Portfolio Help - Edward Jones v. Vanguard

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Portfolio Help - Edward Jones v. Vanguard

Postby bondebj26 » Fri Jan 08, 2010 6:58 pm

I am a 28 year old CPA (married to a 32 yo w/ 2 kids <2 yo), who got into a mess of hiring a friend as a financial advisor - an Ed Jones rep. He keeps giving me the building a foundation spiel, but I think many of the funds I am in are overlapping, and probably have a higher bond weighting than I would prefer at this point.

But, I have a 401k with Vanguard and I have been pleased with it, and last May I stopped Roth contributions to Ed Jones because I was fed up with load funds that seem to have lagged the market. The main thing that ticked me off was putting a 401k rollover (from Vanguard) in the Franklin Templeton Founding Fund Allocation, which promptly went from $4850 in March 07 to $2725 in Dec 08. I try to max Roth contributions each year, but for 2009 I am putting about $3500 to a VG deductible IRA instead of Roth IRA, and look into converting in 2010.

Wife has an account with Merrill Lynch, all C shares. Her family uses that rep, but the expense ratios kill me.

Updated below based upon all of your feedback. Look forward to more discussion now that I've got through newbie status.

Emergency funds = 0 from my income (what I prefer to do). Currently use wife's S-Corp dividend accumulation in taxable account as EFund (approx. $1k/mo) - about 4 months worth of net paychecks. Ideally we would never have to touch these funds, and would primarily be used for home down payment, education, etc. in the future

Debt: 190K mortgage - 4.875%
Credit cards paid in full every month (some months more damage than others), although currently have $3,200 in 0% BT used to cover expenses while on 1 month furlough from work

Tax Filing Status: MFJ, 2 children (2 and 5 mo)

Tax Rate: 15% Federal, TN Resident - no state tax, except Div & Int; When wife goes back to work in 3+ years, will be in 25% bracket - expect to be in higher brackets nears retirement due to growth of S-Corp investment, and additional shares expected to be inherited.

Age: 28, wife 32

Desired Asset allocation: (90 stocks/10 bonds)

Intl allocation: 20-25% of stocks

Breakdown by Category/Sector/Growth vs. value is not extremely important at this time. I just want to be diversified. Have considered REIT's, Commodity, other sector investing in the past, but that is just chasing returns. I like to invest in areas that provide dividends/other income returns - I was looking at one of the Oil/gas partnership ETF's, but those would be covered in an index.

Total Current Portfolio - approx $80K

Merrill Lynch Taxable - Wife's S-Corp Dividend Accumulation Account ($1K/mo dividends, use $417 to move into Roth monthly)
11% Cash
2% BR National Muni (MFNLX) 1.64% exp
2% BR Basic Value (MCBAX) 1.72% exp
2% BR Large Cap Core (MCLRX) 2.09% exp
1% BR Fundamental Grwth (MCFGX) 2.1% exp
1% BR Global Small Cap (MCGCX) 2.44% exp
1% BR Global Allocation (MCLOX)1.94% exp
1% BR High Income (MFHIX) 2.24% exp
1% BR Int'l Value (MCIVX) 2.88% exp

Wife's Roth ML - Broker mysteriously moved into the 3 loser accounts in mid-2007, and subsequently lost about 50% of their value.
33% Cash (on its way to VG! & going to cash at first)

His Rollover IRA at VG
4% VG Int'l Value (VTRIX) 0.47% exp
4% VG Div Growth (VDIGX) 0.32% exp

His Roth at Edward Jones
GONE!

His Roth at VG
24% Cash - need to allocate

His 401k at VG
3% Lord Abbet Small Cap (LSBYX) 1.05% exp
3% TRP Growth (PRGFX) 0.73% exp
3% VG Int'l Growth (VWGIX) 0.53% exp
3% VG MidCap Index (VIMSX) 0.27% exp
3% VG Windsor II (VWNIX) 0.39% exp
Company match 50% of first 5 %, 3 year cliff vesting (approx. 2% of total portolio is unvested and expected to be lost - looking at new job to increase salary and reduce travel)

New annual Contributions
9% (approx. $6,300) his 401k (5.5% 401k, 3.5% Roth 401k)
$5K to Roth or Deductible IRA for both

