herself. No more fees. BTW, as a stock investor (vs mutual fund) if she moves to Vanguard, I think (IMHO) she will be disappointed with the level of brokerage services and costs vis a vis Fido. Rates are higher and executions slower. nwsteve

I will AGREE with this big time.... Vanguard brokerage cost me a couple hundred $$s because of how slow they are... I complained to a few levels up and was told 'We are not a brokerage house, we only offer this as a service to the people who want to use it'...

IOW, don't expect us to do anything that we do not have to do... and expect us to do it as late as we can... and also don't expect any service when you trade...

I have not yet tried FIDO, but might do so later with a self directed 401(k)...

[REWahoo]

Quote:

Originally Posted by FIREdreamer Cheer up Kathrin!

As FIREdreamer says, you are miles ahead of most of your peers. You have a great foundation (no mortgage or other debts and a nice chunk of savings) to build on to be able to retire comfortably before age 60. Something relatively few people are able to accomplish.

[FANOFJESUS]

Quote:

Originally Posted by Kathryn48 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 I don't feel like I can go back to my former life and the only alternative I see to what I was doing is going into a field where the pay is low but at least my age won't be such a negative, as it would be if I were trying to return to the corporate workforce. I'm afraid that in five years I've just gotten so used to controlling my own time and not having to be anywhere and it's going to be awfully tough to set that alarm and take orders from those on high. Moral of the story - never underestimate just how much it really costs to retire or quit working and I wish I would have stumbled across this board five years ago, but better late than never.

A 1% mistake is not bad at all. I would trade you my mistakes for your 1% mistake any day. I cry looking back at some of my mistakes and I am a man. If I were you, I would look into the Vanguard Wellington fund it is down about 4.5% for the year, not bad when the market is down 8%. It is one tough fund that can withstand alot of storms. I might have missed it but what percent are you down for the year?

[Finance Dave]

Quote:

Originally Posted by Kathryn48 At my ripe old age, all I can say is that I'm glad I plan to go into something where age isn't held against one (too much).

Kathryn, several points:

1) 48 is not a ripe old age. There are many people who must work until they are 68. You are only 2 years older than I am...let's hang together.
2) Due to our aging workforce, it's my opinion that over the next 4-8 years age will become a WELCOME attribute. There are a lot of admirable qualities about "older" people. They bring experience, maturity, reliability, and many other good qualities.
3) Not everyone here has "millions". Many of us are simply good at living below your means (LBYM) as you apparently have become. Good job.

I'm sure you'll do well....keep in touch.

Dave