Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

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Sandtrap
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Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Thu Jan 05, 2017 10:57 am

Newly retired. Married.
Age 63.
No pension.
No debt. Own home. Zero liabilities.
LCOL state.
4-6 mil in liquid savings (after tax) from business sale.



What are the advantages and/or disadvantages of having a 3 fund portfolio at Schwab and another at Vanguard?

Is it uselessly redundant?

Does it add a level of additional return or stability?

Or, does the added complexity, if any, negate any advantages of having both?

Thanks for your help everyone.
Still learning.

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Index Fan
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Index Fan » Thu Jan 05, 2017 12:14 pm

Congratulations on the 3-fund portfolio. I'm a fan of simplicity as well (though I do have a bit of $ in REITs and TIPS).

One advantage of such a plan is having your money spread over 2 financial institutions. In my opinion, this is as important as holding a diversity of asset classes in one's portfolio.

If something happens (no matter how unlikely) to your account at one of said institutions, the other is available if you need funds.

Having said that, you may or may not care for keeping 2 sets of 3-fund portfolios balanced. Think also of your beneficiary- would they be interested in doing the same?

You might consider an asset allocation or target retirement fund as a sole holding in one (or even both) of the 2 institutions.
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Thu Jan 05, 2017 5:02 pm

Index Fan wrote:Congratulations on the 3-fund portfolio. I'm a fan of simplicity as well (though I do have a bit of $ in REITs and TIPS).

One advantage of such a plan is having your money spread over 2 financial institutions. In my opinion, this is as important as holding a diversity of asset classes in one's portfolio.

If something happens (no matter how unlikely) to your account at one of said institutions, the other is available if you need funds.

Having said that, you may or may not care for keeping 2 sets of 3-fund portfolios balanced. Think also of your beneficiary- would they be interested in doing the same?

You might consider an asset allocation or target retirement fund as a sole holding in one (or even both) of the 2 institutions.


Thanks for the advice.
Perhaps a blend of the 2 locations to compensate for any weaknesses in the other? :confused

Stan Dup
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Stan Dup » Thu Jan 05, 2017 5:25 pm

"The tyranny of compounding expenses is the eighth deadly sin." - George Sisti

Longtermgrowth
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Longtermgrowth » Fri Jan 06, 2017 3:22 am

The only con I can think of is the additional record keeping and tax form work for virtually identical funds at another brokerage.

I have thought about keeping stocks at one brokerage and bonds at another, but having to push funds through a linked account for rebalancing might become a pain...

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by pgs59 » Fri Jan 06, 2017 7:07 am

I'm intrigued and wondering if you are considering using 3 Schwab funds (if so which ones), or just duplicating Vanguard funds with another brokerage account.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by bondsr4me » Fri Jan 06, 2017 7:14 am

Longtermgrowth wrote:The only con I can think of is the additional record keeping and tax form work for virtually identical funds at another brokerage.

I have thought about keeping stocks at one brokerage and bonds at another, but having to push funds through a linked account for rebalancing might become a pain...



I agree with this post.
I happen to like VG, Schwab and Fidelity.
But I think you will be better off just using Vanguard.
It is easier to maintain your investments with one firm.
(I keep a small residual amount at Fidelity, Schwab & TDAmeritrade just to keep the accounts "alive").
It certainly simplifies monitoring my investments, recordkeeping and tax return preparation.
Good Luck with your choice.
Don

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Dantes » Fri Jan 06, 2017 7:48 am

I don't see any downside to having funds at two different places, particularly with substantial amounts at both.

We have seven different accounts at Vanguard (Taxable, Traditional IRA, Rollover IRA, My Roth, DW's Roth, TDA, and a 403b. They are each individually as much work, in terms of record keeping, as my accounts at Fidelity or TIAA. And thats not much work.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Fri Jan 06, 2017 11:35 am



Thanks so much.
This is exactly what I needed to learn next.
Homework.
Will get right on it.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Call_Me_Op » Sat Jan 07, 2017 7:50 am

I would stick with two accounts.
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by blevine » Sat Jan 07, 2017 9:18 am

Asset location is more of a tax issue, as far as the link above. Could also be used to spread your assets, though having retirement and taxable in two locations may not spread them evenly.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Sat Jan 07, 2017 10:44 am

Call_Me_Op wrote:I would stick with two accounts.


Thanks for the response.

Why? :confused

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Sat Jan 07, 2017 10:48 am

blevine wrote:Asset location is more of a tax issue, as far as the link above. Could also be used to spread your assets, though having retirement and taxable in two locations may not spread them evenly.