Funds available in his 401(k)
VG Total Bond Index (VBMFX) 0.22% exp
Western Asset Core Bond (WAPIX) 0.83% exp
VG Target 2050 (VFIFX) 0.19% exp
VG 500 Index Fund (VFINX) 0.18% exp
VG Total Stk Mkt (VTSMX) 0.18% exp

Questions
1) It still looks like I have a ton of funds in my portfolio - Target date would simplify - this would mirror the market, but I am trying to figure out how my 401k portfolio beat target date by 15% last year. Again, trying to get into international cheaply w/o paying the purchase fees are best done in TR accounts.
2) I don't know why, I had some doubts after all my funds were liquidated from EJ about losing out on returns - the AF Capital World G/I report came out and showed that they were at $59K for $10K investment in 1993 vs. the MCRI (or whatever it is) index only had like $40K - I just can't think that American funds can really outperform over extended periods of time. But I'm just looking to get consistent solid returns over time, and if the market does that (which it should), I just need to be allocated appropriately.
Last edited by bondebj26 on Thu Feb 11, 2010 9:44 am, edited 4 times in total.
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Adding on

Postby bondebj26 » Fri Jan 08, 2010 7:02 pm

Just for $ references,

$18K in Edward Jones account (I've put in about $20K since end of 2004, total invested about $22K after reinvested dividends)

$11K vested in VG 401k

$7K in Rollover IRA
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Postby livesoft » Fri Jan 08, 2010 7:05 pm

EJ portfolios that we have seen here are just like yours. There are breakpoints for AF funds, but EJ keeps people from them by splitting up the money into similar AF funds so you'll never get there.

You didn't say if you all are willing to ditch EJ and ML. Well, are you?
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Postby bottlecap » Fri Jan 08, 2010 7:21 pm

Even if you ever break even on the loads, you never will with the high ER's and 12b1 fees.

He's costing you money, pure and simple. If you can live with the long term effects of that, stay. If not, you've got to discontinue EJ's services.

I think the Star Fund would be fine for the kids in a tax-deferred or advantaged account, but it depends on how much risk you are, or aren't willing to take as well.

Good luck,

JT
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Postby bondebj26 » Fri Jan 08, 2010 7:25 pm

Very willing to ditch both. Plan on doing so within the next few months.

What are your favorite VG funds to complement my 401k options, and thoughts on bond options - I'd probably limit to 10%
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Postby BigFoot48 » Fri Jan 08, 2010 7:30 pm

I use to be a 28 year-old CPA. Now I'm a 61 year-old ex-CPA. (Or is it like the Marines, where once a CPA, always a CPA?) Anyway, my advice is to roll everything at EJ to Vanguard ASAP and never look back. If he remains your friend then he's a true friend, otherwise... Then frequent this forum for the next 40 years and you'll never need the services of a broker again.

I sure wish I had this forum when I was 28. Oh well, live and learn.
Retired | Two-time Top-10 Diehard S&P500 Picker; Nine-Time Loser
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Postby bondebj26 » Fri Jan 08, 2010 7:32 pm

and proof in the pudding I guess - 41% return on my 401k and a 28% in Roth. However, my roth return from a rough irr calc in excel, due to crappy return reporting by EJ. I imagine that is so you don't wise up to the costs and get misled by annual fund reports.

I am not sure if we will use the ESA for high school or college, so didn't want to go 100% equity
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Postby livesoft » Fri Jan 08, 2010 7:47 pm

Since you have no taxable accounts, I see no compelling reason not to simply use a Vanguard Target Retirement fund of your choice in the 401(k) and in the Roths.

You didn't state your tax bracket, but I doubt the Roth 401(k) is a good option. Why not put all into a traditional 401(k) for the tax savings now? There are lots of threads on this forum on how to decide between the Roth 401(k) or traditional 401(k).

The changeover doesn't have to take "the next few months". You can do it this weekend. Vanguard will pull all the funds and you don't even have to talk to the EJ folks until he calls you up. :twisted:
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Postby retiredjg » Fri Jan 08, 2010 9:46 pm

bondeb, welcome to the forum!

You can't control the market. You can control your costs and taxes. Your current funds and your wife's current funds are not helping you do that.

Switch to Vanguard. It does not take months. Have them do all the work.

Figure out a way to tell your friend. I think if you mention "no load" and "lower expense ratios", he should understand. Hopefully, you'll still be friends afterwards.

