Looking to Simplify Portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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TinyElvis
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Looking to Simplify Portfolio

Post by TinyElvis »

Hi.

I have been following this forum for quite some time and have decided to participate. I am hoping that exposing myself like this will prompt me to make the moves necessary to achieve comfort in my financial decisions.

Emergency funds: Yes (two years)
Debt: Mortgage 4.18%
Tax Filing Status: Married Filing Jointly, small business owners (S-Corp)
Tax Rate: 28% Federal, 6% State
State of Residence: TN
Age: 44, 38, no kids and none planned

Desired Asset allocation: Unsure
Desired International allocation: Unsure

Value: High six-figure portfolio value.

UBS Taxable Account - 31.84%
4.0 % Cash
5.26% American Funds Growth Fund of America (AGTHX) (.66)
5.21% American Funds AMCAP (AMCPX) (.68)
3.27% Amerian Funds American Mutual (AMRMX) (.59)
3.12% American Funds New Perspective (ANWPX) (.76)
2.38% Oppenheimer Small&MidCap Value (QVSCX) (1.17)
2.07% Loomis Sayles Strategic Income (NEFZX) (.94)
1.91% Loomis Sayles Strategic Alpha (LABAX) (1.10)
1.52% Oppenheimer Senior Floating Rate (OOSAX) (1.17)
1.42% Seligman Communications&Information (SLMCX) (1.36)
.88% Seligman Communications&Information(B) (SLMBX) (2.11)
.79% American Funds High Income Trust (AHITX) (.66)

His UBS Roth IRA - 22.86%
6.39% American Funds AMCAP (AMCPX) (.68)
3.99% American Funds Fundamental Investors (ANCFX) (.61)
3.65% American Funds Growth Fund of America (AGTHX) (.66)
2.41% Loomis Sayles Strategic Income (NEFZX) (.94)
2.0% American Funds New Perspective (ANWPX) (.76)
1.77% First Eagle Global Bond (SGENX) (1.11)
1.46% Oppenheimer Global Fund (OPPAX) (1.13)
1.19% Mainstay US Equity Opportunities (MYCTX) (2.48)

His UBS IRA - 37.79%
37.79% Cash

His Wells Fargo HSA - 4.3%
4.05% Wells Fargo Advantage Dow Jones 2040 (WFFTX) (.93)
.25% Cash

Her Vanguard Roth IRA - 2.22%
2.22% Vanguard Target Retirement 2035 (VTTHX) (.18)

Her Wells Fargo HSA - 1%
.75% Wells Fargo Advantage Dow Jones 2040 (WFFTX) (.93)
.25% Cash

Contributions

New annual Contributions
$5500 his IRA/Roth IRA
$5500 her IRA/Roth IRA

Questions/Thoughts:

1. I really want to simplify this portfolio because I feel that it is slightly overwhelming and am losing faith in my FA at UBS. Due to that lack of understanding and trust, I have been sitting on a huge bit of cash in my IRA rollover, scared to make a move.

2. I am not in a fee-based program and I do get a break on the American Funds load so they are 2.75 instead of the normal 5.75.

3. I am unsure what my allocations *should* be. A question like this turns into a long, drawn-out answer from my FA at UBS. I am a small-business owner and do not necessarily have as much time as I would like to educate myself which is why I have been using the FA for the past decade. I have consider using the advisory services offered by Vanguard.

What do the experts think of my portfolio? Can I create a better portfolio at Vanguard? I like the idea of 3-4 funds portfolios but I was worried about over-simplification.

Thank you in advance.
Last edited by TinyElvis on Mon Sep 28, 2015 2:37 pm, edited 7 times in total.
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

TinyElvis:

Welcome to the Bogleheads Forum!

It appears your financial adviser knows nothing about fund placement for maximum tax-efficiency Fund Placement; and little about keeping costs low What experts say about costs.

In order to understand your asset-allocation, it is important to use the percentage of each fund/cash in your total portfolio which will add to 100% (You have shown the percentage in each account).

It will also be helpful if you will add the amount of gain (or loss) in each taxable fund.

Hit the "edit post" box (looks like a crayon) at the top of your post to make the changes.

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

I was worried about over-simplification.
TinyElvis:

Read this and you will stop worrying about "over-simplification." and start worrying about your portfolio's complexity.

What Experts Say About Simplicity

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Fallible
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Re: Looking to Simplify Portfolio

Post by Fallible »

TinyElvis wrote:Hi.

3. I am unsure what my allocations *should* be. A question like this turns into a long, drawn-out answer from my FA at UBS. I am a small-business owner and do not necessarily have as much time as I would like to educate myself which is why I have been using the FA for the past decade. I have consider using the advisory services offered by Vanguard....
Asset allocation is based on your goals in life, your time horizon, your financial capacity, and your tolerance for risk. It's about diversifying your assets into stocks, bonds, and cash to achieve the highest returns for the least amount of risk.

Two books that nicely address AA are "All About Asset Allocation," 2nd Ed., by Rick Ferri, "and "The Bogleheads' Guide To Investing," Also check out blogs by Larry Swedroe on need, ability, and willingness to take risk in the wiki. And check the wiki (top right" on "Asset Allocation."
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Thank you for the response. I will try and make the necessary edits although I am not quite sure where I went wrong..
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

TinyElvis wrote:Thank you for the response. I will try and make the necessary edits although I am not quite sure where I went wrong..
TinyElvis:

You made a better first-post than most. If something is not clear, please come back and tell us what it is.

Vanguard offers this Investor Questionnaire to help you decide an appropriate stock/bond ratio.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Hi.

