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Old 05-01-2011, 02:14 PM   #1
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Where to Start Advice?

Looking for advice on creating a portfolio.

Set up an account with an investment company 3 years ago into balanced mutal funds, a growth fund, and a bond fund.

Well it has been 3 years and I still have a negative return & I've been paying an account fee every quarter.

I've only been made whole again from the growth of my dividend reinvestments. At one time my damn balanced funds were down over 30% which was a nice surprise.

I am upset that in 3 years I've taken lots of risk, made nothing, and only enriched the invest firm. Do you understand that if I went outside and found 1 pop can and recycled it, I would have made more money?

----------------------------------------------------------------

I can now make a change and don't know what to do.

I read about inflation, the decline of the dollar, bond market dislocation, and a bubble stock market that is about blow any day now.

So what does a person do?

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Oh, and another thing that ticks me off. My mutual funds all have fees. For example my yeild is around 3% but then there are the fund fees of 1.4%
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Old 05-01-2011, 02:39 PM   #2
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You might find some helpful information in the responses to this thread: Hi all...glad to find this site but now disgusted with myself!

Although your situation is likely quite different from this poster's, the suggestions made to her could be useful to you. (She made several changes as a result and I believe is quite happy with the results.)
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Old 05-01-2011, 02:51 PM   #3
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#1 Find a discount broker that doesn't charge you an account fee. Vanguard and Fidelity are two big ones. There are many more.

#2 I'm sure a majority of investor returns over the past 3 years haven't been positive. Kind of a crappy market at the start of that period. Compare your returns with comparable balanced, growth, or bond index funds/ETF's. I don't think the S&P 500 return is positive over the last three years yet. You may be expecting your managers to beat the market or at least not lose money. At least half of them will do worse than average... right?

#3 Those dividend reinvestments are part of your total return. If your return is positive when they are included, you did pretty well.

#4 1.4% in fees is very high. Use index funds/ETF's to reduce your fees. You should average 1% or less if you stick to actively managed funds. Much less if you change to index funds. Quoted fund performance is net of fees unless you are accessing the funds in some unusual arrangement.

My favorite strategy is described at www.fundadvice.com. They have some good articles describing a diversified buy-and-hold strategy.

If you want to stay very simple, try an all-US (or your home country) equity fund, a similar bond fund, and an international all-world ex-US equity fund. All index funds/ETF's, not active funds. Select the percentage you want of each and once a year adjust your fund balances so they continue to match your target percentages.

If you are worrying about current conditions and don't want to invest now, try doing it 10% per month (or whatever feels OK), keeping the correct percentage in each fund. No thinking required. If the market is going down, great, you're getting more shares for your money. If it goes up at least you have something already in the market.

Keep reading. Check out Morningstar.com. You should have a few more suggestions here by early tomorrow.
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Old 05-01-2011, 03:15 PM   #4
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Welcome to the forum. Great advice given above by Animorph.

The good news is that it is easy to do it yourself and you don't have to sacrifice returns. Bear in mind that the last few years have been the worst market in decades.
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Old 05-01-2011, 05:24 PM   #5
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The best place for investment advice online has migrated to Bogleheads Investing Advice and Info Read the books suggested and click on the "Getting Started" link. Good luck!
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Old 05-01-2011, 10:50 PM   #6
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Okay, Maybe I'm a perma bear but I don't see how things have improved since the crash

1.) We have run away inflation in Energy and Food
2.) GDP is being supported by Government Spending and Borrowing.
3.) The Gov is going to have to pull back the spending. All the Gov. in the world are going to cut back.
4.) Jobs are hard to find

---------------------------------


1.) What has changed in the market and economy since the crash?

2.) Is now the time to be buying stocks and bonds?

3.) How are companies going to post profits and growth?

4.) Are the dow/s&p even going to grow at all?

5.) What is the market going to do when oil is $150.00 and gas is $5-6

----------------------------------------------------

sorry if my questions are silly.
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Old 05-01-2011, 11:51 PM   #7
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Originally Posted by HappyEarlyRetirementForum View Post
Okay, Maybe I'm a perma bear but I don't see how things have improved since the crash

1.) We have run away inflation in Energy and Food
2.) GDP is being supported by Government Spending and Borrowing.
3.) The Gov is going to have to pull back the spending. All the Gov. in the world are going to cut back.
4.) Jobs are hard to find

---------------------------------


1.) What has changed in the market and economy since the crash?

2.) Is now the time to be buying stocks and bonds?

3.) How are companies going to post profits and growth?

4.) Are the dow/s&p even going to grow at all?

5.) What is the market going to do when oil is $150.00 and gas is $5-6

----------------------------------------------------

sorry if my questions are silly.
Welcome to the board, "Happy".