There probably are better choices in your 401 also. If you'll post your information (see links below) someone here can help. You wife's assets should be included too.
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Postby pkcrafter » Fri Jan 08, 2010 10:56 pm

blondebj,

You have multiple problems here, and if you really want to do this right it would be best to step back and post all assets according to this example:

http://www.bogleheads.org/forum/viewtopic.php?t=6212

This will include your wife's holdings too. Her ML account is the worst.



Paul
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Postby bondebj26 » Sat Jan 09, 2010 12:11 am

Paul, spent the past half hour typing this up, and stupid IE back shortcut button wasted the whole update. Thanks for the suggestion - should get this up tomorrow night.
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Postby TO39 » Sat Jan 09, 2010 1:23 am

I put almost everything into an Edward Jones account in Oct. 2002. For the last three years I have been putting all dividends from Edward Jones account into Foliofn and all new money into 401K at work. I do not think Edward Jones is worth what they charge. I would move out quicker except for capital gains. I plan to retire in the next two years, so it might pay me to wait till then, but that is when I will spend down the EJ accout first.

If you listen to the good info at this site, you should not have to pay the huge fees that Edward Jones charges.
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Postby SpringMan » Sat Jan 09, 2010 7:19 am

bondebj26 wrote:Paul, spent the past half hour typing this up, and stupid IE back shortcut button wasted the whole update. Thanks for the suggestion - should get this up tomorrow night.

It is a pain when stuff like that happens. You might want to type all the information in offline using a word processor or even the notepad application that is free on most PCs, saving your work often. Then go online and post using copy and paste and the preview button to make sure you are happy with the format. Consider dumping IE and switching to another browser like Firefox if this kind of thing happens much.
Best Wishes, SpringMan
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Postby ndchamp » Sat Jan 09, 2010 9:00 am

SpringMan wrote:
bondebj26 wrote:Paul, spent the past half hour typing this up, and stupid IE back shortcut button wasted the whole update. Thanks for the suggestion - should get this up tomorrow night.

It is a pain when stuff like that happens. You might want to type all the information in offline using a word processor or even the notepad application that is free on most PCs, saving your work often. Then go online and post using copy and paste and the preview button to make sure you are happy with the format. Consider dumping IE and switching to another browser like Firefox if this kind of thing happens much.

The BACK buttons are located in pretty much the same place in both IE and Firefox. What you have here is the dreaded PICNIC error.

Problem In Chair Not In Computer
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Postby Clumsum » Sat Jan 09, 2010 9:02 am

As one who started with an E.D. Jones broker years ago, I would suggest ditching the broker and moving all to Vanguard. Read, learn, and use this forum. Why pay a fee and higher expenses when this money can go toward your next egg. Good luck with our decision.
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Re: Portfolio Help - Edward Jones v. Vanguard

Postby paulob » Sat Jan 09, 2010 9:37 am

bondebj26 wrote:I But, I have a 401k with Vanguard and I have been pleased with it, and last May I stopped Roth contributions to Ed Jones because I was fed up with load funds that seem to have lagged the market. The main thing that ticked me off was putting a 401k rollover (from Vanguard) in the Franklin Templeton Founding Fund Allocation, which promptly went from $4850 in March 07 to $2725 in Dec 08.


I am in the minority on this site in that I like American funds!

The time period mentioned was a big loser for a lot of funds, VG included, so a benchmarked comparison for that fund would be more appropriate than just the sheer size of the decline.

The "lagged the market" for the load funds is very typical for load funds in the first five years. You need to look at a 10 holding period to fairly evaluate those funds.

That doesn't mean I am inferring you shouldn't make the move you are contemplating. I am troubled by the number of funds in the broker portfolio. I agree there probably is overlap. Perhaps the better question is: how do they fit into a portfolo? It appears to be "sell a fund (to the client)" on its merits vs designing a portfolio and selecting funds that the "best fit". E.G. your option in a 401-k might be a small value fund. So small value might be funded there but not in the 401-k.

Since you have already paid the load, you might consider transferring the American funds in-kind and holding them (but at your new broker).
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Re: Portfolio Help - Edward Jones v. Vanguard

Postby YDNAL » Sat Jan 09, 2010 9:48 am

bondebj26 wrote:I can do another post of my wife's broker account with ML, but any brief thoughts on the Blackrock funds? He has her all in C shares, and I am not thrilled by the 1.5-2% expense ratios.

