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should I change investment strategy?
Old 02-24-2010, 10:44 AM   #1
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should I change investment strategy?

I currently have my retirement accounts with Fidelity Personal Advisory Service. We are both 55 years old and want to retire by 62. I have recently read the "New Coffeehouse Investor" and we are thinking of switching to this index style of investments. The PAS historical returns for the last 10 years are arount one percent. This compares with the five percent return of the coffeehouse style.

I called PAS and they are trying to talk me out of changing, because they believe that the managed account style will beat the index style over the long run (even though it has not in the last 10 year period). They said that they have a fiduciary commitment to me, with over 70 full time annalists (they talk daily with Bill Gross), and over 50 billion in assets giving me the advantage of institutional funds.

I want to do what is best for me and my family. Please advise.
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Old 02-24-2010, 10:46 AM   #2
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They said that they have a fiduciary commitment to me !

I have some nice swamp land for sale you too !

I had a similar experience and decided to follow my gut and convert the FIDO managed accounts to FIDO index funds. Have no regrets whatsoever.

BTW, I did this five years ago.
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Old 02-24-2010, 10:56 AM   #3
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... with over 70 full time annalists (they talk daily with Bill Gross),
Wow! When would he have time for anything else... like go to the bathroom, for instance. (Maybe this herd follows him in.)
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Old 02-24-2010, 11:01 AM   #4
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70 full time analysts sounds expensive ... (pssst; costs matter) I'm basically an index fund investor.

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Old 02-24-2010, 11:10 AM   #5
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I don't like either approach, but if you are going to be a passive investor, they are reasonable choices. Don't make a decision based upon 10 year returns alone. This has been an unusual period to say the least.
Include in your research 5 year, 3 year, 1 year, 6 month, and 3 month figures.
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Old 02-24-2010, 02:11 PM   #6
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I see you've been here a few years, which means you probably already know that you won't find many people here advocating a managed approach. And is the 1% return before or after fees - in other words, is it the published return or your own personal return calculated from what you've put in versus what it's currently worth?

Personally I don't buy any of those sales arguments any more (literally or figuratively) and DH and I have done way better by switching to a coffeehouse-like approach for about the last 10 years. There have been plenty of ups and downs in that period where the "analysts" should have proved their worth, if they were going to.
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Old 02-24-2010, 02:42 PM   #7
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I'm a long term bull (based on the growth in Asia) but for the moment I'm very bearish and I'm shorting the market in general. Almost totally in cash otherwise. I feel the rational/efficient market theory is a bunch of crap and thus am not a believer in mutual funds. The markets are as irrational as the people who invest in them. I like to invest in high dividend yielding stocks that have a nice growth pattern. To protect myself I put 10 % trailing stop loss orders on them all, so I don't get surprised when I'm not watching. Tough to do that in a mutual fund. Take greater control of your money.
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Old 02-24-2010, 03:23 PM   #8
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Old 02-24-2010, 09:21 PM   #9
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Costs matter.

Ditto onwards suggested reading. Along with a whole library of suggested here. Four pillars, bogleheads guide to successful investing, work less live more as a few examples.

I still have one managed fund in my 401k which I'm migrating out of, everything else is an index.
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Old 02-24-2010, 10:09 PM   #10
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thanks for the help, I will be changing to index funds
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Old 02-25-2010, 08:36 AM   #11
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For a more complete reading list see:

An updated FIRE recommended reading list (with a military twist)
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Old 02-25-2010, 10:20 AM   #12
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thanks for the help, I will be changing to index funds
I was afraid you were going to wait another 10-20 years for sufficient data to make a decision...
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Old 02-25-2010, 10:46 AM   #13
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Take a stroll over to Bogleheads for a free portfolio recommendation. They don't even want 1%.

Bogleheads :: View topic - Asking Portfolio Questions
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Old 02-25-2010, 11:18 AM   #14
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thanks for the help, I will be changing to index funds
Well, now that you have done exacting due diligence...

This is after all an internet board, and one with a very definite outlook and personality.

There are different ways of looking at most of these things, and for the most part you will not find them here.

Ha
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Old 02-25-2010, 12:31 PM   #15
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Well, now that you have done exacting due diligence...

This is after all an internet board, and one with a very definite outlook and personality.

There are different ways of looking at most of these things, and for the most part you will not find them here.

Ha
Right, be sure to check out www.variableannuities.com.....
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Old 02-25-2010, 07:22 PM   #16
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I was afraid you were going to wait another 10-20 years for sufficient data to make a decision...
I went with my gut. I called my rep. over at Fidelity and he befuddled me with his technical knowledge. But when I feel confused and anxious, I tend to go with what I can understand. If they were such experts then why are they trying to get hefty commissions from me, when they could just make the money themselves on their investments.
I also am reading "A Random Walk Down Wall Street"
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Old 02-25-2010, 07:50 PM   #17
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Here's what I don't get about the "only 1%". If the SWR is 4% isn't it 25% that they are taking to pay for all the people trying to help you?
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Old 02-25-2010, 09:06 PM   #18
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I also am reading "A Random Walk Down Wall Street"
This could be a pivotal moment for you. It was for me.
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Old 02-26-2010, 10:42 AM   #19
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I went with my gut. I called my rep. over at Fidelity and he befuddled me with his technical knowledge....
My experience was not with Fidelity, but with a group that did the same thing. They loaded me up with talk of past performance (it was in their best interest in my case), dedicated research staff, investor services, fiduciary responsibility (I got that too) and encourage you to think about it before you 'make a mistake you will regret'. It is a desperate attempt to hold on to your account.

You just need to be persistent. If there are no tax consequences for you, just move everything to a new tax sheltered account that you control, where there will be no pressure from these professionals.
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Old 02-26-2010, 01:42 PM   #20
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...I called PAS and they are trying to talk me out of changing, because they believe that the managed account style will beat the index style over the long run (even though it has not in the last 10 year period). They said that they have a fiduciary commitment to me, with over 70 full time annalists (they talk daily with Bill Gross), and over 50 billion in assets giving me the advantage of institutional funds.

I want to do what is best for me and my family. Please advise.
Please note my use of bold font on the "they" stuff above.

Three little words I shall give to you...

"It's YOUR money."
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