Thanks for the help.

Does that mean that having one portfolio in one location that is more favorably tax advantaged and another portfolio in a second brokerage that accomplishes something different, ie: higher yield, may have more benefits than one portfolio in one brokerage?

I may not have understood your answer so am confused. :confused

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by blevine » Sat Jan 07, 2017 11:18 am

Sandtrap wrote:
blevine wrote:Asset location is more of a tax issue, as far as the link above. Could also be used to spread your assets, though having retirement and taxable in two locations may not spread them evenly.


Does that mean that having one portfolio in one location that is more favorably tax advantaged and another portfolio in a second brokerage that accomplishes something different, ie: higher yield, may have more benefits than one portfolio in one brokerage?


There is much discussion about placing various types of investments in tax advantages vs taxable accounts,
read this wiki
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Highly debated, not a single clear winner, but many would generically put bonds in a tax advantaged acct
and equities in a taxable account. So were you proposing an IRA at one and taxable at the other ?
Or both the same from a tax standpoint ? If they are taxable and tax advantaged, many would suggest NOT
to do a 3 fund port in each and separate by asset class.

It is not 100% agreed that this separation is advantageous, and not sure this was your reason anyway.

If you reason was safety of having two different custodians of your assets, sure go ahead and have same
3 fund at both. No brainer. I personally don't worry too much about custodian issue. You should have an emergency
fund somewhere other than Vanguard or Schwab, and I see little reason to complicate your life having investments
with same purpose and tax status in 2 places, but that is all a comfort issue. I work in the industry, and know the safeguards
in place for major name firms like Vanguard and Schwab. I would not put even a penny in a firm I did not trust
(like a Madoff) but Vanguard or Schwab, no worries to hold my long term investments. Short term savings for emergency
or near term expenses should go elsewhere, for multiple reasons (should be invested differently being most critical).

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by HoneyBee » Sat Jan 07, 2017 12:04 pm

I have accounts at both Vanguard and Schwab with about 70% of my investments at Vanguard and 30% at Schwab. I do not duplicate funds or portfolios although there is some overlap.

Over the last 4 years I have worked to simplify my investments and consolidate holdings. But I decided to keep the Schwab accounts open because I really like Schwab's banking services. It is very easy to transfer cash between my investor accounts and multiple Schwab bank accounts. For example, we used a Schwab bank account for all our children's college expenses (only one more semester to go!). And with the Schwab Bank card you do not incur any ATM charges or foreign transaction charges. And looking ahead, we may use Schwab's charitable donor advised fund because it has a much lower minimum than Vanguard.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Sat Jan 07, 2017 2:20 pm

blevine wrote:
Sandtrap wrote:
blevine wrote:Asset location is more of a tax issue, as far as the link above. Could also be used to spread your assets, though having retirement and taxable in two locations may not spread them evenly.


Does that mean that having one portfolio in one location that is more favorably tax advantaged and another portfolio in a second brokerage that accomplishes something different, ie: higher yield, may have more benefits than one portfolio in one brokerage?


There is much discussion about placing various types of investments in tax advantages vs taxable accounts,
read this wiki
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Highly debated, not a single clear winner, but many would generically put bonds in a tax advantaged acct
and equities in a taxable account. So were you proposing an IRA at one and taxable at the other ?
Or both the same from a tax standpoint ? If they are taxable and tax advantaged, many would suggest NOT
to do a 3 fund port in each and separate by asset class.

It is not 100% agreed that this separation is advantageous, and not sure this was your reason anyway.

If you reason was safety of having two different custodians of your assets, sure go ahead and have same
3 fund at both. No brainer. I personally don't worry too much about custodian issue. You should have an emergency
fund somewhere other than Vanguard or Schwab, and I see little reason to complicate your life having investments
with same purpose and tax status in 2 places, but that is all a comfort issue. I work in the industry, and know the safeguards
in place for major name firms like Vanguard and Schwab. I would not put even a penny in a firm I did not trust
(like a Madoff) but Vanguard or Schwab, no worries to hold my long term investments. Short term savings for emergency
or near term expenses should go elsewhere, for multiple reasons (should be invested differently being most critical).