But, without ado, here is my Ed Jones portfolio, compared to my Vanguard 401k & Rollover IRA funds. I'm also starting a Coverdell for both kids for 2009 with 100% in the Vanguard STAR Fund. Thoughts on that?
bondebj26,

Three problems:
  1. Do you file: Married Filing Jointly? Yes, I would venture.
    • Same thing with retirement assets: Married Investing Jointly.
    • Treat all accounts as one unified portfolio.
  2. Each account is a portion of the total and not 100% each.
  3. Fire your friend. The good friends know what is best for good friend-clients.
Edward Jones
AF Capital Income Builder A - 21% of portfolio
Comstock Fund A - 15%
VK Equity & Income A - 16%
AF Mutual Discovery A - 18%
AF Growth Fund of America A - 10%
AF Capital World G/I A - 20%
No more contributions being made since May 2009

Vanguard 401k - 5.5% contributions to 401k (match 50% of first 5), and 3.5% to Roth 401k option - total 9% contributed, 20% to each option
Lord Abbett Small Cap Blend
T Rowe Price Growth Stock
VG Int'l Growth Fund
VG Mid Cap Index
Vanguard Windsor II
You are starting out and should concentrate on the amount you save. Put everything in auto-pilot in a target date fund - one with the right % of Bonds for you. Sometime in the future you can split them to your heart's content.
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Postby bdpb » Sat Jan 09, 2010 1:23 pm

Do you have a business relationship with this person? Maybe you should
up what you charge to do his CPA work.

More seriously, if he refers enough business to you it may be worth it to stick
around. But I'm guessing he doesn't pay you for anything.
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Postby bondebj26 » Sat Jan 09, 2010 7:15 pm

Well, I finally think I have updated my post to meet the standard. Please let me know if I missed anything. I talked to my father in law today and he doesn't really have a tight relationship with the ML broker, so I think I'll double check w/ the wife when she gets home tomorrow and get everything moved. As mentioned in updated post, I am not sure if I should be transferring anything in kind for a short period of time, or any funds you like to keep in a portfolio. I'm not really attached to anything. On a side note, taxable account has about $1600 in losses which I can use this year. Thanks again to you all - you don't have anything to gain but help people see where you have made mistakes and had successes.

In response to a few posts
@bdpb - No business relationship - We sold books door to door together in college and I got suckered in. He doesn't have me do his taxes, or refer me anything (I'm an auditor by trade but have the background) and he gave another guy who invests with him the I'm going to shop around for insurance. He made me feel bad by saying "I paid to get licensed in TN".. Well, cost of business - you charge me loads, pay to get licensed, you write it off.. I'm done and letting VG do the work.

@YDNAL - Thanks for the pointers. I'm trying to increase savings as much as possible. I'd like more feedback on the Target funds, but after looking at 2050 it seems fairly well split to what I would like to be in. Hoping to find a new job soon that can provide a 10-15% bump in pay, since I got hosed this last year (although still have a job).

@paulob - I am not sure if I like my AF's. I like the Euro Pacific in my wife's account, but it's a c class with a big expense. When you DCA into a loaded fund, it just seems to me like you're getting nailed with it forever.
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Postby gnosis » Sat Jan 09, 2010 8:18 pm

ndchamp wrote:The BACK buttons are located in pretty much the same place in both IE and Firefox. What you have here is the dreaded PICNIC error.

Problem In Chair Not In Computer

HAHAHAHAA
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Postby ObliviousInvestor » Sat Jan 09, 2010 9:14 pm

Clumsum wrote:As one who started with an E.D. Jones broker years ago, I would suggest ditching the broker and moving all to Vanguard. Read, learn, and use this forum. Why pay a fee and higher expenses when this money can go toward your next egg. Good luck with our decision.


As one who started as an Ed Jones broker years ago, I'd suggest ditching the broker and moving all to Vanguard.

1. Determine the asset allocation you want.
2. Find the lowest cost way to implement it.
3. Don't mess up steps 1 or 2.
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Postby retiredjg » Sun Jan 10, 2010 2:06 pm

bondeb, thanks for the update.

A word about bonds. I would encourage you to have more bonds. There is a thorough discussion in this thread . I believe all portfolios, even for people in their early 20s (which you are past) should contain at least 20% bonds.

