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Old 01-12-2009, 02:45 PM   #21
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Will the OP get clobbered with short term cap gains or would this be better as a long term exercise to trim down that fund inventory? It has taken me 4+ years to undo the damage I did to myself by chasing performance and going crazy with too many funds. Comments?
One of the few silver linings about this horrible bear market is that it is relatively painless from a tax consequence to get rid of doggy funds and simplify.
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Old 01-12-2009, 02:57 PM   #22
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One of the few silver linings about this horrible bear market is that it is relatively painless from a tax consequence to get rid of doggy funds and simplify.
Last year, almost all funds looked "doggy".........
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Old 01-12-2009, 04:10 PM   #23
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The strategy is supposed to be 60/40 allocation which is "tax aware," which I guess explains the Maryland tax-exempt muni funds (I live in Maryland). They claim it's "personalized" service, but I suspect they just manage a handful of investment profiles and match new customers to the closest one.

.
Not sure if this was mentioned, but since you are in MD and they claim to be offering "personalized" service, have you visited one of Fido's investment centers? They have offices in Bethesda, Baltimore and maybe other locations in the area and it could be beneficial to have a face-to-face meeting.
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Old 01-12-2009, 04:19 PM   #24
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Not sure if this was mentioned, but since you are in MD and they claim to be offering "personalized" service, have you visited one of Fido's investment centers? They have offices in Bethesda, Baltimore and maybe other locations in the area and it could be beneficial to have a face-to-face meeting.
For 1%, they should come and cut your lawn too.........
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Old 01-12-2009, 04:30 PM   #25
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I second what FIREDreamer said. You can do much better on your own, while saving probably 1.5%-3% a year in fees/expenses/taxes.

I can only think advisors assemble these huge asset lists for their clients for three reasons:
1) To present a highly complex list of holdings that implies some very detailed planning went into choosing them, justifying the 1% fee.
2) To allow some high fee funds to be hidden among the others.
3) To dissuade the client from managing their own investments. The list makes it look like a very complex undertaking, and at a minimum if a client decides to DIY, he has to decode the byzantine structure that has been built, figure out what to sell and when to sell it. The hassle probably encourages some folks to stay aboard for a few years extra. Cha-ching!

I'm surprised that Fidelity would do this to someone. Vanguard has nothing to fear in this area.
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Old 01-12-2009, 05:38 PM   #26
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Do you have to pay the 1% advisory fee every year?
If so, I'd dump them and move the money into Vanguard funds over time.


You said you are 40 - if you live to 80 and if you were only to pay them the same 8K/year - you would be paying them 320K. Quite a lot of money.

A percentage fee for the Fidelity advise is like Real Estate selling fees.

Does it really cost twice as much to sell a 400K house Vs a 200K house?
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Old 01-12-2009, 06:27 PM   #27
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Do you have to pay the 1% advisory fee every year?
Yes, he does..........

Quote:
Does it really cost twice as much to sell a 400K house Vs a 200K house?
In this market, yes...........
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Old 01-12-2009, 06:41 PM   #28
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Yes, he does..........
In this market, yes...........
How?
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Old 01-12-2009, 07:31 PM   #29
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Last year, almost all funds looked "doggy".........
LOL true that but as example. For the last 5 years I've considered switching from my slightly under performing Schwab Small Cap Index fund to a lower expense, better perform Vanguard index fund/ETF. But each paying the 15%+ tax on the considerable capital gain in order to pick up an extra .5-1% performance didn't make sense. This year with lots of other other losses making the switch was painless.
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Old 01-12-2009, 08:23 PM   #30
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How?
In relative terms it still costs twice as much to see a house worth $400k than a house worth $200k. That's the literal response.

As to the 1% fee (I'm assuming you're suggesting a break on the rate based on the amount invested), yes 1% fee is due every year until such time as the investments exceed the next tier.

That said, HOWEVER, the OP didn't say if his arrangement with Fidelity limited them in any way to the investments, i.e., no loaded funds, prior approval before investing, etc. The cost, as many have pointed out, is far more than the 1% fee when one counts in the up-front loads and the expense ratios.

To the OP: if you made money in 2008, I'd suggest that Fidelity might want to lower this year's management fee in acknowledgment of the 'haul' they earned on the loads in 2008.

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Old 01-12-2009, 08:38 PM   #31
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I did not look at the funds since everyone pretty much said, "Holy Crapola!"

But I wanted to write that the OP is probably not paying any front-end loads because the loads are likely waived. And the numerous funds is a good way for Fidelity to have some winners each year.

This makes portfolio reviews easier, "Well, you were in the number one fund in bunny futures this year", while ignoring the fact that you were in the worst fund for large cap stocks. Then the next year, "Well, you were in the number one fund in real estate in third world countries fund", while ignoring that your bond funds lost 10%. Etc.

Basically they are dazzling you.

And you should not compare their results to some play portfolio. Instead, compare it over the long term to a serious asset allocation of index funds that is properly tax-managed.
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Old 01-12-2009, 08:46 PM   #32
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In relative terms it still costs twice as much to see a house worth $400k than a house worth $200k. That's the literal response.
Can you explain that in a non literal response; so I can understand it?


++++
A percentage fee for the Fidelity advise is like Real Estate selling fees.