Thanks "blevine".
Appreciate the help. Still a "newbie".
My reason would be the later as I'm still not comfortable with having all my life savings in one place.
I'm not yet sure of the A/A in each (still learning), but it would be about 3-4 million in each, all from savings. No IRA's etc.
I have been impressed with both Vanguard and Schwab as to professionalism, advice, and modernization of website and security VS brick and mortar banks, some of which, by comparison, seem stone-age. I'm not sure if the "brokerages" naturally "level up" because of the nature of their business.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Sat Jan 07, 2017 2:23 pm

HoneyBee wrote:I have accounts at both Vanguard and Schwab with about 70% of my investments at Vanguard and 30% at Schwab. I do not duplicate funds or portfolios although there is some overlap.

Over the last 4 years I have worked to simplify my investments and consolidate holdings. But I decided to keep the Schwab accounts open because I really like Schwab's banking services. It is very easy to transfer cash between my investor accounts and multiple Schwab bank accounts. For example, we used a Schwab bank account for all our children's college expenses (only one more semester to go!). And with the Schwab Bank card you do not incur any ATM charges or foreign transaction charges. And looking ahead, we may use Schwab's charitable donor advised fund because it has a much lower minimum than Vanguard.


Thanks a whole lot "HoneyBee".
Though retired, I'm still a "newbie" at this digital/online thing.
I also have come to appreciate Schwab's banking and level of professionalism and customer service. Though the various Vanguard funds and approach is outstanding, thus Vanguard, too.
You mention "no portfolio duplication but some overlap". Is there an advantage to that? What? :confused
Thanks again.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by blevine » Sun Jan 08, 2017 12:52 am

I'm not yet sure of the A/A in each (still learning), but it would be about 3-4 million in each, all from savings. No IRA's etc.
I have been impressed with both Vanguard and Schwab as to professionalism, advice, and modernization of website and security VS brick and mortar banks, some of which, by comparison, seem stone-age. I'm not sure if the "brokerages" naturally "level up" because of the nature of their business.



If you have 3 fund portfolio at both, you need to rebalance twice, at each firm to keep them the same AA.

If you treat them as one pool with a single AA, you can just divy up between two custodians.
Let's say you wanted 50/50 stocks/bonds, you could keep the stocks at one and bonds at the other,
but then you have the need to move cash back and forth between the two firms. Easy to do electronically
but takes more time than if all investments were at the same firm.

Whether one firm or two, avoid frequent rebalance and read up on how to determine when to do so :

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

If you add or remove funds regularly I would be biased a bit towards keeping stocks at one and
bonds at the other. Then you could add/remove to/from the one that needs adjustment,
rather than having to make transactions in both accounts to keep both at the desired AA.
This is how I do the majority of my rebalancing, which is helpful whether you have 1 or 2 brokers.
You will still have to transfer after very large stock market moves, unless you have very large cash flows
in and out regularly.

Of course if one was going to have an AA very far from 50/50,then you are not splitting your assets
to meet your goal of distribution, by simply putting stocks at one and bonds at the other. Your exact AA
should be your top priority to decide. As a retiree you may be leaning towards a bit more bonds than stocks ?
If so one might consider Total bond at Vanguard, US stock/Int stocks/Inflation bonds at Schwab or vice versa
Regardless, I would not duplicate both portfolios at each firm, but again a slight bias, not a major decision.
The major decision is asset allocation, stock vs bond ratio.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by lostdog » Sun Jan 08, 2017 8:45 am

Keep it simple and just go with Vanguard. Set your allocation with the 3 fund portfolio with tax efficient placement and then get on with your life. Just keep it simple...
"Our life is frittered away by detail. Simplify, simplify." -Thoreau | Vanguard Total World Index

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by HoneyBee » Sun Jan 08, 2017 5:29 pm

Sandtrap, my overlap in investment portfolios at Vanguard and Schwab is because my IRA is at Schwab. This is because when I left a former job, Schwab managed my firm's 401K and it was very easy to convert it to a Schwab IRA. So my Schwab IRA is all bond funds but I ran out of tax advantaged space so I also have some Total Bond Fund and municipal bond funds at Vanguard. I also keep a small taxable account at Schwab because, as previously mentioned, I like their banking services.

I hope to retire in another 3 years and will probably move all my banking to Schwab.