I'm a little unclear about what is the emergency fund and what is taxable money set aside for retirement. Your ML taxable account is 22% of the portfolio listed. Is all that emergency fund? Only part?

1) If all the taxable money is emergency fund/short term goals, then using a target retirement fund in each of your other accounts makes good sense. However, the funds you have in the ML taxable account are awful and should be changed.

2) If part of the taxable money is actually set aside for retirement, a target fund for all locations (other than taxable) may not be your best idea. Sort of depends on how much is for retirement.

If #2 is the case, you'll need to set aside the other money and just give us percentages based on money for retirement. You don't have to recalculate each fund, just each separate account.
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Postby gallo146 » Sun Jan 10, 2010 9:38 pm

i wouold ditch your "friend" and rollover every penny to Vanguard. Select 1 or 2 stock funds (aggressive etc.) and 2 bond funds (short and intermediate now). BTW you should suggest your former University Dean to have a class on financing at your Alma Mater for future grads!
"Life is like riding a bicycle. To keep your balance you must keep moving". Albert Einstein
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Re: Portfolio Help - Edward Jones v. Vanguard

Postby tarnation » Mon Jan 11, 2010 12:28 am

bondebj26 wrote:Questions
1) I am in process of opening up Roth accounts online at VG, and will get these things transferred over soon. Just trying to avoid any fees to sell, so I am trying to determine what needs to be moved in-kind for a short time. My wife's C shares in Euro Pacific probably need to be held until August to avoid the 1% back-load, and if I stop contributions on Fidelity this month need to wait until December 2010 to avoid the 1%. Thoughts on liquidating vs. moving certain funds?
2) Do you recommend the target funds and forget it, or look to keep some of the VG funds I currently have and diversity to round out.

1) Look at transaction fees to determine where they are best sold. I would lean toward liquidating all of it at EJ and ML, e.g. ML only charges a small fee for selling their crappy funds. I doesn't make sense to me to wait a year in a 1.93% er fund to avoid a 1% fee: that is why those fees are structured as such: stay you pay, leave you pay. That was basically a sunk cost when you bought in.

2) I would not use target retirement funds for your taxable account. You probably don't want to hold bonds in your taxable account (e.g. MFHIX), while you still have room in your IRA's. Since you are not maxing out Tax advantaged , you might want to consider living off of your taxable and contributing more to your other accounts, unless of course you have liquidity needs.

Further:
I would turn off any dividend reinvesting ASAP.
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Postby livesoft » Mon Jan 11, 2010 12:41 am

I wouldn't worry about the 1% back-end loads. It's a sunk cost. Get out now. You pay 1% more in fees by waiting. Or you pay 1% now by not waiting. You pay it no matter what. It's better to get out now and enjoy possible increases in the market with lower fees.
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Postby bondebj26 » Mon Jan 11, 2010 10:19 am

Makes sense about not worrying about the back loads when you'd get hammered either way.

We primarily use the entire taxable account as an emergency fund; however, I am looking into just keeping $10K cash and then using the rest as a growth fund for home down payment in the next 3-5 years. I am fine just leaving this in cash, but would like to get some return on it. I'm debating just whether to ladder CD's here, or stash in a online MMA to earn a little better than nothing on the Prime MMA's w/ Vanguard Brokerage. This being said, I'll likely liquidate the $17K in the taxable ML account and move it to my ING cash account. I'll try to find an emergency fund thread to look into? Hopefully putting a portion in TSM would provide lower downside risk.
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Postby bondebj26 » Mon Jan 11, 2010 4:06 pm

Of course EJ gives me hard time today considering I gave them my notice. He says "I don't believe in index, never will, never have".. Yeah, because you get paid on everything but index; and he can outperform index as well, WITH LESS RISK! Snakes at their best.. and Going to Vanguard means no service as well; although I can't say I've ever really gotten service with him either - there is absolutely zero return reporting, crappy website, and I still have to do my own research. I wanted him to provide how the load funds perform better, and couldn't give me anything really. And we were up 31% for the year; my 401k was up 41, and I calculated a 1% CAPR (I think) since 2004 in the EJ account; and wasn't happy w/ that.

