Have had money in a managed Merrill Lynch account for years, wondering if I should switch

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sockkin
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Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

Please excuse any poor terminology - I am just starting to attempt to become financially literate.

I am 22 years old and have an inheritance of 250,000 placed in an actively managed portfolio of mutual funds at Merril Lynch. Over the past year I have begun to read personal finance books to start getting a better understanding of whether my money was being managed in a manner that wasn't screwing me over.

According to ML, "Because of your household size, most account fees are waived, i.e. $150 annual account fees. You do pay management fees on the mutual funds you own in your account, you own C share mutual funds which carry fees of 1%".

While this is nice if its true, has anyone heard of a scenario where an actively managed account had no fees? I really hope that I am not coming off poorly. I want to make sure that I am not being lied to and also make sure that I don't leave ML and move to a Vanguard account when I should not have.
bluebolt
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by bluebolt »

The short answer is that it is likely to save you a lot of money over your lifetime if you switch to low cost investments.

It would be helpful if you posted the symbols of the shares that you owned so folks could comment on the fees and what low-cost alternatives are available. I'd be surprised if the C shares you owned only had fees of 1%.

BTW, I just consolidated a large rollover from Merrill Lynch a few months ago - took about a week, was painless and the receiving financial institution reimbursed the fees that ML charged.
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dwickenh
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by dwickenh »

I have experience with Merrill Lynch through a trust account that my deceased father placed with them. I will guarantee the expenses are more than you think. Just look at their statement and tell me if you can make any sense out of it. They try to make it as complicated as possible, so you will think they are needed to manage the mess. I am unable to move the Trust funds for 3 more years per my father's wishes, but the cost is obvious when you do a little research.

Good luck to you and do some research before making any decision. Once decided, don't let them talk you out of your decision.

Dan
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mhalley
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by mhalley »

They may waive the 150 bucks but I wouldn't be surprised if you are paying an aum fee. Someone has to be paid to do that active managing! Have the funds remained the same since you inherited the account? Who picked the mutual funds in the first place?
billfromct
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by billfromct »

I checked the Merrill Lynch "A Client Disclosure Pamphlet".

Class C shares charge a 1.00% fee each year instead of a front end load (sales charge) of 5.75%.

In their 2010 Disclosure Pamphlet it said, "Class C shares generally become less economical for investors who hold their investments over a longer term."

I couldn't find that in their 2017 Disclosure Pamphlet.

They will do everything in their power to keep you in Class C shares so the ML sales person can collect his/her commission.

This 1.00% annual fee is in addition to the ML annual mutual fund expenses, probably .50% to 1.50%. This is only a guess without knowing the exact ML fund.

Call Vanguard & move this money out of ML as soon as possible. I would think you can move them "in kind" then sell them at your convenience to manage cap gains taxes.

bill
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Garco
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by Garco »

We had a similar situation a few years ago regarding my father's estate. I and my 3 sibs had the option to leave the investments at Merrill; most were fixed income (municipal bonds, etc.). We could even have the convenience of the same advisor, for the 4 of us.

Two of us took the money and investments out -- in my case via a simple transfer initiated by fidelity. I'm not sure what the other two did, but I think they kept the investments and cash at Merrill. One of them didn't need the money or complications involved in transferring things; the other didn't have the knowledge to know for sure what to do. So the original advisor is still managing half of the original. Lucky man.

In my opinion there's only one correct approach for you, especially at your age: take everything to Fidelity or Schwab or Vanguard.
Artisan
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by Artisan »

Sounds like you are paying with AUM, Expense ratios and load waiver fees between 2.5 - 3%.

That is huge!!

