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Switching To Vanguard
Old 03-02-2009, 12:33 PM   #1
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Switching To Vanguard

I am in the process of moving my beat up IRA to Vanguard. It has been with a local management firm since 2004. It has been invested 50% bonds/cash and 50% equities. The equity portion of the portfolio is actual stocks spread across the spectrum to simulate a mutual fund. I have been reading all the posts about minimizing the management fees and have been thinking about moving to Vanguard. The management company just sent a letter that they are raising their fees. That finalized my decision and I've got the paperwork to switch the IRA to Vanguard. Vanguard suggested that I sell my stocks while I'm with the mgmt. firm to minimize the costs (Vanguard has to charge $25 for each stock). It kills me to sell when the market is plummeting (even as I type). But, if I turn around and invest in Wellesly....isn't it a wash? This has been keeping me awake at night and I don't know if I can think clearly any longer. I want to make sure I'm not reacting emotionally and just need to bounce this off some folks that have nothing to gain by my decision. I've reached out to you before when I was trying to decide to make the jump - now, I just need to decide whether to sell the stock now and start fresh with Vanguard (I'm transferring the bonds over to Vanguard and will just let them mature).
Thanks, Dog
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Old 03-02-2009, 01:13 PM   #2
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Moving to Vanguard sounds like a good move, since you are getting clobbered with ever higher fees.

Wellesley is about 34.5% equities right now, and you currently have 50% equities. So, you would be selling more stocks that you would be buying. Not a good idea, generally, but if you bought some VTSMX to bring it up to 50% equities then I would have a hard time telling you not to do it.
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Old 03-02-2009, 01:20 PM   #3
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Yeah, if it was me, I'd sell all the stocks unless you'd buy 'em again today. That is, if you have a reason to hold or would buy more of an individual stock today, then hang on to 'em I guess. For simplicity, I'd wipe the slate clean, myself.

When you transfer your money I'd think any fund at Vanguard would be way more diversified than individual holdings.

I transferred my wifes local 401k to a Traditional IRA at Vanguard when she quit her last job. Vanguard made the process very effortless.

-CC
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Old 03-02-2009, 01:22 PM   #4
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A simplistic answer from the numbers...I am no wizard with market stuff.

Do a simple cost analysis...the back of the envelope often reveals great things...

A. what will the annual fee you might have to pay your current firm to manage your assets? can you SIGNIFICANTLY lower that by telling them you are bailing because of the increase? if so, get it in writing.

B. what is the cost (total number of stocks x $25 per stock) of actually transferring stocks you want to keep to VG?
C. what will be the annual cost (using VG expense ratios) of making the switch from individual issues (sell unwanted stocks) to stock funds?
D. what is the cost of transferring the bonds/cash portion to VG ?

If A > B + C + D, then you have your answer.

If A < B + C + D through negotiation of A, maybe it is not the right time.
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Old 03-02-2009, 06:18 PM   #5
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Why not just sell the stocks in your old account and buy VG Total Stock Market? If you want to mix it up a little with some foreign and emerging markets, buy some of that, too. With transferring the bonds, you'll keep your allocation and lower your fees.
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Old 03-02-2009, 06:26 PM   #6
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Quote:
Originally Posted by Dog View Post
Vanguard suggested that I sell my stocks while I'm with the mgmt. firm to minimize the costs (Vanguard has to charge $25 for each stock). Thanks, Dog
I switched everything I owned from Fido to Vanguard in 2005. They did not charge me anything to move my individual equity holdings over, but it may be that I had a larger portfolio so they waived the fees. I can't imagine a $25 fee being a factor in your decision re: whether to sell your holdings before transferring. If you want to sell, go ahead to avoid the $25. But if you want to hold the equities, $25 must be an insignificant cost. Best of luck whatever you decide...
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Old 03-02-2009, 07:57 PM   #7
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Thanks for the replies. I guess it is hard to sell stocks that I've watched decline in value (understanding that I haven't lost anything until I actually sell). However, I want to cut expenses (fire my current money manager) and move to Vanguard (lower fees). I guess it is a wash if I go with mutual funds...it is just a hard move to make.
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Old 03-02-2009, 07:59 PM   #8
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Midpack - the cost would be $25 per stock holding (I hold about 40 different stocks diversided across the different segments: finance, retail, energy, etc.). Oh, if only there were "do-overs" in life!
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Old 03-03-2009, 05:47 AM   #9
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Sell everything and move to Vanguard. It will hurt but you will feel better afterwards.
You may feel like you need a shower after leaving your fee-charging advisors.
They need to raise their fees because all of the portfolios have tanked under their management and their total income has decreased.
Get out before you wind up with a new agreement with them that includes some sort of exit penalty. They are going to need it.

These stocks have lots of bad karma for you anyway. You will likely have to look at them for years thinking about what each one cost when you purchased it.