If you're asking how you should invest to address all these issues then you have two choices:
1. Learn about asset allocation and design your own portfolio to handle these issues. The Bogleheads Wiki is a good place to start: Category:Asset Allocation - Bogleheads
You could also read about AA from the recommended reading list:
An updated FIRE recommended reading list (with a military twist)

2. Buy gold bullion, shotgun ammunition, and MREs for your shelter.

In general all these issues will always be with us in one form or another. You can choose to be paralyzed with fear while you try to divine which way the market will go. Your other choice is to set up a defensive asset allocation to enable you to sleep better at night.

I'm going to avoid direct answers to questions 1-4 and 1-5. Some companies somewhere will always find growth, some portion of the stock market will grow, and the market will figure out how to handle high gas prices.

The rest is too easily sucked into political debate. Not gonna go there.
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Old 05-02-2011, 12:09 AM   #8
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Welcome to the FIRE forum Happy. You don't give us any info on what stage of life you are in, so advice will be general.

If I were to do it all over again, I would:
1) Read Boglehead forum reading list
2) Decide on when I want to FIRE (what age or timeframe)
3) Decide how much I need to do so for the appropriate timeframe (i.e. how long do you expect to live)
4) Do the math on where I am, do the math on what I need, see if a) I am there or b) what the shortfall is
5) If 4a then hit the button, if 4b, then figure out what I need to get the shortfall in the timeframe alloted.
6) Nose to the grindstone for x number of years then FIRE
7) Before you hit the button, you should figure out what you THINK your risk tolerance is (and that of your partner if you have one). That will dictate a lot of your financial decisions, like asset allocation, survivor decisions, ...etc

btw, you're timing was very bad ... that is why you fingers are singed (sp?). One of my friends starting investing at the end of 2009 early 2010 and thinks the market is the only place to be. It kinda all depends. He talks about all his winners and how the market is wonderful.

Best of luck to you.
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Old 05-02-2011, 08:02 AM   #9
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great advice in earlier posts; all I can add is stick to either Vanguard or Fidelity (low cost funds) and subscribe to a financial planning magazine, either Money, Kiplinger or Smart Money and read it closely each month. After a year or so you'll understand much more about market choices. Good Luck, and stay with it!
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Old 05-02-2011, 08:49 AM   #10
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Good!! Thank you

I'm reading and thinking about what you are writing.

A question on my broker / firm.

They told me their annual management fee of 1.4% was replacing the the mutal fund load fees?

Does this sound correct?

And I was able to purchase more shares at the time of investment.

-----------------------------

It appears that it is better to just pay the load for long term balanced stock funds?

For example, if you plan to hold the funds longer than 3 years it is cheaper just to pay the load? even though you buy less shares?

------------------------------

Building a defensive portfolio is what I want to do with some investment in growth, but mostly I want safe dividends.

I just hate "Dead Money" which are non productive investments that just sits on the floor paying fees.

Right now I just don't trust my broker. I don't want to be rude, but it feels like he was a used car salesman. He told me that there was going to be strong growth in the market, that the mortgage crisis was no big deal, and that it would easy for him to make 7 - 8 %. He just smiled all the time.

When the market crashed he just shrugged. Thats the market he said.

Now, I feel like they are paying me back with my own money and trying to tell me I have growth and a yeild. All I did was recover the money that was lost.
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Old 05-02-2011, 10:12 AM   #11
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They told me their annual management fee of 1.4% was replacing the the mutal fund load fees?

Does this sound correct?
No.

That means that they are able to trade funds with a 0% cost to them for trade or ongoing holding fees?

I don't think so ...

You pay x% to the fund.

You payx% to your "management firm".

There is no "free ride". Heck, DW/me pay .53% overall on our holdings (yeah, not as good as VG index funds, but we're more selective outside of a normal "vanilla" index portfolio, as slice/dice investors), but we don't pay anything to anybody else outside of that total portfolio fund expense.

I would suggest that you ask some questions of your "advisors" and find out what you really are paying for, and I feel that you will learn that you can do it on your own, without their expenses (thus increasing your total return)...
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Old 05-02-2011, 12:09 PM   #12
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You are overpaying your broker, who is worth $0 if I'm being charitable. Don't pay anyone to buy mutual funds for you. If they're buying stocks for you, and you're OK with what they're doing, then something below 1% for an annual fee is within the norm at least. Given the talk this guy's been giving you, you should run away from him.

However, there's no harm in taking enough time to feel comfortable with investing by yourself before you transfer your money.

Vanguard or Fidelity would probably be happy to give you some advise on an initial portfolio as well.