I will pass on these words of wisdom from Mr. Bill Bernstein from his "If You Can" pamphlet:

"Act as if every broker, insurance salesman, mutual fund salesman and financial advisor you encounter is a hardened criminal."
Mr.BB
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by Mr.BB »

Tell you advisor that you want a complete breakdown per fund they have you in.
What the expense ratio of that particular fund is as well as any other fees that you are paying.
Then add in any fees that the advisor is charging you.
FYI anyone that tells you that they can't give you a breakdown, you shouldn't worry about it, or any other excuse should NOT be managing your money.
Once you get your total expense percent that you paid for the year, go online and find an "expense calculator"..simpler is better. Just add in the dollars and expense ratios and compare two funds side by side. The real value is when you look at the totals over 20, 30, 40 years...that will blow your mind!
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
2comma
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by 2comma »

Yep, blow you mind. On $250,000 for 30 or 40 years it's amazing! Here is my favorite investment fee calculator http://buyupside.com/calculators/feesdec07.htm. Once you figure out the true fees ML is charging be prepared to be shocked!
If I am stupid I will pay.
kenner
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by kenner »

sockkin wrote:Please excuse any poor terminology - I am just starting to attempt to become financially literate.

I am 22 years old and have an inheritance of 250,000 placed in an actively managed portfolio of mutual funds at Merril Lynch. Over the past year I have begun to read personal finance books to start getting a better understanding of whether my money was being managed in a manner that wasn't screwing me over.

According to ML, "Because of your household size, most account fees are waived, i.e. $150 annual account fees. You do pay management fees on the mutual funds you own in your account, you own C share mutual funds which carry fees of 1%".

While this is nice if its true, has anyone heard of a scenario where an actively managed account had no fees? I really hope that I am not coming off poorly. I want to make sure that I am not being lied to and also make sure that I don't leave ML and move to a Vanguard account when I should not have.
You are likely transferring a large portion of your future wealth to the coffers of Merrill Lynch.

Most people would not want to do that.

Nothing will enrich you more than educating yourself regarding the investment world. Keep reading and learning. Beating market returns is the dream of most investors. And most investors fail in that endeavour over the long term.

Self-education is key.

For definitive advice, please post the details of your ML investment portfolio.
bluebolt
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by bluebolt »

Mr.BB wrote:Tell you advisor that you want a complete breakdown per fund they have you in.
What the expense ratio of that particular fund is as well as any other fees that you are paying.
Then add in any fees that the advisor is charging you.
FYI anyone that tells you that they can't give you a breakdown, you shouldn't worry about it, or any other excuse should NOT be managing your money.
Once you get your total expense percent that you paid for the year, go online and find an "expense calculator"..simpler is better. Just add in the dollars and expense ratios and compare two funds side by side. The real value is when you look at the totals over 20, 30, 40 years...that will blow your mind!
You can just see what is in your Merrill Lynch account by logging in. You don't have to go through your broker to find out this info.
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by pkcrafter »

C class funds are the worst in my opinion. That 1% is an ongoing commission, but it isn't the total expense ratio. The 1% is added to the expense ratio making the total probably close to or over 2%. That will seriously reduce the returns that go in your pocket over many years.
You are not getting any deals. List the tickers or look them up and compare fund expense to Vanguard.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

bluebolt wrote:The short answer is that it is likely to save you a lot of money over your lifetime if you switch to low cost investments.

It would be helpful if you posted the symbols of the shares that you owned so folks could comment on the fees and what low-cost alternatives are available. I'd be surprised if the C shares you owned only had fees of 1%.

BTW, I just consolidated a large rollover from Merrill Lynch a few months ago - took about a week, was painless and the receiving financial institution reimbursed the fees that ML charged.
Thank you to everyone for you're responses. I will find out more information and post it shortly as to where my money is tied up specifically.
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sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

bluebolt wrote:The short answer is that it is likely to save you a lot of money over your lifetime if you switch to low cost investments.

It would be helpful if you posted the symbols of the shares that you owned so folks could comment on the fees and what low-cost alternatives are available. I'd be surprised if the C shares you owned only had fees of 1%.

BTW, I just consolidated a large rollover from Merrill Lynch a few months ago - took about a week, was painless and the receiving financial institution reimbursed the fees that ML charged.