I have adjusted as follows:

1. I added a summary that includes percentages across all accounts.
2. I added the % loss/gain on the UBS taxable account.

If I need to make it more clear or correct, please let me know. :)
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BL
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Re: Looking to Simplify Portfolio

Post by BL »

You have taken the first step in getting out of this expensive mess.

I realize you are pretty busy but there is a nice little booklet written by one of the recommended authors that put things in a nutshell for new investors:
http://www.etf.com/docs/IfYouCan.pdf

I suggest you give Vanguard a call with your portfolio in hand and let them know the total. They may either have free advice or steer you to the newer Portfolio Advisory system which would handle everything for 0.3% AUM/year and would not steer you into expensive funds that are not in your best interests (conflict of interest with an advisor who profits from the selections he chooses.)
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

TinyElvis wrote:Hi.

I have adjusted as follows:

1. I added a summary that includes percentages across all accounts.
2. I added the % loss/gain on the UBS taxable account.

If I need to make it more clear or correct, please let me know. :)
Tiny Elvis:

Sorry, the "Summary" will not do. Please use the format in Laura's post:

Taxable
xx% cash (for investing – do not include emergency funds)
xx% fund name (ticker symbol) (expense ratio)
xx% stock company name (ticker symbol)

His 401k
xx% fund name (ticker symbol) (expense ratio)
Company match?

His Roth IRA at Vanguard
xx% fund name (ticker symbol) (expense ratio)
xx% fund name (ticker symbol) (expense ratio)

His Rollover IRA at Schwab
xx% fund name (ticker symbol) (expense ratio)

Her 403b
xx% fund name (ticker symbol) (expense ratio)
Company match?

Her SIMPLE IRA at Fidelity
xx% fund name (ticker symbol) (expense ratio)

Her Traditional IRA at Vanguard
xx% fund name (ticker symbol) (expense ratio)

Total of All Accounts Together (not each account individually) should equal 100%.
I could not understand the capital-gain information for each taxable fund? What does +57.26 mean:

"16.52 American Funds Growth Fund of America - AGTHX, .66, +57.26"

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
2comma
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Re: Looking to Simplify Portfolio

Post by 2comma »

One last change. You need to give some sense of what each account represents of the whole. Please list each asset as a percentage of the whole portfolio. For example, for her Roth IRA it helps to know what percent of the entire portfolio that represents. The total of all should add up to 100.

I know as a small business couple you are pressed for time but once you have a simple, low cost, diverse portfolio it takes very little time to manage it and over a 30-40 year investment period you will literally be hundreds of thousands of dollars ahead because of lower fees and the opportunity costs.
If I am stupid I will pay.
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Taylor Larimore wrote: Sorry, the "Summary" will not do. Please use the format in Laura's post:
I thought that is what I did. I was using it as a template when posting :-\
Taylor Larimore wrote:I could not understand the capital-gain information for each taxable fund? What does +57.26 mean:

"16.52 American Funds Growth Fund of America - AGTHX, .66, +57.26"
I thought you had asked to see the gain/loss % for each fund in the taxable account.
"Give a cat a fish and it will eat for a day. Teach a cat to fish and it will just sit there waiting for you to give it a fish."
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

TinyElvis wrote:
Taylor Larimore wrote: Sorry, the "Summary" will not do. Please use the format in Laura's post:
I thought that is what I did. I was using it as a template when posting :-\
Taylor Larimore wrote:I could not understand the capital-gain information for each taxable fund? What does +57.26 mean:

"16.52 American Funds Growth Fund of America - AGTHX, .66, +57.26"
I thought you had asked to see the gain/loss % for each fund in the taxable account.
TinyElvis:

We need to know capital-gain dollars. Sorry I was not clear.

"Total of All Accounts Together (not each account individually) should equal 100%." If we add your fund percentages they add up to about 600%

Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Taylor Larimore wrote:TinyElvis:

We need to know capital-gain dollars. Sorry I was not clear.

Taylor
Oh, ok. The template for posting suggested that dollars should not be used so I was just trying to stick to percentages. I will work on my post. Perhaps I should just include the UBS accounts to keep things simpler.
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Hi.

I have edited my original post again to hopefully provide all the detail in the best manner possible.

Thank you for looking.
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

TinyElvis:

If it is time-consuming, leave the % gain or % loss as is. Dollars can be estimated.

What we are trying to do is determine whether it is better to exchange a profitable taxable fund for a lower cost and more tax efficient fund and pay the tax--or keep the inferior fund.

Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Taylor Larimore
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

Tiny Elvis:

We're getting there.

Please put the percentage of each fund in your portfolio as a percentage of the total portfolio. Put this figure in front of each fund as in Laura's example.

It may not appear necessary, but it is the only way to know how much of each asset class is in your portfolio (a major factor). It also shows the restrictions in moving funds from one account to another.

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

I think I may finally have what you have requested. Thank you for your patience. :)
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Lafder
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Re: Looking to Simplify Portfolio

Post by Lafder »

Getting closer !

Your summary is redundant and not helpful other than for calculating overall AA since it comingles taxable and retirement accounts, and at a quick glance looks like a separate holding. I would take that whole section out, but keep it for your self :)

Your UBS RMA account (I had to google RMA) would typically be labeled "Taxable Account" and that will help clarify if you change it since most people do not know what UBS RMA means. Am I even correct ?