Does it really cost twice as much to sell a 400K house Vs a 200K house?
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Old 01-12-2009, 11:24 PM   #33
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And you should not compare their results to some play portfolio. Instead, compare it over the long term to a serious asset allocation of index funds that is properly tax-managed.
And what funds might those be? (Not being sarcastic, I'm new here! Vanguard Wellesley?)
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Old 01-12-2009, 11:58 PM   #34
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I second what FIREDreamer said. You can do much better on your own, while saving probably 1.5%-3% a year in fees/expenses/taxes.

I can only think advisors assemble these huge asset lists for their clients for three reasons:
1) To present a highly complex list of holdings that implies some very detailed planning went into choosing them, justifying the 1% fee.
2) To allow some high fee funds to be hidden among the others.
3) To dissuade the client from managing their own investments. The list makes it look like a very complex undertaking, and at a minimum if a client decides to DIY, he has to decode the byzantine structure that has been built, figure out what to sell and when to sell it. The hassle probably encourages some folks to stay aboard for a few years extra. Cha-ching!

I'm surprised that Fidelity would do this to someone. Vanguard has nothing to fear in this area.
Good points, although I'd think with all the competition with investment schemes and money managers out there, it makes more business sense for them to truly do their best and try to get best returns instead of losing clients after a couple of years when they realize it's not worth it. So I have to wonder why their best and brightest are currently saying put everything in big distributed funds of funds?
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Old 01-13-2009, 12:13 AM   #35
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Can you explain that in a non literal response; so I can understand it?


++++
A percentage fee for the Fidelity advise is like Real Estate selling fees.

Does it really cost twice as much to sell a 400K house Vs a 200K house?
Sorry, Dex, if I wasn't clear. In both cases (real estate and investment purchases) any fees to complete the sale are based on the value of the purchase. So to sell a $200k house, it might cost 10% to complete the sale (including commissions and taxes/fees based on the sale price) - $20,000; it also costs 10% to sell a $400k house - $40,000. So the sale of a $400k house costs twice as much as the sale of a $200k house.

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Old 01-13-2009, 12:18 AM   #36
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So I have to wonder why their best and brightest are currently saying put everything in big distributed funds of funds?
(1) For the income it generates for the firm. Even if there is no load to buy the fund, Fidelity is earning a commission from the mutual fund company for selling the OP the fund.
(2) To assure the client they have placed his/her investment with a highly regarding investment company.

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Old 01-13-2009, 12:41 AM   #37
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Good points, although I'd think with all the competition with investment schemes and money managers out there, it makes more business sense for them to truly do their best and try to get best returns instead of losing clients after a couple of years when they realize it's not worth it. So I have to wonder why their best and brightest are currently saying put everything in big distributed funds of funds?
Many clients never catch on to the game. First, the advisor has always got a reason things turned out as they did. Second, many of them sell "hope" as much as anything else, and many clients want to believe. It's the same thing that keeps people paying high fees at boutique managed mutual funds. Sometimes a particular fund might do well, sometimes it won't but on average the managed funds typically do worse than the indexes, particulalry after expenses.

Many people want to pay an advisor who will time the market and get them into/out of the various sectors at the proper time. This seldom works. If it were possible to do it routinely (or even to spot the people who can do it) then it would be very easy to become fabulously wealthy. You probably already know this. What seems to work for many investors is to carefully choose a desired asset allocation and then invest in low-cost products that achieve that allocation. Rebalance periodically and don't fuss with it too much.
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Old 01-13-2009, 12:59 AM   #38
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Many clients never catch on to the game. First, the advisor has always got a reason things turned out as they did. Second, many of them sell "hope" as much as anything else, and many clients want to believe. It's the same thing that keeps people paying high fees at boutique managed mutual funds. Sometimes a particular fund might do well, sometimes it won't but on average the managed funds typically do worse than the indexes, particulalry after expenses.
I bet Kabekew is really feeling great about now.

Maybe he just found this forum. But if he has been here a while I am always interested in the motivation of someone who takes a big expensive postion, then asks others what they think of it.

Wouldn't it be better to ask prior to acting?

Ha
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Old 01-13-2009, 08:30 AM   #39
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I use Fidelity and I never had anyone call to solicit me to use their advisory fee program. Did you seek out this service? I do get a call every now and then from my account assignment guy to see if there as anything he can do for me. The other day I asked if there was any quick way to recoup my losses and he said no. So I said 'no', there is nothing you can do for me.

If I were you, I would simply diversify among their index funds and use a couple of municipal bond etf's if you are needing some protection from taxes. Should be able to accomplish what you want in 6 for or so funds. Or just go to a target fund. Forty funds is ridiculous.
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Old 01-13-2009, 09:10 AM   #40
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How?
a)The 1% management fee is assessed at 25bp (1/4%) each quarter. If the value of the portfolio goes up, Fido broker makes more money, and vice versa.

b)I'm not an RE expert but one of my best friends is. To answer your question, more expensive houses generally take more time and expense for the agent to market. If you live in an area where "affordable" housing is $200K, that house will sell very quickly. The more expensive a house is, the less buyers there are that can afford it, so the agent has to work harder and incur more expense to market it.
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