I agree the market may be a little high right now. Maybe a good time to average into the market. But are you going to be moving 100% of your portfolio in and out of the market every time the sentiment shifts? I'd stay at least 80% invested through your transfer.
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Old 05-02-2011, 12:11 PM   #13
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That 1.4% will likely be 30-40% of your real returns. What you live off of in retirement is your real returns. That means you are trading 30-40% of your retirement income to have someone manage it for you (and more likely than not, poorly). In addition, it does not stop at 1.4%, while your "adviser" will not charge loads, the funds he will plunk your money into likely will (and he will get a kickback), which will deplete your principle by 3-5%. He may do this multiple times, further depleting your principle 3-5% each time. And that is a good scenario with brokers, quite often there is an expensive annuity thrown in on top of all that.

Or, you could just invest yourself, at the cost of 0.2-0.3%, no loads, and having to spend only a few hours on it each year, once you have decided on an allocation (and this can be very simple, such as a total market index, a total bond market index, and a savings account).
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Old 05-02-2011, 12:18 PM   #14
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A question on my broker / firm.

They told me their annual management fee of 1.4% was replacing the the mutal fund load fees?

Does this sound correct?
You seem to want answers, so I'll tell you your brokerage is almost certainly ripping you off plain and simple. If you ever said what firm it is, I missed it, but that would be helpful.

You could easily learn to manage your investments yourself and reduce your expenses considerably - and improve your returns by more than 1% by virtue of lower expenses. You don't have to be a rocket scientist, most of us here aren't, but you do have to know a little something about investing, asset allocation, rebalancing - and have the mental discipline to follow through in good times and bad.

If you don't want to learn and most people don't, that's what expensive brokers are for. Many people pay exorbitant fees without ever realizing at, at least you're ahead of all those people and asking the right questions. Your choice...
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Old 05-02-2011, 02:25 PM   #15
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Okay, Maybe I'm a perma bear but I don't see how things have improved since the crash
...
sorry if my questions are silly.
Your question may not be silly, but it is highly amusing.

If you don't call going from S&P500 index ~680 then to ~1360 today an improvement (doubling!!!), then there is no hope for you.
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Old 05-02-2011, 10:17 PM   #16
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Your question may not be silly, but it is highly amusing.

If you don't call going from S&P500 index ~680 then to ~1360 today an improvement (doubling!!!), then there is no hope for you.
It seems his timing is bad. If he had started investing in March 2010 he would be feeling pretty good right about now IMO.

Happy you need to take the long view in this 'game'. I know it's tough after taking such a substantial 'hair cut', but some of us have been there too. You can learn the hard way by yourself or learn from our lessons.
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Old 06-21-2011, 02:50 AM   #17
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I suggest finding a really good seminar at some hotel, one that specializes in day trading, work out a system and use all those broker fees to trade for yourself.
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Old 06-21-2011, 03:05 AM   #18
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I suggest finding a really good seminar at some hotel, one that specializes in day trading, work out a system and use all those broker fees to trade for yourself.
Easy, mick. He might take you seriously.
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Old 06-21-2011, 09:42 AM   #19
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If you don't call going from S&P500 index ~680 then to ~1360 today an improvement (doubling!!!), then there is no hope for you.
That ~680 level was only available for about 3 days, at the very bottom of the Mar09 crunch. Very few people were that good or that lucky.

A whole lot more people bought somewhere between '05 and '08, in the 1200-1500 range. For those people, today's S&P value of 1290 doesn't look so hot.

Worse, anyone who bought in from mid-99 to mid-01 has watched their account value gyrate up and down for 10-12 years, with zero gain after all that time.

And that's in dollar terms. When priced in terms of most other major currencies, the S&P is DOWN a lot in the last 10 years. E.g. the US$ is worth about half as many Swiss Francs as it was on 1/1/2000, so priced in Francs, the S&P500 is down 50% since 1/1/2000. That currency difference represents a very real decrease in buying power of the dollar in that period.

Furthermore, I think there is a very real chance that Happy's "perma-bear" assessment is more accurate than any of us would like. Look at Japan's stock market for the last 20 years and you will see what can happen when the country's finances get out of whack. (Hint: the Nikkei index is currently about 75% below its 1989 peak. For every 100 yen you put into the Nikkei in 1989, you have 25 now.)

Given that, I think that anyone who says "put all your money in balanced funds and everything will be just peachy" is whistling past the graveyard.

Just call me Mr. Sunshine......
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Old 06-21-2011, 10:03 AM   #20
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You mean you didn't put your money in Swiss Francs like many of us? Shame on you!

There have been many articles that folks should not invest in just the S&P500 index. The conclusion is that a diversified portfolio of stocks (large,mid, small, US, foreign, etc) and bonds that was rebalanced occassionally along with some some tax-loss harvesting did just fine.

Now if you are complaining that folks didn't make 15% to 25% per year in all that time, then you have a point.
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