I do not find it that difficult to balance my allocations.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Dogsplaypoker » Tue Jan 10, 2017 12:28 am

I was once a zookeeper.....And as such we did not put the bears next to the pigs or the big cats next to the birds. And of course You would most certainly not want them all in the same cage (don't use just one). As is the same with your options. Where to put the big cat/retirement and Where to put the small birds and so forth. I'm no longer a zookeeper, and have been fortunate enough to be comfortably retired now, although alone. I spend much of my time micromanaging my very large portfolio with TD, Schwab, and vanguard. I day trade as a hobby and it keeps my mind busy. And now to hopefully be of some use to you , it is from my personal experience that Vanguard does an excellent job with very big cats, conservative and large. I.E a large retirement fund. That in addition to any vanguard investments should go into that cage. They play well. The rest I keep in schwab, the birds and the pigs. This way i can screw around with the birds and the pigs, pardon my example. And you NEVER touch or go into the big cat lions cage. It's a psychological ploy. By seperating entirely you have sealed it off mentally. No different from having a savings account at Wells Fargo and a lesser checkings and savings at chase or bank of Hannah Montana. My advice is "yes" think about tax advantages and ease of management and yaddah yoda. But also remember that it is your personal portfolio and as such condition it towards both what benefits you and so that it is protected from you. You will be this portfolios greatest ally and enemy.
Schwab and vanguard have been around since ~1975. You can always refer to both for opinions on this matter as well. Keep asking and take a survey. Keep asking for a month and average the answers out. That then would be a very good answer. That's investing. Patience and calculated decisions even when deciding on deciding to make a decision.....Also, I was never a zookeeper.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by nisiprius » Tue Jan 10, 2017 7:49 am

Here are my *opinions.* (I had accounts at Vanguard and Fidelity at the same time for about eight years, and I've had an account at Schwab).

I constantly fight the urge to tinker, to fiddle, to tweak, to optimize, to do something. Even though I'm very skeptical about many things, of course I read about low-vol or momentum or consumer staples or whatever and I wonder "gee, am I missing out? Maybe I really should get a little of this year's everybody-is-talking-about it stuff."

So my main struggle has always been to do nothing. Given a choice between making a small "improvement" and doing nothing, I do nothing. And if I decide to do something, I try to wait at least a month before deciding and taking action, to give myself a "cooling-off period."

There's nothing actually wrong with two accounts, so the principle of "do nothing" would suggest doing nothing.

On the other hand, if the "now the New Year reviving old desires" itch has set in, fresh start, spring cleaning, etc. then consolidating the two account is a good way to satisfy the need for action without doing any harm. It will keep you harmlessly busy.

The disadvantages of two accounts is complexity. It's all perfectly manageable, but it needs to be managed. (Speaking of rebalancing, if you actually set a criterion for when it "needs" to be done, you'll probably find that a three-fund portfolio only "needs" to be rebalanced several times per decade, not even once a year--although that's a frequently debated topic.) However, you'll notice I did not say it is "just complexity," because I think complexity is fairly important. This is particularly true if you have a family that might need to figure out where everything is if you were to unexpectedly [insert some euphemism here].

The advantage of two accounts is rarely you can't reach a website for one reason or another, and two firms gives you a little redundancy. It also enables you to be constantly comparing the two, so that if one of them institutes a nuisance fee and says "it's customary now," you'll know if they are lying. And you'll know if there's a real difference in their customer service.
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Tue Jan 10, 2017 3:36 pm

nisiprius wrote:Here are my *opinions.* (I had accounts at Vanguard and Fidelity at the same time for about eight years, and I've had an account at Schwab).

I constantly fight the urge to tinker, to fiddle, to tweak, to optimize, to do something. Even though I'm very skeptical about many things, of course I read about low-vol or momentum or consumer staples or whatever and I wonder "gee, am I missing out? Maybe I really should get a little of this year's everybody-is-talking-about it stuff."

So my main struggle has always been to do nothing. Given a choice between making a small "improvement" and doing nothing, I do nothing. And if I decide to do something, I try to wait at least a month before deciding and taking action, to give myself a "cooling-off period."

There's nothing actually wrong with two accounts, so the principle of "do nothing" would suggest doing nothing.

On the other hand, if the "now the New Year reviving old desires" itch has set in, fresh start, spring cleaning, etc. then consolidating the two account is a good way to satisfy the need for action without doing any harm. It will keep you harmlessly busy.

The disadvantages of two accounts is complexity. It's all perfectly manageable, but it needs to be managed. (Speaking of rebalancing, if you actually set a criterion for when it "needs" to be done, you'll probably find that a three-fund portfolio only "needs" to be rebalanced several times per decade, not even once a year--although that's a frequently debated topic.) However, you'll notice I did not say it is "just complexity," because I think complexity is fairly important. This is particularly true if you have a family that might need to figure out where everything is if you were to unexpectedly [insert some euphemism here].