Here is a list of the mutual funds that I am invested in:


MCDVX
BLACKROCK EQUITY
DIVIDEND FD C

MCLOX
BLACKROCK GLOBAL
ALLOCATION FD INC C


BCBDX
BLACKROCK GLOBAL
DIVIDEND PORTFOLIO CL C

MCLHX
BLACKROCK LARGE CAP
GROWTH FUND C


BRBCX
BLACKROCK TACTICAL
OPPORTUNITIES FUND C


According to my broker, my investment accounts are a part of my family household account, and therefore my fees with ML are under 1%. If this is true, then I feel as though maybe it is fine to stay with them for peace of mind of having someone managing my money that also manages my families money. However, according to every book or forum like this, it is not true and no one is exempt from these fees no matter how much money they have invested in ML.
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by bsteiner »

sockkin wrote:... Here is a list of the mutual funds that I am invested in:

MCDVX
BLACKROCK EQUITY
DIVIDEND FD C

MCLOX
BLACKROCK GLOBAL
ALLOCATION FD INC C

BCBDX
BLACKROCK GLOBAL
DIVIDEND PORTFOLIO CL C

MCLHX
BLACKROCK LARGE CAP
GROWTH FUND C

BRBCX
BLACKROCK TACTICAL
OPPORTUNITIES FUND C

According to my broker, my investment accounts are a part of my family household account, and therefore my fees with ML are under 1%. ...
In addition to the Merrill Lynch fees of under 1% (is it 0.01% or 0.99%), you're paying expenses at the fund level of:

MDCVX - 1.70%
MCLOX - 1.89%
BCBDX - 1.78%
MCLHX - 1.96%
BRBCX - 1.96%

You can check them here: https://investor.vanguard.com/other-funds/.
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by pkcrafter »

bsteiner beat me to it. Everyone of your funds has a 1% commission embedded in the expense ratio. Those will not be reduced, so are you saying you are charged another fee of close to 1% on top of those high ERs?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

pkcrafter wrote:bsteiner beat me to it. Everyone of your funds has a 1% commission embedded in the expense ratio. Those will not be reduced, so are you saying you are charged another fee of close to 1% on top of those high ERs?

Paul
No, I think that they might be saying that my fees for being a part of ML are under 1% not including the fees that the Mutual Funds charge. Is it possible that a mutual fund would charge less of a percentage in fees because the rest of my household is invested in it?

I think I will ask my broker for more specifics. Thank you for your help.
bluebolt
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by bluebolt »

pkcrafter wrote:bsteiner beat me to it. Everyone of your funds has a 1% commission embedded in the expense ratio. Those will not be reduced, so are you saying you are charged another fee of close to 1% on top of those high ERs?

Paul
When I look those funds up in Merrill Lynch, it shows a 1% "Load Percentage" in addition to the expense ratio.
So, it looks like you need to add 1% to all of those expense ratios to get the actual expense ratio. Based on your financial advisor's statement, you may be getting a little break, but let's be generous and say you are paying a 0.75% load in addition to the expense ratio.

Those fees are 10x what you could be paying for equivalent low cost index funds.

You will significantly impact your ability to accumulate wealth if you stay invested in those funds.

You should transfer to a low-cost broker (Vanguard, Fidelity, Schwab, etc) and invest in low-cost alternatives.

Do it on Monday. Open an account at one of those brokers and request that your funds be transferred. Liquidate them and buy a lazy 2 or 3 fund index portfolio. You'll thank me in 20-30 years.

Image
Last edited by bluebolt on Fri Mar 31, 2017 5:27 pm, edited 1 time in total.
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by pkcrafter »

sockkin wrote:
pkcrafter wrote:bsteiner beat me to it. Everyone of your funds has a 1% commission embedded in the expense ratio. Those will not be reduced, so are you saying you are charged another fee of close to 1% on top of those high ERs?

Paul
No, I think that they might be saying that my fees for being a part of ML are under 1% not including the fees that the Mutual Funds charge. Is it possible that a mutual fund would charge less of a percentage in fees because the rest of my household is invested in it?
No the funds have fixed expense ratios, but the broker appears to also be charging you an advisory fee of close to 1%. This would make total fees in the range of a whopping 2.75%. That will crush your returns over the years.