Simplify like this and it is more clear:

TAXABLE:
UBS RMA Account - Taxable Account 31.84%
4.0 % Cash
5.26% American Funds Growth Fund of America (AGTHX) (.66) (+$15,000)
5.21% American Funds AMCAP (AMCPX) (.68) (+$9,000)
3.27% Amerian Funds American Mutual (AMRMX) (.59) (+$12,000)
3.12% American Funds New Perspective (ANWPX) (.76) (+$8,000)
2.38% Oppenheimer Small&MidCap Value (QVSCX) (1.17) (+4,000)
2.07% Loomis Sayles Strategic Income (NEFZX) (.94) (+$300)
1.91% Loomis Sayles Strategic Alpha (LABAX) (1.10) (-$200)
1.52% Oppenheimer Senior Floating Rate (OOSAX) (1.17) (-$400)
1.42% Seligman Communications&Information (SLMCX) (1.36) (+$4,000)
.88% Seligman Communications&Information(B) (SLMBX) (2.11) (+$2,000)
.79% American Funds High Income Trust (AHITX) (.66) (-$500)

RETIREMENT/TAX ADVANTAGED
His UBS Roth IRA - 22.86%
6.39% American Funds AMCAP (AMCPX) (.68)
3.99% American Funds Fundamental Investors (ANCFX) (.61)
3.65% American Funds Growth Fund of America (AGTHX) (.66)
2.41% Loomis Sayles Strategic Income (NEFZX) (.94)
2.0% American Funds New Perspective (ANWPX) (.76)
1.77% First Eagle Global Bond (SGENX) (1.11)
1.46% Oppenheimer Global Fund (OPPAX) (1.13)
1.19% Mainstay US Equity Opportunities (MYCTX) (2.48)

His UBS IRA - 37.79%
37.79% Cash

His Wells Fargo HSA - 4.3%
4.05% Wells Fargo Advantage Dow Jones 2040 (WFFTX) (.93)
.25% Cash

Her Vanguard Roth IRA - 2.22%
2.22% Vanguard Target Retirement 2035 (VTTHX) (.18)

Her Wells Fargo HSA - 1%
.75% Wells Fargo Advantage Dow Jones 2040 (WFFTX) (.93)
.25% Cash

Have you asked an accountant about retirement account options like a SEP or solo401k or some kind of pension plan ? Only putting away 5500$ in a tax advantaged retirement account each year is not going to be enough :)

As far as a simple portfolio, you have gotten some great advice and will get more. Once you get the hang of posting your portfolio in the usual format, it will make more sense to you too!

You can not beat a 3 fund portfolio for simplicity, elegance and effectiveness : ) This thread is a good read and discussion reminding me why I try to follow a 3 fnd as much as possible. Note the OP of this thread has already responded to you above :) viewtopic.php?f=10&t=88005

Asset allocation is a personal choice. Age in bonds down to age - 15 % in bonds is often used. At your ages we were at 80/20. Then we went to 70/30, and I recently bumped to 65/35 (we are 50 and 47). We have used 30% International stock which is mid way between Vanguard's recs of 20-40% Though they changed their all in one funds to 40%. So somewhere between 20-40% International seems reasonable.

You need to keep in mind capital gains tax effects to simplify your taxable accounts. But the savings in ERs will make up for the taxes soon, and the capital gains taxes being due also reset your cost basis.

I would pick an AA you are both comfortable with and call Vanguard about rollovers and even transfers in kind to get assets to them then simplify. Check the fees for moving funds from UBS. If it is per holding, it could make more sense to go to all cash and move fewer holdings. There will still be multiple accounts between his/hers/taxable/IRA etc. Vanguard's concierge service can call UBS with you and then your spouse on the line and help figure the simplest and best way to move the money :)

A 2.75 fund load is still ridiculous. Vanguard has zero loads.

I would not pay the 0.3% advisory service. You get plenty of help from Vanguard without that fee, and the folks here can help too :)

Once you get it figured out the ongoing time and effort to manage your holdings is minimal :) The deciding and getting it moved is the hardest part. But between the group wisdom of Bogleheads and Vanguard'c concierge service it will be made easier :)

lafder
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TinyElvis
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Hi.

When folks speak of a 3-fund portfolio, are they referring to a 3-fund across all different account types? Or, 3-funds in each account type? I feel that that mean the latter, but I wanted to be sure. If the latter, would one duplicate those same 3-funds or are some better in retirement accounts as opposed to taxable accounts?
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Lafder wrote: Have you asked an accountant about retirement account options like a SEP or solo401k or some kind of pension plan ? Only putting away 5500$ in a tax advantaged retirement account each year is not going to be enough :)
We are working on setting up a plan for our business. We had one previously.
Lafder wrote:Asset allocation is a personal choice. Age in bonds down to age - 15 % in bonds is often used. At your ages we were at 80/20. Then we went to 70/30, and I recently bumped to 65/35 (we are 50 and 47). We have used 30% International stock which is mid way between Vanguard's recs of 20-40% Though they changed their all in one funds to 40%. So somewhere between 20-40% International seems reasonable.
Historically I have understood that approach. However, it seems the "game" has changed a bit. Stock funds and bond funds do not appear to offset one another like they used to. It is a bit of a crazy market.
Lafder wrote:You need to keep in mind capital gains tax effects to simplify your taxable accounts. But the savings in ERs will make up for the taxes soon, and the capital gains taxes being due also reset your cost basis.
Noted. I researched potential tax-liability late last year if I were to liquidate.
Lafder wrote:I would pick an AA you are both comfortable with and call Vanguard about rollovers and even transfers in kind to get assets to them then simplify.
Picking the AA is the hardest part. :) Seriously, that it why I have been so hesitant to move from UBS. I'm one of these types who wants to understand completely before committing. It's a bit of analysis-paralysis.
Lafder wrote:A 2.75 fund load is still ridiculous. Vanguard has zero loads.
I was told that even with the load, net/net the funds out-perform the non-managed funds. It was always my understanding that managed funds held up better during the rough-patches because of the active management. Is that wrong thinking?
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asif408
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Re: Looking to Simplify Portfolio

Post by asif408 »

TinyElvis wrote:Hi.