The advantage of two accounts is rarely you can't reach a website for one reason or another, and two firms gives you a little redundancy. It also enables you to be constantly comparing the two, so that if one of them institutes a nuisance fee and says "it's customary now," you'll know if they are lying. And you'll know if there's a real difference in their customer service.


Thanks so much for your help. Your posts are always insightful, instructive, and relevant.

I have about 6 mil to play with so there's the "old geezer" comfort zone of not having all "my eggs in one basket" for no specific reason.
And, the idea of my "successor trustee" trying to figure out what I've done and maintaining things is also a factor, should I "kick the bucket".

I am a geek/nerd with the OCD urge to "tinker". While that served me well in decades of real estate investing to maximize returns, I'll have to resist the urge in portfolio finance management and get used to "doing nothing".

It is said that a "watched pot takes twice as long to boil". And, the geek nature motivates me to "watch" less the pot boil over and I have to clean up the mess. So, thus, I have arrived at a 2-3 fund portfolio in 2 places vs a 4 fund portfolio in 3 places to keep things simple.

With that said, do you now have all your funds in one place?

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Sandtrap » Tue Jan 10, 2017 3:41 pm

Dogsplaypoker wrote:I was once a zookeeper.....And as such we did not put the bears next to the pigs or the big cats next to the birds. And of course You would most certainly not want them all in the same cage (don't use just one). As is the same with your options. Where to put the big cat/retirement and Where to put the small birds and so forth. I'm no longer a zookeeper, and have been fortunate enough to be comfortably retired now, although alone. I spend much of my time micromanaging my very large portfolio with TD, Schwab, and vanguard. I day trade as a hobby and it keeps my mind busy. And now to hopefully be of some use to you , it is from my personal experience that Vanguard does an excellent job with very big cats, conservative and large. I.E a large retirement fund. That in addition to any vanguard investments should go into that cage. They play well. The rest I keep in schwab, the birds and the pigs. This way i can screw around with the birds and the pigs, pardon my example. And you NEVER touch or go into the big cat lions cage. It's a psychological ploy. By seperating entirely you have sealed it off mentally. No different from having a savings account at Wells Fargo and a lesser checkings and savings at chase or bank of Hannah Montana. My advice is "yes" think about tax advantages and ease of management and yaddah yoda. But also remember that it is your personal portfolio and as such condition it towards both what benefits you and so that it is protected from you. You will be this portfolios greatest ally and enemy.
Schwab and vanguard have been around since ~1975. You can always refer to both for opinions on this matter as well. Keep asking and take a survey. Keep asking for a month and average the answers out. That then would be a very good answer. That's investing. Patience and calculated decisions even when deciding on deciding to make a decision.....Also, I was never a zookeeper.


Yes yes. Thanks so much for your help.
Also, when one eats one should not let the peas touch the corn touch the entree, and eat them one at a time. . (I digress)
I believe in the idea of containment and compartmentalization to keep each thing on target and focused no matter what it might be.

So, I can take your metaphor and apply it to perhaps one portfolio focused on a reliable long term income stream (not spia and not annuitized), anothe portfolio focused on long term gains and reinvestment of dividends? And a 3rd location for "mad money" investing?

Thanks again for your help and advice. Great clarity here.

The "Bogleheads" forum of experts and helpful experienced wise folks is without peer.

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by Dogsplaypoker » Tue Jan 10, 2017 8:30 pm

Yes, exactly. I am glad you were able to grasp the metaphor. And yes, absolutely don't let the peas and veggies or sides touch the main entrée portion, that would mean catastrophe!

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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by nisiprius » Tue Jan 10, 2017 8:46 pm

Sandtrap wrote:...With that said, do you now have all your funds in one place?...
Yes, I do. Before 2007, three places: TIAA-CREF, FIdelity, Vanguard. Before 2011, two places: Fidelity and Vanguard. Since then: all Vanguard. It was close to a coin-flip deciding between Vanguard and Fidelity. And it was a bit of a struggle consolidating each time.

By "funds" I assume you mean "mutual funds." I still have a Treasury Direct account to hold Series I savings bonds, one online bank account, and one brick-and-mortar bank account.
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Re: Pros and cons of having a 3 fund portfolio at Schwab and another at Vanguard?

Post by lazylarry » Tue Jan 10, 2017 9:35 pm

One practical consideration is that for TLH purposes, having two different accounts (e.g. Vanguard and Fidelity) allows you commission-free trades with different large index funds that likely won't match exactly, allowing for TLH. This wouldn't be possible with just one broker. Of course, this only saves you a small portion yearly, so maybe slightly more useful if you are a young investor.
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