Note: I don't think it will do much good to ask the broker. He will be prepared with a wonderful reply.

Paul
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Taylor Larimore
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Post by Taylor Larimore »

soskin:

Welcome to the Bogleheads Forum!

William Bernstein is one of the most respected authorities on the subject of personal investing. He wrote a short book that can be read in less than an hour. It could have been written just for you.

Best wishes.
Taylor

EDIT: Soskin: I am sorry my link did not work. Anyway, I collected valuable excerpts from this little book. You can read them here:

viewtopic.php?f=10&t=137266
Last edited by Taylor Larimore on Fri Mar 31, 2017 5:59 pm, edited 2 times in total.
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NancyABQ
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by NancyABQ »

I agree OP should look at an exit strategy, but he needs to find out the tax consequences of just liquidating everything.

How much are the unrealized capital gains on those holdings?
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sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

pkcrafter wrote:
sockkin wrote:
pkcrafter wrote:bsteiner beat me to it. Everyone of your funds has a 1% commission embedded in the expense ratio. Those will not be reduced, so are you saying you are charged another fee of close to 1% on top of those high ERs?

Paul
No, I think that they might be saying that my fees for being a part of ML are under 1% not including the fees that the Mutual Funds charge. Is it possible that a mutual fund would charge less of a percentage in fees because the rest of my household is invested in it?
No the funds have fixed expense ratios, but the broker appears to also be charging you an advisory fee of close to 1%. This would make total fees in the range of a whopping 2.75%. That will crush your returns over the years.

Note: I don't think it will do much good to ask the broker. He will be prepared with a wonderful reply.

Paul

Ok, I sent my broker an email asking if I could get the percentage fee ML charges me for managing my account. After I have confirmed (which I think is imminent) that the fees that ML are charging me are far too much, should I simply contact someone at Vanguard and have them advise me on how to move my money over?

Forgive me for my rookie questions, but what is it that makes Vanguard so much better? Is it that they have a more strict fiduciary responsibility to its clients? I still have not been able to make this part clear. Baby steps..
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sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

bluebolt wrote:
pkcrafter wrote:bsteiner beat me to it. Everyone of your funds has a 1% commission embedded in the expense ratio. Those will not be reduced, so are you saying you are charged another fee of close to 1% on top of those high ERs?

Paul
When I look those funds up in Merrill Lynch, it shows a 1% "Load Percentage" in addition to the expense ratio.
So, it looks like you need to add 1% to all of those expense ratios to get the actual expense ratio. Based on your financial advisor's statement, you may be getting a little break, but let's be generous and say you are paying a 0.75% load in addition to the expense ratio.

Those fees are 10x what you could be paying for equivalent low cost index funds.

You will significantly impact your ability to accumulate wealth if you stay invested in those funds.

You should transfer to a low-cost broker (Vanguard, Fidelity, Schwab, etc) and invest in low-cost alternatives.

Do it on Monday. Open an account at one of those brokers and request that your funds be transferred. Liquidate them and buy a lazy 2 or 3 fund index portfolio. You'll thank me in 20-30 years.

Image
Thank you for your help - I honestly think that is exactly what I will do. They really do make you feel cornered. I was handed this account at 18 and it was basically told to me that these people have been managing my families money for years and years. It didn't even dawn on me until now that they might not have my best interests in mind. They really don't seem like bad people, but I can't seem to find any reason to stay with them other than laziness.
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sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

NancyABQ wrote:I agree OP should look at an exit strategy, but he needs to find out the tax consequences of just liquidating everything.

How much are the unrealized capital gains on those holdings?
Will someone at Vanguard be able to discern this for me?
bluebolt
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by bluebolt »

sockkin wrote:Ok, I sent my broker an email asking if I could get the percentage fee ML charges me for managing my account. After I have confirmed (which I think is imminent) that the fees that ML are charging me are far too much, should I simply contact someone at Vanguard and have them advise me on how to move my money over?