When folks speak of a 3-fund portfolio, are they referring to a 3-fund across all different account types? Or, 3-funds in each account type? I feel that that mean the latter, but I wanted to be sure. If the latter, would one duplicate those same 3-funds or are some better in retirement accounts as opposed to taxable accounts?
TinyElvis,

Typically the advice here is to look at all your accounts as one. Here is the wiki on the subject: http://www.bogleheads.org/wiki/Asset_al ... e_accounts

There are pluses and minuses to both ways. I prefer to view all my accounts as one because:

1) It limits the number of funds I have in total
2) It allows me to place funds tax efficiently
3) I can pick the lowest cost funds in each account
4) I don't have to have small slices
5) It makes rebalancing simpler (although you could also argue the reverse in some situations)
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

asif408 wrote:Typically the advice here is to look at all your accounts as one. Here is the wiki on the subject: http://www.bogleheads.org/wiki/Asset_al ... e_accounts
Thank you. That is a very educational wiki (even with just a quick review). I will dig in more and see how I can align with it.
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Lafder
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Re: Looking to Simplify Portfolio

Post by Lafder »

From one analysis paralysis person to another, I literally feel your pain ! I agonize over my account changes way more than I should. And I know you must be in the worst spot now trying to make sense of all of this and make major choices about your money that will effect your family for years to come ! Interesting, to me at least, it gives me much less anxiety to suggest to people what to do with their money than to make decisions about my own ! I think because it is more of a logical thought process with other people's money, and more emotional with my own! For me, once I make the decision and make the changes, there is relief!

I have 2 books that may help:
The Paradox of Choice (it will help you make decisions faster and move on, it did for me) Maybe the wikipedia will be enough of a summary, but I do rec the whole book ! https://en.wikipedia.org/wiki/The_Paradox_of_Choice

Why Smart People Make Big Money Mistakes and How to Correct them. Here is a summary http://www.getrichslowly.org/blog/2007/ ... rect-them/

As far as this quote "I was told that even with the load, net/net the funds out-perform the non-managed funds. It was always my understanding that managed funds held up better during the rough-patches because of the active management. Is that wrong thinking?" It is utter crap. That is what money managers tell you to convince you to use them. I read that if money managers could make the correct choice about trades 7 times in a row (I may be remembering the number wrong) they would be multi millionaires themselves and not need to work. The whole point of index funds is that no one can consistently beat the market no matter how fancy their computers are or how much inside information they have. So the point is to be the market! If you believe the market as a whole can go up, you do not need to "pick" the winners which includes some wrong picks. Yes there are losing businesses, we just do not know which ones they are yet.

An idea that helps me with the fees is to consider that it is often quoted that a "safe" withdraw rate in retirement is 4%." Well, in a 2.75 front loan plus the higher ER, your money manager is already taking almost a whole year's safe withdraw amount up front, then look at the fees coming out year after year. Even at a fee of 1%, the manager is taking 25% of your money you would be living on. A book I have never read but is often referenced here is Where Are All of the Customer's Yachts ? You can search more on forum about fees, effects of fees, and read the wiki. Costs matter. Costs matter. Costs matter. :) Front load funds also usually have higher than average ERs.

A 3 fund portfolio means to me that you primarily use 3 funds and their equivalents in all accounts.
Total Stock Market
Total International Stock Market
Total Bond Market

Since most of us have to deal with employer options and existing accounts that may not make sense to sell due to tax effects, we have to find the closest equivalents to the 3 funds and make do with what we have. Between various accounts, and companies it can still be quite a hodge podge. You do not need to hold each fund in each account, and have the same AA within each account. For example if an employer 401k only has a super high ER International fund, you can have your International holdings elsewhere. You can let smaller accounts be just one holding and rebalance in the bigger accounts.

It is typical to hold more bonds in retirement accounts. So the AA within your taxable may be 100% stock, as it is in my case, or have some bonds. It just depends on how big your taxable to nontaxable accounts are. See this http://www.bogleheads.org/wiki/Principl ... _placement

Note if you need to have bonds in your taxable accounts, there are more tax efficient bond funds than Total bond market, so ask for help if that is the case that you want or need bonds in taxable. My retirement accounts are much bigger than my taxable, so I have not had to understand tax advantaged bond funds myself.

If a 3 fund portfolio is too "simple" for you and you want more complexity, you can add REITS or other sectors such as small or mid cap. Some people add Energy or healthcare. But remember, all of those are captured by total stock market. Here are some simple yet more complicated portfolios than the 3 fund. http://www.bogleheads.org/wiki/Lazy_portfolios Obviouosly you are not lazy if you run your own business :) But you do want to have investments that a lazy person could handle so you do not have to mess with them! (I am a lazy person! Ok, about some things)

Note, really read through the 3 fund link I provided earlier and here it is again. I only read it recently and it is a great summary of why I rec a 3 fund over a more complex option :) viewtopic.php?f=10&t=88005

As far as bonds not being worth having............. I disagree. I would strongly suggest you turn off and tune out financial news from any sources besides here. Almost every night the television news says how much the DOW dropped or a crash is coming, or how great the stock market is, or sell bonds etc etc. I do not really see an alternative to bonds myself. Cash is losing money at the rate of inflation. Pay down your mortgage as another way to save that does not involve the markets. Read more on this site about bonds. It is a frequent question about not buying bonds due to interest rates etc. Instead of reading financial news anywhere else, come here and read. Most major $ news does end up getting discussed here since someone usually asks about changing their portfolio because of it. Also, folks here will help remind you to sit tight and not panic if there is a major market change.