Don't rush to put everything back into stocks or duplicate what went down so you will get it all back when "they go back up." It just doesn't work that way.

Start with a clean slate.

Decide what investments will be best for you going forward.

Unfortunately, no one knows at this point.

I'm not going to toss out some 60/40 this or that. No one knows and this time it really may be different.

You will like Vanguard. I moved from a full-service account at Smith Barney to Vanguard a while back. I am much happier. It is very easy to buy and sell stocks and mutual funds online. You don't have to buy Vanguard funds, you know. The only problem is that it may be too easy to buy and sell. A full service broker may keep you from churning your own account every week watching Cramer.

So. It's like a divorce. You lost half of everything. Accept it. Get over it. Move on. Life will get better .... but I digress.
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Old 03-04-2009, 06:10 AM   #10
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IMO? after Being an INWESTOR for 30 yrs, serving Wall Street with my Limo Business? Not only Managing my own 7 figure Port and It's Equity side being down -53% and That of Our Companies Pension Program is down -18% past 12 mos..:

1. In most cases, Now is NOT the Time to be Selling ( Or to be selling to raise cash to reposition into Higher recovery Potential Investments..like Going long On ETF's..
2. If anything? To be Buying
3. Worse yet? Now is not the time to Go More Conservative.. It will take Forever to recover your Losses with A More Conservative Portfolio
4. To be Inspired? Look at how your Portfolio Did btwn 2000-2002 and then Total up the tot. Rtns btwn 03' & 04'.. what was your Tot. Gains for 03' & 04'? That will give you an idea of what lies ahead for your stocks..all in 1 yr this time around
5. The % main Indexes did over +58% Btwn 03' and 04'
6. Now comapre that to where you THINK you should Move Into?
7. Wait Until AFTER you Get even and THEN Make your Move to a more Conservative Portfolio..
8. WE are closer to a Bottom and even if we drop another 10% on the S&P, stay there for a few more months, the recovery will be tremendous..Think +30-50% in less than a few weeks..
9. 4 of the 5 top successfull investment firms from the alst Bear/Bull Market are Buying now.. in ave of 10% increments
10. Many are also Buying Leveraged ETF's for the short term..allocating upto 25% of Clients Portfolio's ( Such as Buy Signal On UAPIX-Small Cap ETF )

And ask your Investment Advisor what they think the Recovery Potential is for your Portfolio of Stocks?

I went thru times like these since 1987's Crash adn learned from my Predessors to have a Plan in place Way Ahead of time of the What If Syndrom... What to do , but and sell..For a Crash, Bear, Recvoery and Longer Term Bull market.. and your Investment Advisor should have the same, ask them..

If they have provided you a +2% or more APY after their Expenses? vs Whatever else your Looking at going into? What is that telling you..? Most Investment Firms ( I've interviewed Dozens over the Yrs, including Madoff, whom our Limo Service took care of when He came into town) and You have to specify If you want to Have a Aggressive ( 80/20-70/30), Moderate ( 60/40-50/50) or Conservative ( 45/55-20/80) Portfolio.. This is the most common Problem with Clients.. They can't read your Mind and Most Firms follow a Traditional 60/40 for openers for clients..( Historically the Best over-all for Pre -Retirement Investors by their Industry..)

And you have Not LOST Anything Yet, until you Sell! You still own those # of Shares and if reinvesting Divs? Own even Alot more now..

and why, if still working, would you want to invest ina Conservative Fund Like VWINX that now has a 10 yr apy of only about 5%? At $10k Cost basis, is now only worth about $16,000 after 10 yrs.... while Many Other Balanced Funds have an ave of over $21,000 after 10 yrs yet..

this Time around is an Excellant Training & Learning Period for Newer and InExperienced Investors..Of what To and Not To do.. Look 2-5 yrs ahead, not Now , nor what has happened... and " 93% of Private Investors are their Own Worse Enemy on Investing their Own $.. Either Hire a Respectable and Proven Advisor, Firm or Own a Couple of Balanced Funds ( with min. 50% Bull and 50% Bear Histories on their Portfolios Performance ) and Let them make the Decisions for you... using the past 10 yrs is a good yardstick.."

We are selling our Bonds and conservative Investments and Buying our proven equity Investments that did very well in the last Recovery period of late 03' and 04'...( that made us over +60% then and expect even a bigger rtn this time around ) of course we had 100% of our Bond Alocations into Treasuries last yr...and have significant gains from them to ReInvest from rebalancing..
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Old 03-07-2009, 03:15 AM   #11
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Dennis may be right.
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Old 03-13-2009, 02:23 PM   #12
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I've been with Vanguard for a few months now - just got started with their STAR fund.

Honestly, I was getting tired of the big fees from my prev set of funds, and I also like the variety of funds V has to choose from.

