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studying the investment situation
Old 05-21-2012, 08:30 PM   #1
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studying the investment situation

I have been using the suggestions I have received (so many, and thank you!) to begin examining all the things our FA has us in, the various retirement 401ks, and the options of Vanguard, so I can compare. My spreadsheet has for each, a column for where the item is (or could be had), the fund name, ticker symbol, expense ratio, YTD, 1, 5, and 10 yr yields, front end fees and load, deferred fee/load, Morningstar risk assessment, MS return assessment, number of stars, and minimum investment andVanguard's own risk assessment for their funds. Of course, for some things there are blank columns: for example, one retirement 401 K, the one that gets matching funds for a little of it, is in Vanguard target 2015; and the Tiaa-CREF stuff doesn't have Morningstar data.
But, is there any other data I need to assemble to be able to compare all these funds?
Thanks much!
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Old 05-21-2012, 08:35 PM   #2
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I'm chuckling because the only thing you really need to go on is COST. For a given asset class, what's the lowest cost you can achieve? MS risk, return, stars are all BS and mean nothing.

In other words, once you are in the Large_Cap_US regime, what's the lowest cost way to achieve that? Or in the Small_Cap_exUS regime, what's the lowest cost way to achieve that?
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Old 05-22-2012, 12:27 PM   #3
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LOL, are saying that ALL I need to do is choose index funds with the lowest expense ratio? Track record ignored?
(Glad to offer you a laugh!)
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Old 05-22-2012, 12:39 PM   #4
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Is this all tax deferred or are there any taxable investments here? Also, are you only comparing funds or is there an asset allocation plan?
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Old 05-22-2012, 12:39 PM   #5
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It is in your FA's best interest to confuse you and to make everything as complex as possible. It will be next to impossible without many hours of meticulous work to complete a full comparison of your specific situation.

Research consistently shows that many (pick one) simple, no load index portfolios consistently beat ~80% of actively managed funds. The ones that don't get beat in one time period usually get beat the next.

Scott Burns has a lot of different information at his web site. Here's a link:

AssetBuilder Inc. - Registered Investment Advisor- Couch Potato Monthly Results

His website has a wealth of good information even if it is associated with DFA funds. My experience with DFA funds is that they change the make up of their funds and their recommended weighting periodically and apply the results back in time. So, doing what they say you should do now ten years ago would have made you a lot of money.
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Old 05-22-2012, 12:59 PM   #6
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LOL, are saying that ALL I need to do is choose index funds with the lowest expense ratio? Track record ignored?
(Glad to offer you a laugh!)
It is a good start, index funds with low expenses. You still get to play with slice and dice market segments if you want. After that, see what you can put together with active funds. The problem is that with lots of funds available, it is likely that a few of them will be "lucky" enough to do well even if they aren't geniuses. So there's more work involved.

So how do you recognize the geniuses among the just lucky? I also look at long-term performance, management team with a value-ish bent (not a single hot-shot manager who may retire in a few years), low portfolio turnover rate, and a performance record that is not relying on a single good year for its outperformance. Availability at your broker is also handy, though I go direct with the fund company occasionally.

Once you have your picks, then you have to monitor them versus your comparable index funds. If your picks do worse over a reasonably long period of time (hopefully a full market cycle), then you can change your selection criteria and try again (probably performance chasing), or give up and use the index fund instead. If your picks are still doing well then you may be a good fund picker.
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Old 05-22-2012, 01:05 PM   #7
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You mention Vanguard. Have you input all your investments and run a Portfolio Watch report and a Financial Engines analysis from the Vanguard website?

Portfolio Watch will give you a nice summary of your overall asset allocation across your various accounts, concentrations, etc. and suggestions.
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Old 05-22-2012, 01:11 PM   #8
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Some quotes from William Bernstein that I like;

"Brokers serve their clients the same way Baby Face Nelson serviced banks. And why, because that's, where the money is."

"If you act on the assumption that every broker, insurance salesman, mutual fund salesperson and financial adviser is a hardened criminal, you will do just fine."
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Old 05-22-2012, 01:20 PM   #9
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LOL, are saying that ALL I need to do is choose index funds with the lowest expense ratio? Track record ignored?
(Glad to offer you a laugh!)
Absolutely, yes. Do not forget that there is an index for just about every asset class. I'm not saying you should even invest in the S&P500 index fund, but choose your asset classes wisely, then select the index fund in that asset class.

And certainly do not compare your advisor's small cap value fund to the S&P500 index fund.
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Old 05-22-2012, 01:21 PM   #10
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So many thanks--that VG site should help a lot. Spouse is the one to usually keep up w/ AA.
Quote: It is in your FA's best interest to confuse you and to make everything as complex as possible. It will be next to impossible without many hours of meticulous work to complete a full comparison of your specific situation. End quote

Exactly--those many hours of meticulous work are under way right now. I just want to make certain that the many hours of work are the RIGHT work, and collect the RIGHT data.
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Old 05-22-2012, 01:58 PM   #11
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Well, I think those many hours of meticulous work are a waste of your time.

You could try this: Put all your investments into a Morningstar Instant X-ray Analysis. See the results. Then try to mimic the results of that asset allocation with a few index funds. By "results" I mean the percentages of cash, bonds, US stocks, foreign stocks, and the 9-box style grid for stocks as well as the grid for fixed income. It should take about 15 minutes of work to do this.
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Old 05-22-2012, 02:07 PM   #12
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The detail work may help your piece of mind, but IMHO it won't help you make a decision on what to do going forward.

If you are in a bunch of funds and you want to self-manage, I would suggest that the next steps can be very simple including:

1. Determine your AA
2. Choose a low cost investing company (Vanguard, Fidelity, etc)
3. Choose index funds that match your AA
4. Buy said funds
5. Relax and have the beverage of your choice because you're already done (except with the occasional rebalancing as needed)

If 401k accounts are involved there is a bit more complexity since you'll have the AA split among different companies AND you have to know which funds go in tax deferred vs taxable accounts. (Bogleheads.com has great guidance on this).

When we moved away from Ameriprise I started to go down the same path as you and began analyzing what we currently had. I decided quickly that it was a moot point and instead focused on what whe should be doing going forward and then got it done as quickly as possible.
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Old 05-22-2012, 02:07 PM   #13
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While I wholeheartedly agree with what LOL! and others are advising, in all fairness all of us probably once paid too much attention to 1,3,5,10 year performance and Morningstar ratings and were oblivious to expense ratios and tax efficiency among other metrics.

Unfortunately the mainstream population may always focus on 1,3,5,10 year performance, MStar ratings, magazine covers, hot tips from friends/family, CNBC etc. and get below average returns for the effort. Lots of people have to have below average results for all others to have returns in the top half. You can achieve above average performance without all the work, but people just refuse to believe it, and the financial services industry goes to great lengths to reinforce the latter.

Have you read any of the W Bernstein or J Bogle books? http://www.bogleheads.org/readbooks.htm/url
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Old 05-22-2012, 08:02 PM   #14
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Originally Posted by pb4uski View Post
You mention Vanguard. Have you input all your investments and run a Portfolio Watch report and a Financial Engines analysis from the Vanguard website?

Portfolio Watch will give you a nice summary of your overall asset allocation across your various accounts, concentrations, etc. and suggestions.
PB, I can't even find them on the site. Do I need to already have an account? I have one of their funds, but in a 401k through work, not through them directly.
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Old 05-22-2012, 09:36 PM   #15
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I believe that you need to have an account with them to use those tools. Call them and see if you get access to the tools as a result of the Vanguard 401k.

Or as LOL! suggested, use M* Instant X-Ray analysis.
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