Hopefully something I said will help !

Great job simplifying your original post. Let's see if anyone suggests making it better than that !? :)

If you want me to tell you what AA to have, I suggest 65/35, 30% International stock.

Even though I was at 80/20, then 70/30 at your age. But since you have so much cash now, I think safer is better for you than more aggressive. And yes I would go all in once you decide what you want :) You can always decide you want a different AA later. But you need something to get to now to make a move! If you absolutely can not decide, go 50/50 ! It is better than the 40 plus % cash you have now !

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Re: Looking to Simplify Portfolio

Post by BL »

Since the tax-advantaged funds can be sold without tax consequences, only the taxable account must be considered with regard to cost/benefit concerns:
UBS Taxable Account - 31.84%
4.0 % Cash
5.26% American Funds Growth Fund of America (AGTHX) (.66) (+$15,000)
5.21% American Funds AMCAP (AMCPX) (.68) (+$9,000)
3.27% Amerian Funds American Mutual (AMRMX) (.59) (+$12,000)
3.12% American Funds New Perspective (ANWPX) (.76) (+$8,000)
2.38% Oppenheimer Small&MidCap Value (QVSCX) (1.17) (+4,000)
2.07% Loomis Sayles Strategic Income (NEFZX) (.94) (+$300)
1.91% Loomis Sayles Strategic Alpha (LABAX) (1.10) (-$200)
1.52% Oppenheimer Senior Floating Rate (OOSAX) (1.17) (-$400)
1.42% Seligman Communications&Information (SLMCX) (1.36) (+$4,000)
.88% Seligman Communications&Information(B) (SLMBX) (2.11) (+$2,000) (This may have a deferred load of up to 5% unless you held it long enough for that to disappear! However you are paying them an extra 1% 12b-1 kickback every year (in ER) so it is probably still worth ditching! Date of purchase might be useful for this Class B fund.)
.79% American Funds High Income Trust (AHITX) (.66) (-$500)
The first 4 have the most capital gains but fortunately have the lower-ERs so they could possibly not be sold, as that would avoid paying CG taxes on those for now. Assuming these are Class A funds, you have already paid the loads so that is a sunk cost.
The rest (in color) have very high ERs, Capital losses to help off-set gains, and/or aim to give off too much taxable income so you are paying unnecessary taxes on them. I would get rid of all of these. I would consider "transfer in kind" for the first 4, unless someone here comes up with something better. I haven't done the numbers to find out how long it would take to make up for cost of selling. Vanguard index funds would have ERs from 0.05 to 0.20, so they are still a lot cheaper.
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Lafder wrote:Hopefully something I said will help !
Yes, you definitely did! Thank you for your insight and taking the time to share it. :)
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Re: Looking to Simplify Portfolio

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BL wrote:The first 4 have the most capital gains but fortunately have the lower-ERs so they could possibly not be sold, as that would avoid paying CG taxes on those for now.
That was along my lines of thinking as well. I feel that the American Funds are pretty goods funds and since I've already "paid the freight", I have been hesitant to drop them. While not as low as Vanguard, I don't think their expense ratios are *that bad*. But then again, that is my long-time, "trained", view. I could be completely wrong. :) The downside to keeping them is that I don't think that I would qualify for the "Voyager Select" services unless I have them in Vanguard funds.
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Re: Looking to Simplify Portfolio

Post by pkcrafter »

TinyElvis wrote:Hi.

When folks speak of a 3-fund portfolio, are they referring to a 3-fund across all different account types? Or, 3-funds in each account type? I feel that that mean the latter, but I wanted to be sure. If the latter, would one duplicate those same 3-funds or are some better in retirement accounts as opposed to taxable accounts?
TinyElvis,

The 3 fund portfolio would be across all accounts. Three funds, One portfolio. To do it correctly, you would put total stock market and total international in taxable, and bonds in tax deferred to minimize taxes. If necessary to put some bonds in taxable, you would use tax-exempt bonds.

You've done a good job of posting your portfolio in the recommended format, and going through this process will help you really understand what you are holding. It's very apparent that your advisor has paid no attention to taxes in your taxable account. Most of those holdings are terrible choices because they are very tax inefficient. Also a lot of funds with very small allocations don't do much for a portfolio except add complexity and more fees.

You said you don't know what asset allocation you should have, but do you even know what it is now? It isn't easy to tell by looking at the funds because some contain both stocks and bonds. I wonder if your advisor even knows.

Chosen asset allocations (AA) are all over the map because investors have different situations and different personal risk tolerances. Considering your age, a typical AA range would be 50% stock for an investor who was somewhat risk averse, and up to around 75% for others. Some are even higher, but I would not recommend it. Recommended international allocations typically range from 20-40% of equity.

Asset Allocation - 3 fund or maybe Target Retirement funds? You may also read about slice/dice, tilting, or lazy portfolios, but you should stick with a simple, effective portfolio--the basic and fully diversified 3 fund choice.

3-Fund Portfolio

viewtopic.php?f=10&t=88005

What you need to do right now is ramp up on understanding and education, so do not get ahead of yourself and start making changes because if something isn't done right, it could be costly. You need to know what you want to do, write down a plan, and then implement. When ready, call Vanguard to initiate the custodial transfer of tax deferred accounts. Your biggest problem will be the taxable account, and that may take some time to straighten out.

https://www.bogleheads.org/wiki/Getting_started

Tax considerations:

http://www.bogleheads.org/wiki/Tax_basics

Small business plans - Forum members can help you choose the right tax-deferred plan for you. Check to see if your choice will accept IRA transfers because you may want to do that to simplify and at some point use back-door Roths if possible. I don't know if it's possible with small business plans.