Forgive me for my rookie questions, but what is it that makes Vanguard so much better? Is it that they have a more strict fiduciary responsibility to its clients? I still have not been able to make this part clear. Baby steps..
Don't expect your broker to make it easy for you understand the fees. Look at my screen shot above to understand what you're paying. You can look that up yourself for each symbol in your ML account (that's where that screen shot is from).

Low cost brokers like Vanguard, Fidelity & Schwab have low-cost options and their business model does not depend on paying financial advisors' salaries (for the most part).

Look at the expense ratios on the Lazy Portfolios page:
https://www.bogleheads.org/wiki/Lazy_po ... _portfolio

For example the two fund portfolio has fees of 0.30% for the world stock index fund and 0.20% for the total bond market index fund.
You are paying 10x more than that at Merrill Lynch.

As a couple posters have mentioned, you should take tax considerations into account.

By the way, feel free to PM me with any questions. I just transferred six figures from Merrill Lynch to Fidelity in December and would be glad to give you more details in PM. Heck, I'll give you my phone number in PM and you can call me and I'll walk you through it.

I know it seems scary and there's an actual person who is your broker who you don't want to insult, but he is not looking out for your interests, and, oddly enough, a bunch of strangers on this board are.
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by NancyABQ »

sockkin wrote:
NancyABQ wrote:I agree OP should look at an exit strategy, but he needs to find out the tax consequences of just liquidating everything.

How much are the unrealized capital gains on those holdings?
Will someone at Vanguard be able to discern this for me?
You should be able to ask your current broker for the information on unrealized gains. I think this kind of information should be summarized on your monthly statement? After it is transferred Vanguard could tell you.

You can give the new broker a list of the holdings and see if you can "transfer in kind". If you can do that, then transfer without selling anything (no tax consequences) and then figure out the cost basis and liquidate in a sensible way to avoid undesired tax consequences (maybe over the course of a few years -- it depends on your current and expected income/tax brackets).

Meanwhile once transferred, make sure you are not reinvesting any of the dividends and distributions. Take those distributions and invest them in some cheap index funds.

If you can't transfer in kind, that becomes more difficult. In that case you definitely need the unrealized gains info in order to make a good decision about what to do.

I personally recommend Schwab, especially because they seem to have better customer service than Vanguard. But Fidelity, Vanguard or Schwab should all be good choices.
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by pkcrafter »

Play with this for a bit.

Use 1.75% for fund management cost.
Use 0.9% for advise fee.
Use 25 years and put in the amount of your assets and contributions and a 6% rate of return.


https://www.moneysmart.gov.au/tools-and ... calculator

Paul
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BL
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by BL »

In response to asking about fees with active funds, Wellington at 0.16% VWENX, and Wellesley at 0.15% ER are very low-cost at Vanguard with no 12b-1 kickbacks, unlike your Class C funds of 1% 12b-1 kickbacks.
Avoid C class funds like the plague. I wonder what other fees you are charged, AUM or other types of costs.
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Taylor Larimore
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by Taylor Larimore »

They really don't seem like bad people.
sockind:

When you have been around as long as I have, you learn that nearly all the best salesman seem like wonderful, honest people who are only interested in helping you (The great swindler, Bernie Madoff, was charming).

My wife and I were with Merrill Lynch for many years. Leaving Merrill Lynch for Vanguard in 1986 was the best financial decision we ever made.
Morningstar: "If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds."
Best wishes
Taylor
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sockkin
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by sockkin »

For everyones reference, I made a portfolio mocking my actual portfolio

https://hellomoney.co/portfolio/2c1d7f
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Taylor Larimore
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Re: Have had money in a managed Merrill Lynch account for years, wondering if I should switch

Post by Taylor Larimore »

Sockin:

I compared a $10,000 investment in the first listed fund in your posted portfolio, BlackRock Equity Dividend (MCDVX) fund, a large growth fund, with Vanguard Growth Index fund (VAGIX).

MCDVX has a 10-year cost (not including broker fees) of $1,906.

VAGIX has a 10-year cost of $103 with no broker fees.

The $1,906 difference comes out of your returns.

http://financials.morningstar.com/fund/ ... ture=en-US

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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