My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

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Christian NY
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My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sat Apr 15, 2017 9:41 am

Hi everyone!
I have been reading this forum for many years and recently purchased and read the Bogleheads Guide to Investing but never needed to post because I didn't have much money. That has changed recently due to a death in the family. The amount is ~$520k. It's a combination of savings and inheritance where most of the funds were inherited.
I only have a very basic understanding of modern portfolio theory so I talked to several people (friends/relatives) that manage their own portfolios and came up with a portfolio which I will post a bit later. My plan was to manage the portfolio myself - I like to learn and have an interest in doing this. "How hard can it be?"...or so I thought :P Even Warren Buffett said "Put my estate in index funds. I suggest Vanguard's". I just need to figure out which funds and what allocation.

I then decided to go talk to investment management companies like Merrill Edge and Charles Schwab... I also talked to Vanguard itself and even opened an account.
I must admit, these guys (the first two) confused the hell out of me and I am now totally lost.

Note on Vanguard: Vanguard has a reputation for best returns and lowest fees and at first I was considering just placing the entire amount with them. All was great until I asked to talk to a financial advisor (I asked to do this BEFORE I actually wired funds there). The operator told me that the wait time to talk to someone is SIXTEEN DAYS (at the time of my call).
They asked what the amount is and I told them it's 500k (yeah I realize it's not much these days but I really think it's enough to be able to talk to an advisor). That did not sound right and I went to Merrill Edge and Charles Schwab. I prefer in-person meetings anyway.

Merrill Edge was on my radar because I bank with BofA and they always push it. The consultant basically told me that he is not allowed to look at the portfolio I made and when it comes to self-investing I am totally on my own. Fair enough. But then he went on to say that I am not qualified to build and manage my own portfolio and suggested their Select Portfolios where you choose one the the five strategies ranging from conservative to aggressive and the fee is 0.85%. They also offered the robo-advisor automated investing for a fee of 0.40% ALL ETF portfolio. The financial advisor said that will outperform anything I do myself due to heavy analysis done by ME, rebalancing, etc.
That left me totally confused as over the course of the same time period I talked to four different people who manage their own portfolios and they all suggested that I stay away from anything with fees, manage the portfolio myself and keep it simple.

Charles Schwab confused me even more. The advisor was extremely negative about anything self-directed. He pushed three different products and suggested opening three different acounts: 1) Intelligent Portfolios (automated all-ETF portfolio) 2) Thomas Partners for equities portion and 3) Spectrum Preferred for Bond portion. I am ok on the first one but I have almost no understanding of #2 and #3 and the advisor did not have the time to go into detail. The fees are 0.90% for Thomas Partners and 1.35% (!!!) for Spectrum.
One thing that really bugs me is that BOTH of them said these managed or even robo-products will outperform anything I do on my own. Their justification is:
- The portfolio is managed by either a sophisticated algorithm or an experienced team of people
- Automatic rebalancing
- Tax loss harvesting
- If I manage the portfolio myself I don't know the correlation between funds and I may be duplicating stocks in different funds/ETFs.

I am 44 years old (will be 45 in July). I am currently working so don't plan to draw from the portfolio and I also have some reserves. Investing horizon is ~20 years... I hope :P
Investment strategy is somewhere between moderate and moderate-aggressive.
I better stop here as the post is becoming too long. In my next post, I will post the portfolio I created by reading online resources such as Bogleheads and talking to four different people that manage their own funds. After reading this forum it basically looks to me like a variation of a 3-fund portfolio plus "a little fiddling around the edges".

I would greatly appreciate any thoughts on this managed/self-managed dilemma. :oops:

---------------------------
Emergency funds: Yes
Debt: Mortgage $42k, no other debt
Tax Filing Status: Single
State of Residence: NY
Age: 44
Desired Asset allocation: 75/25
Desired International allocation: 15% of stocks
Last edited by Christian NY on Sat Apr 15, 2017 5:11 pm, edited 1 time in total.

Dottie57
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Dottie57 » Sat Apr 15, 2017 10:01 am

Of course the Merrill Lynch and Schwab guys were negative on DIY. They want to make a meal of you!

Three fund portfolio is very good. Lfestrategy funds from Vanguard are good. Target date funds are good. Take you pick.

You have Bogleheads to present ideas!

selftalk
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by selftalk » Sat Apr 15, 2017 10:13 am

Why not do what J. Bogle and W. Buffett advocate and buy either the Vanguard Total Stock Market Index Fund and/ or the Vanguard S&P 500 at Vanguard.com and hold on no matter what for the long term and of course DON`T PEEK at it. Most of all stop asking everyone.

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BL
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by BL » Sat Apr 15, 2017 10:32 am

Here is a great free little pdf booklet with almost everything you need in 16 pages by a recommended author, Dr. William Bernstein:
https://www.etf.com/docs/IfYouCan.pdf
You can even read about "advisers" in Hurdle #5.

You could probably do better than using an advisor by just buying a Life Strategy Moderate or a Vanguard Target date fund if you choose not to do the 3-fund portfolio.

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by retiredjg » Sat Apr 15, 2017 10:46 am

Christian NY, if you go to a Ford dealer, do you expect them to try to sell you a new Toyota or a Chevy? Of course not. It's the same going to Schwab and Merril Edge (and even Vanguard for that matter). So it should not be surprising to hear that each salesperson tried to sell you their own products by saying "ours is the best". That's the world of salesmanship. It is also not unusual to tell a customer "this is hard, you can't do it very well on your own". Well, hogwash.

If you decide to let Vanguard give it a shot, why worry about 16 days? They are swamped with incoming customers. Their customer service is suffering right now. They are slow right now and getting new customer service people up to speed takes time.