The forum is a good source along with the Wiki and a few good books for all questions.

Things you need to think about:

Do you want to manage on your own or use an advisor? You can get Vanguard's Personal Advisor Service for 0.3% annual fee.

When you are ready to move funds, understand the difference between a rollover and a custodial transfer. Always use the transfer.

http://beginnersinvest.about.com/od/ira ... nsfers.htm


Paul
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

Tiny Elvis:

You have received excellent replies from very knowledgeable Bogleheads. Lafder spent considerable time helping you re-format your portfolio into an understandable and useful format. I strongly urge you to continue to use it. 2comma, asif408 and BL have also given you good suggestions.

Paul Keck, another one of your contributors, is extremely knowledgeable and author of an excellent online book. You can read valuable excerpts here: Investment Guide.

In my opinion, you should probably not make changes (although many are needed) now. Instead, Contact Vanguard's Personal Advisor Service. I recommend Vanguard because their advisors will give you professional advice, are conflict-free (paid by salary only), and they will guide you through the transfer (it won't be easy).

Bogleheads are here anytime you have questions.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Taylor Larimore wrote:Bogleheads are here anytime you have questions.
Thank you all who have chimed in and given their time and advice.

I have an appointment scheduled with a VA advisor in the coming weeks (they are quite busy it seems). I feel that will at least get me going on the right foot. I don't mind paying a nominal fee for good advice and peace-of-mind. In the meanwhile, I have been reading up on everything that has been provided; especially the Asset Allocation in Multiple Accounts wiki.

I will keep you posted of the results and my progress. Thank you again.
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"Investor Questionnaire"

Post by Taylor Larimore »

I have been reading up on everything that has been provided; especially the Asset Allocation in Multiple Accounts wiki.
TinyElvis:

Your stock/fixed-income allocation may be the most important investment decision you will make (individual funds are much less important). More than anything else, your stock/fixed-income ratio determines your expected return and your expected risk. This Vanguard Questionnaire can help you make this all-important decision:

Vanguard Investor Questionnaire

Best wishes.
Taylor
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Re: "Investor Questionnaire"

Post by abuss368 »

Taylor Larimore wrote:
I have been reading up on everything that has been provided; especially the Asset Allocation in Multiple Accounts wiki.
TinyElvis:

Your stock/fixed-income allocation may be the most important investment decision you will make (individual funds are much less important). More than anything else, your stock/fixed-income ratio determines your expected return and your expected risk. This Vanguard Questionnaire can help you make this all-important decision:

Vanguard Investor Questionnaire

Best wishes.
Taylor
An excellent analysis from Vanguard.
John C. Bogle: “Simplicity is the master key to financial success."
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"Investment Gems"

Post by Taylor Larimore »

I have been reading up on everything that has been provided; especially the Asset Allocation in Multiple Accounts wiki.
Tiny Elvis:

Try this: Investment Gems

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Looking to Simplify Portfolio

Post by BlackStrat »

Elvis - you've come to the right place; the folks here are awesome.

I would also recommend reading "The Bogleheads' Guide to Investing" - especially prior to your vanguard interview.

You're at a great age to revamp your investing strategy (or even become aware of one) and you have some accumulation years left so you can avoid any regrets at starting too late.

You may find that a good plan will end up being much simpler, less expensive, and more profitable than you think.

Your 65-year old self will thank you.

Best of luck.
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Good day.
Taylor Larimore wrote:It appears your financial adviser knows nothing about fund placement for maximum tax-efficiency..
Please forgive my ignorance, but I'm not sure where the inefficiency lies (I assume that you are referring to the allocation of the taxable account). I think my FA was trying to find a balance in my taxable account based on my risk comfort.

I *do* understand the theory but I am not sure how one maximizes tax efficiency without throwing off their portfolio allocation. Since one can only put so much annually in their tax-deferred account, how can tax inefficiency be avoided in a taxable account?

I did read the Wiki entry. Is it the bond funds that contribute to the inefficiency?

Since the funds pay dividends and capital gains, I always get a 1099 for this account. Is it a best practice to avoid dividend-paying funds in a taxable account?

Thanks.
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Re: Looking to Simplify Portfolio

Post by BL »

Yes, non-qualified dividends are not considered tax-efficient in general, especially if you don't need them to live on.

Take a look at your 1099 and see how much of the dividends are qualified (which are taxed at CG rate).
Whatever dividends are not qualified are taxed at your regular tax rate. Also see if CGs are there because that counts up after a while even at their special tax rates.

Vanguard's total stock market have maybe 2% dividends, all qualified, and mostly no CG at all. So there is little tax cost except CG when you eventually sell it. Many non-index funds generate lots of taxable dividends and CGs every year.

Municipal bonds have non-taxable dividends, which are good if higher income.
Last edited by BL on Wed Jul 29, 2015 8:52 am, edited 1 time in total.
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Re: Looking to Simplify Portfolio

Post by niceguy7376 »

One point that was missing in the OP post that I wanted to highlight:

OP says that they have a S Corp and I dont see any Solo 401k (if OP and spouse are the only employees) or SIMPLE IRA for them. With them in 28% tax bracket, I sure assume that you can save on taxes by having a retirement plan at work.

OP, please look into this as well as you still have time to open a 401k or SIMPLE IRA for this year itself and use it going forward.