And I'm the first person that's ever transferred out before. I don't know; I'm a small fish anyways so I don't know what he cares. I always get caught up in what these guys say, and think I'm a fairly loyal person, but I shouldn't have to beg to get some halfway descent info. And he always tried to get me a credit card or VUL every time we did have a chance to meet up.

$95 term fees from VG, I think $75 from ML. There's a better chance I'll be on the losing end of the market, especially as AF gets bigger and bigger - I'd rather take the market. I'll monitor the AF for 2010, but I bet I'll still do better in my 401k
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Postby livesoft » Mon Jan 11, 2010 4:25 pm

Congrats. Better to have a learned a lesson now than many years in the future.
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Took the Plunge!! Now in AA phase

Postby bondebj26 » Thu Feb 11, 2010 9:36 am

Well, the EJ account is officially done! Funds just got deposited with VG from my Roth transfer. Wife's Roth has been liquidated, check should be on the way. Have not been able to get a hold of her ML broker to liquidate taxable account - will be able to harvest about $2K in losses for next year's tax return (so I can do some Roth conversions in 2010 to offset).

Now, the big question - what to invest in? I think it makes sense to set up each account as their own and do the same AA in each account. I've updated my original post to represent new breakdown. I've been pretty slammed at work so haven't sat down to re-look at my options.

I'm hesitant on Target Retirement funds, but it seems to be the cheapest way to get into EM without the 0.75% purchase fees in some of the International funds. I'll be looking at some of the S/D posts, but would probably just be easier to do a set split with the funds we're brining over and looking at DCA for new investments.
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Postby livesoft » Thu Feb 11, 2010 9:49 am

As I wrote previously, if all you have are tax-advantaged accounts, you should go with a target retirement fund for all of them if the expense ratio is good. There is no good reason to have a medley of funds to get the same asset allocation in all the various accounts. The would be repeating the mistake that your EJ person made.

Once you get a taxable account going, then come back and revisit.

You do not need to get a hold of the ML broker to liquidate that account. Another vendor such as Vanguard will suck that money away with your permission without you talking to ML.
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Postby retiredjg » Thu Feb 11, 2010 11:20 am

If the taxable account is not part of your retirement portfolio, there is no reason to slice and dice. The target retirement funds hold what you say you want - US stocks, bonds, 20% of stocks in international. Why make things harder than necessary?

I would again encourage you to have more bonds. See the link provided in one of my earlier posts for reasons why.
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Re: Portfolio Help - Edward Jones v. Vanguard

Postby KEP » Sun Feb 05, 2012 7:37 am

Hello. I discovered Bogleheads just today when I googled “Edward Jones vs Vanguard.” Can anyone out there give me some advice?

My mother is in her early 90s and goes along with whatever her Edward Jones representative recommends, such as moving some of her money from bonds to mutual funds and then back to bonds again. (Is it wrong of me to wonder about the representative’s ethics?) Although I see no need to withdraw her money from Edward Jones, I did advise my mother to stop direct re-investment, which she has done.

Now she wants me to find a place to invest $10,000 of her money, and I am considering Vanguard. Is Vanguard a sensible place for a person of my mother’s age to put money? If so, which Vanguard fund make sense for a person of her age? Which should she avoid?

Her total worth is less than half a million. She will probably live another ten years or more.
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Re: Portfolio Help - Edward Jones v. Vanguard

Postby dailybagel » Sun Feb 05, 2012 11:36 am

KEP wrote:Hello. I discovered Bogleheads just today when I googled “Edward Jones vs Vanguard.” Can anyone out there give me some advice?
...


HI, KEP. Glad you found this site. I'm relatively new here too.

I'd suggest you create a new post to make sure your question gets the answer it merits. The questions people may have are: what are your mother's goals for this money? Does she want to earn dividends/interest with "minimal" principle risk? Does she have strong "bequest motives," as economists call them?

If you create a new post, I would suggest you ask/investigate the following funds at Vanguard:
Target Retirement Income fund
LifeStrategy conservative growth
LifeStrategy Income fund
Wellesley Fund
inflation Protected Securities

Which is appropriate would depend on your mother's goals and tolerance for risk.
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Re: Portfolio Help - Edward Jones v. Vanguard

Postby dbr » Sun Feb 05, 2012 11:41 am

There is guidance for posting in this sticky:

viewtopic.php?f=1&t=6212

This is good to read as well:

viewtopic.php?f=1&t=6211

Definitely create a new thread.
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