Also, Dennis - I'm with you on your thoughts. Now is a great time to learn, and a very good time to buy.
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Old 03-13-2009, 05:18 PM   #13
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Originally Posted by Dog View Post
I am in the process of moving my beat up IRA to Vanguard. It has been with a local management firm since 2004. It has been invested 50% bonds/cash and 50% equities. The equity portion of the portfolio is actual stocks spread across the spectrum to simulate a mutual fund. I have been reading all the posts about minimizing the management fees and have been thinking about moving to Vanguard. The management company just sent a letter that they are raising their fees. That finalized my decision and I've got the paperwork to switch the IRA to Vanguard. Vanguard suggested that I sell my stocks while I'm with the mgmt. firm to minimize the costs (Vanguard has to charge $25 for each stock). It kills me to sell when the market is plummeting (even as I type). But, if I turn around and invest in Wellesly....isn't it a wash? This has been keeping me awake at night and I don't know if I can think clearly any longer. I want to make sure I'm not reacting emotionally and just need to bounce this off some folks that have nothing to gain by my decision. I've reached out to you before when I was trying to decide to make the jump - now, I just need to decide whether to sell the stock now and start fresh with Vanguard (I'm transferring the bonds over to Vanguard and will just let them mature).
Thanks, Dog
Is a Roth conversion out of the deal? Trying to think of a way to make this more appealing to you. For instance, you could sell enough of the stock at the old firm, put that into cash, then transfer that to Vanguard and convert to a Roth. Next year, repeat.
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Old 04-21-2009, 03:01 PM   #14
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Vanguard

I love Vanguard. I have been with them for around 10 years. The expense ratios on their funds along with tax efficiency on their index funds are hard to beat. The site is so easy to use. Their customer service dept is very helpful too.
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Old 04-22-2009, 09:42 PM   #15
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Whatever you do keep a good record of your cost basis from the original firm for Tax purposes. Often they (The old firms) are very little help in reconstruction during TAX time and Vanguard won't know if you move to them for selling.
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Old 04-23-2009, 09:56 AM   #16
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Whatever you do keep a good record of your cost basis from the original firm for Tax purposes. Often they (The old firms) are very little help in reconstruction during TAX time and Vanguard won't know if you move to them for selling.
Actually, NO firms are required to carry forward cost basis, although there is a bill in Congress on the back burner that would require it. It would be very helpful to the consumer. I understand why it was not mandated years ago, but with today's technology barriers to such info have been removed........
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Old 04-23-2009, 10:33 AM   #17
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4. To be Inspired? Look at how your Portfolio Did btwn 2000-2002 and then Total up the tot. Rtns btwn 03' & 04'.. what was your Tot. Gains for 03' & 04'? That will give you an idea of what lies ahead for your stocks..all in 1 yr this time around

What is it that makes you believe this? I tend to agree, albeit slightly less optimistic, but I'm curious as to what you see that makes you think we would see such a drastic reversal / upward momentum.
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Old 04-24-2009, 08:32 PM   #18
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Whatever you do keep a good record of your cost basis from the original firm for Tax purposes. Often they (The old firms) are very little help in reconstruction during TAX time and Vanguard won't know if you move to them for selling.
Is this really necessary in an IRA? Sounds like a wash to me if the resulting portfolio is comparably to what you have now.
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Old 04-29-2009, 08:26 PM   #19
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What is it that makes you believe this? I tend to agree, albeit slightly less optimistic, but I'm curious as to what you see that makes you think we would see such a drastic reversal / upward momentum.

I'd like to know the answer to that myself. I've been hearing that it may be years before things recover fully to what they were.
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Old 04-30-2009, 01:43 AM   #20
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From what I have read, the market is the first thing to recover, before even the economy, housing, or jobs. This is because, while the market can be pretty inefficient, it still is based on predictions of how things will turn on in the future. This means that when things actually do start turning around in an easily noticeable fashion, the market will have already been rebounding for a good bit before-hand.

As for the opening posters question, unless there are back-end loads, this is going to end up being a wash, except that you will be paying less from the moment you do it. This assumes you get out of the market, and back in, within a short period of time. I did my own research, and found Vanguard to be the most economical option for my Roth IRA investing needs. Aside from making sure that you have the proper documentation for your taxes, and checking for back-end loads, there shouldn't be a problem. If you were happy with the performance of your portfolio in comparison to the market, you can attempt to simulate it by buying a similar balance of funds.

So, you will need to put some thought into 1) whether you will remain 50/50 (was this too risky for you, just fine, or not enough risk) 2) select appropriate funds so that you are diversified like you were before 3) carefully choose a mix which will minimize your investment costs

I would recommend you go over to bogleheads.org, read the sticky on how to present your situation, and then follow the sticky to ask the people there how to properly structure your portfolio to match what you want, they have a lot of experience with Vanguard funds.
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