Also just curious on why you have two different HSA accounts. Is it that you have two individual policies? If that is the case and the reason was to have a group health ins policy (need 2 or more participants and you dont have other employees), this might be another line of thought. Due to the ACA act, you can buy single family policy on your own in the market.
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

niceguy7376 wrote:OP says that they have a S Corp and I dont see any Solo 401k (if OP and spouse are the only employees) or SIMPLE IRA for them. With them in 28% tax bracket, I sure assume that you can save on taxes by having a retirement plan at work.
We have employees so we do not qualify for a Solo 401k, etc. We plan on getting a retirement plan in place. I do understand the advantages as we had one previously.
niceguy7376 wrote:Also just curious on why you have two different HSA accounts. Is it that you have two individual policies?
We have a group plan. The premium is actually cheaper for individual policies as opposed to a family policy.
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

BL wrote:Yes, non-qualified dividends are not considered tax-efficient in general, especially if you don't need them to live on.

Take a look at your 1099 and see how much of the dividends are qualified (which are taxed at CG rate).
Whatever dividends are not qualified are taxed at your regular tax rate. Also see if CGs are there because that counts up after a while even at their special tax rates.

Vanguard's total stock market have maybe 2% dividends, all qualified, and mostly no CG at all. So there is little tax cost except CG when you eventually sell it. Many non-index funds generate lots of taxable dividends and CGs every year.

Municipal bonds have non-taxable dividends, which are good if higher income.
I will take a look at my 1099.

So, it's not a good thing for a fund to pay dividends and capital gains? Or, just not a good thing in taxable accounts?

Thanks.
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Re: Looking to Simplify Portfolio

Post by niceguy7376 »

TinyElvis wrote:We have employees so we do not qualify for a Solo 401k, etc. We plan on getting a retirement plan in place. I do understand the advantages as we had one previously.
You might look at SIMPLE IRA plan. You each can contribute 12.5K each and your employer (ofcourse you) will match 3% to all employees participating in the plan. With Fidelity, the fees are very minimal at $25 per participant (deducted from their accounts) or $350 paid by employer per year.

Just with you and your spouse, you would be able to sock away 25K and save a minimum of 25% of it(6K+) on taxes.

BUT, if your income even after contribution to SIMPLE IRA is more than direct Roth IRA contribution limits, you cannot do Backdoor Roth. So look out for that. But you already have a trad ira that would prevent back door roth for you. But your spouse currently dont have a trad ira and it might prevent backdoor roth for the spouse if you have simple ira and still make more than direct roth ira limits.
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Re: Looking to Simplify Portfolio

Post by BL »

TinyElvis wrote:
BL wrote:Yes, non-qualified dividends are not considered tax-efficient in general, especially if you don't need them to live on.

Take a look at your 1099 and see how much of the dividends are qualified (which are taxed at CG rate).
Whatever dividends are not qualified are taxed at your regular tax rate. Also see if CGs are there because that counts up after a while even at their special tax rates.

Vanguard's total stock market have maybe 2% dividends, all qualified, and mostly no CG at all. So there is little tax cost except CG when you eventually sell it. Many non-index funds generate lots of taxable dividends and CGs every year.

Municipal bonds have non-taxable dividends, which are good if higher income.
I will take a look at my 1099.

So, it's not a good thing for a fund to pay dividends and capital gains? Or, just not a good thing in taxable accounts?

Thanks.
I guess if you love to pay taxes there is no problem. Otherwise I would attempt to place income-producing funds into retirement accounts as much as possible. I understand certain income-producing funds such as REITs should not be in taxable accounts for that reason as well. If they are kicking out a lot of CGs, that may mean there is a lot of buying and selling going on, which is not ideal. (Granted, some types of funds are more prone to that, but I would compare it to a similar Vanguard fund to see if it is the norm.)
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

BL wrote:I guess if you love to pay taxes there is no problem.
I prefer to limit that. :)
BL wrote:Otherwise I would attempt to place income-producing funds into retirement accounts as much as possible. I understand certain income-producing funds such as REITs should not be in taxable accounts for that reason as well. If they are kicking out a lot of CGs, that may mean there is a lot of buying and selling going on, which is not ideal. (Granted, some types of funds are more prone to that, but I would compare it to a similar Vanguard fund to see if it is the norm.)
Looked at my 1099... I had ordinary, non-qualified dividends and capital gains. Of that total mount, 65% were capital gains, 25% were ordinary dividends, and 10% were qualified.

Oy.
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Re: Looking to Simplify Portfolio

Post by BL »

TinyElvis wrote:
BL wrote:I guess if you love to pay taxes there is no problem.
I prefer to limit that. :)
BL wrote:Otherwise I would attempt to place income-producing funds into retirement accounts as much as possible. I understand certain income-producing funds such as REITs should not be in taxable accounts for that reason as well. If they are kicking out a lot of CGs, that may mean there is a lot of buying and selling going on, which is not ideal. (Granted, some types of funds are more prone to that, but I would compare it to a similar Vanguard fund to see if it is the norm.)
Looked at my 1099... I had ordinary, non-qualified dividends and capital gains. Of that total mount, 65% were capital gains, 25% were ordinary dividends, and 10% were qualified.

Oy.
Now figure out the dollars in tax you paid on it, using the tax bracket you are in. (You don't need to tell us!)
(25% at your bracket rate + 75% at your CG rate.)
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Well, I have not yet transferred my accounts to Vanguard (still a work-in-progress).

I want to avoid selling-low (although all my holdings are still in the black) in my current accounts, so it seems to the best course is to sit tight for a bit and wait for the current volatility to settle. Since that seems a bit like timing, I wanted to solicit the opinion of others.

Should I go ahead and pull the trigger?

Thanks in advance.
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Re: Looking to Simplify Portfolio

Post by Taylor Larimore »

TinyElvis wrote:Well, I have not yet transferred my accounts to Vanguard (still a work-in-progress).

I want to avoid selling-low (although all my holdings are still in the black) in my current accounts, so it seems to the best course is to sit tight for a bit and wait for the current volatility to settle. Since that seems a bit like timing, I wanted to solicit the opinion of others.

Should I go ahead and pull the trigger?

Thanks in advance.
Tiny Elvis:

The market is down. You are lucky. Unless you need the money within 5 years, I would "pull the trigger."

Best wishes.
Taylor
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Well.. I've done nothing as I am paralyzed with my analysis of trying to put together a portfolio (I guess this is why I need an adviser). Because of this paralysis, I tried to get set-up with the Vanguard Adviser Services but that went like this:

1. Initial call to Vanguard to outline my situation.
2. Call back to schedule appointment with adviser.
3. Wait 2 weeks for adviser to call.
4. Explain to adviser my situation. Explain that I would like help with initial allocation. We discuss the relationship, etc. Seems ok. Couldn't really get any specific commitment or if the guy I was talking to would be the person I talked to moving forward. Told me to call back and talk to the initial guy again to get accounts set up and we'll go from there.
5. Call back to talk to initial guy to help set-up accounts. He told me that he didn't do that and I would have to talk to someone else.
6. Talk to the new guy. I told him I wold go ahead and set-up the initial accounts on line and set-up funding later.
7. Unable to set-up online access due to "synergy" issue.
8. One-week later, I have online access (yea!)
9. Call back to talk to adviser. Told that they can schedule an appointment for 2 weeks later. I explained that I had spoken with an adviser and was hoping to follow up with him. They emailed him and he reached out.
10. He told me that to schedule an appointment and "someone" would get back to me since he was going to be out.

The videos and literature on the Vanguard web site sell it as "personal" services and that you can build a long-term relationship with your adviser. The reality is quite the opposite. I expressed my concerns over the program to whomever I spoke with in Concierge services, but never heard back.

So, I am sitting here doing nothing and frustrated as hell.
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Re: Looking to Simplify Portfolio

Post by livesoft »

It seems like everything is proceeding in a timely manner. What is the asset allocation you have decided upon?
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

livesoft wrote:It seems like everything is proceeding in a timely manner. What is the asset allocation you have decided upon?
Nothing is proceeding. I can't get any help from Vanguard for their adviser service.
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Re: Looking to Simplify Portfolio

Post by pkcrafter »

TinyElvis, have you actually signed up for PAS? I don't things will get rolling until you do that. If you have, then Vanguard has really dropped the ball.

Here's what they claim--
Your partnership with a Vanguard advisor is at the heart of our service. An advisor works closely with you to develop a customized goals-based financial plan according to your unique situation—and can manage your portfolio throughout your retirement years.

Here they seem to imply that you will be assigned an advisor

https://investor.vanguard.com/financial ... ?wt.srch=1

Here they seem to be saying you will have access to advisors
Once you're enrolled, you can call or email a Vanguard advisor at your convenience.
But then there is this
A Vanguard personal financial advisor will:

1. Get to know you, your goals, and your unique financial situation.
2. Partner with you to create a custom-tailored financial plan.
3. Put your plan into action and manage your portfolio, allowing you to be as involved as you want to be.
4. Work with you to keep track of your plan's progress.
5. Rebalance your portfolio as necessary and partner with you to revise your plan when important changes in your life occur.
Again, it implies an advisor is assigned to you.
Once you're enrolled, you can call or email a Vanguard advisor at your convenience. And with our easy-to-use videoconferencing service, you can also video chat with an advisor from the comfort of your own home. Simply schedule an appointment online, anytime.
I would take this to mean nothing is going to happen until you actually sign up.

https://investor.vanguard.com/financial ... al-planner

Have you read, Getting Started? You probably have. Signed up?

TinyElvis, on Aug 24th you wrote this:
Well, I have not yet transferred my accounts to Vanguard (still a work-in-progress).
Now Sept 7. Have you transferred assets to VG? If not, you are probably not going to get much help. If you haven't, is it because you are unsure of the service or your asset allocation?


Paul
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Re: Looking to Simplify Portfolio

Post by TinyElvis »

Hi.

Thank you for responding.
pkcrafter wrote:TinyElvis, have you actually signed up for PAS? I don't things will get rolling until you do that. If you have, then Vanguard has really dropped the ball...
I told Vanguard that I wanted to use their adviser services but there was no sign-up. I did speak to an adviser though.

During my first intro with an adviser, I explained that I wanted help with my allocation, that I had money/funds with UBS, and that I wanted assistance putting together my Vanguard portfolio, ongoing advice, etc. He knew that I did not have my accounts going yet. We agreed to reconnect after they were set-up. I wanted to understand the allocation before we funded. He was ok with that. I contacted concierge and told them I was ready to move forward. They told me that I needed to speak with another concierge.

After the battle of getting my accounts set up due to the "synergy" issue, I tried to reconnect with with the adviser (because I thought he was assigned to me) but I was told to make an appointment again (with concierge) and wait 2 weeks and that I may or may not speak to the same him because he was going on a leave-of-absence.

Correspondence with concierge services is slow as it takes a day for them to answer.

Sooo.. It just seems to be a bit of cluster with them which was a turn-off for me. I thought it was a stream-lined service. It's not a small amount of money so I was hoping we would be working more closely and proactively.

Where do I stand right now.. I have a couple of zero-dollar accounts. I have not moved anything because I wasn't sure of the allocation and wanted to discuss that with the adviser first.
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Re: Looking to Simplify Portfolio

Post by pkcrafter »

TinyElvis, Yes, you do have to enroll.

What is the synergy issue?

Paul
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