It is quite likely that you can manage this portfolio on your own. You do need to learn some basics but you apparently already know quite a bit about that. If you post your information in the format suggested, you may learn all you need to know to do it yourself.

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tractorguy
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by tractorguy » Sat Apr 15, 2017 10:53 am

There was just a story on the New York Times with the headline: " Vanguard is Growing Faster Than Everybody Else Combined" https://www.nytimes.com/2017/04/14/busi ... rowth.html

This explains why you have a 16 day waiting period to talk to somebody at Vanguard. Their staff must be feeling more than a bit overwhelmed with new business. It also explains why Charles Schwab & Merrill Edge are trash talking the do it yourself approach. If they have any sense, they should be worried that all of their business is going to go to low cost providers and they are going to have to cut their commissions to compete. IMOP, the industry is going through a change that is equivalent to the auto industry losing high paid blue collar jobs in the U.S. & a lot of historically well paid stock brokers & advisers are going to find out what it's like to be downsized.

Congratulations on your windfall, if you have not already done so, I advise you to read the wiki section on managing a windfall. https://www.bogleheads.org/wiki/Managing_a_windfall

Secondly, usually there shouldn't be any hurry about developing and executing a plan to invest your windfall. So called advisers who want to make money from you will urge you to hurry up and put the money with them. This is a red flag that their primary interest is making a monthly quota for bringing in new money, not taking care of you. In reality, the market bounces up and down. Tomorrow may be worse or better to invest than today but there is no way of knowing.

Thirdly; its your money. Investing in a conservative approach that provides a high probability of your money growing to support your retirement isn't hard. The money you save doing it yourself will pay for a luxury car in 20 years. Personally I'd rather spend the time to do a little studying and learn how to manage my money myself and buy the car for myself than buy it for an adviser at Merrill or Charles Schwab.

My specific comments on what Merrill Edge told you follow;
- The portfolio is managed by either a sophisticated algorithm or an experienced team of people All the research I've seen says that the best they can do is make enough money to sometimes cover their extra fees. Usually they don't do that well and an actively managed fund does worse for the investor than a passive index fund with the same risk. Key words here are same risk. Advisers love to show you a high risk fund that did better than an index fund until it crashes and then they don't show it any more.
- Automatic rebalancingThis might take you 2 hours/year. How much do you want to pay for this?
- Tax loss harvestingIMOP, tax loss harvesting is what my advanced math teacher used to call a second order effect. As in, "you can simplify the equations and get a good enough answer by ignoring the second order effects". This is a problem that active advisers create for themselves and then claim it is a reason to use them to fix. Tax loss harvesting only becomes important when you are buying and selling a lot of stocks or bonds. Active advisers buy and sell a lot so they should worry about tax loss harvesting. Since most boglehead type investors don't trade funds or stocks or bonds very much, they don't have nearly as much capital gains to pay tax on and tax loss harvesting isn't nearly as important.
- If I manage the portfolio myself I don't know the correlation between funds and I may be duplicating stocks in different funds/ETFs.This is only a problem for an adviser that has you in a lot of funds. If you are in the 3 or 4 fund portfolio recommended by most Bogleheads or Vanguard, then their is very little overlap and what little their is can be calculated very simply with a free tool from Morningstar
Lorne

NancyABQ
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by NancyABQ » Sat Apr 15, 2017 11:12 am

Vanguard is a favorite here, but there is nothing wrong with Schwab (or Fidelity). You can totally do-it-yourself at any of these brokerages.

I have been with Schwab for over 20 years, and have been managing my own investments just fine. On the occasions when I needed customer service, it was a phone call away with essentially zero wait time. And they do have local offices in most places if you value that. Once in a while they have contacted me to see if I want investment assistance, usually after I have done something on my end (for example, right after I rolled over a large IRA), but they aren't pushy and I can just ignore their overtures.

I guess my point is just that if you are concerned about the customer service at Vanguard due to their being overwhelmed by business, then you can do just fine at Schwab, managing your own investments. If you transfer a significant amount of money to Schwab, be sure to get some kind of a bonus deal, even if it is only some free trades.

If you are nervous about it, then start by transferring the money into a money market account (at any of these brokerages) and then invest it slowly, getting comfortable with the trading interface by starting with small transactions. It really isn't hard!

And you can get advice on the composition of the portfolio here at Bogleheads, or from various other sources. All these brokerages have inexpensive index funds, and that's what you are looking for.

Basically, your "mistake" here was talking to the salesmen whose job is to sell you on non-DIY services. Those aren't the guys you need to talk to :)

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by CppCoder » Sat Apr 15, 2017 11:15 am

tractorguy wrote: - Tax loss harvesting IMOP, tax loss harvesting is what my advanced math teacher used to call a second order effect. As in, "you can simplify the equations and get a good enough answer by ignoring the second order effects". This is a problem that active advisers create for themselves and then claim it is a reason to use them to fix. Tax loss harvesting only becomes important when you are buying and selling a lot of stocks or bonds. Active advisers buy and sell a lot so they should worry about tax loss harvesting. Since most boglehead type investors don't trade funds or stocks or bonds very much, they don't have nearly as much capital gains to pay tax on and tax loss harvesting isn't nearly as important.
I agree that tax loss harvesting is a second order effect, and one can ignore it and still have a very successful portfolio, I don't agree that it is only for active traders. First, you can tax a $3k loss against your *income* per year. If you have a job and pay taxes, tax loss harvesting is for you. Second, those of who invest might like to eventually reap our rewards. Even long term investors do eventually sell, and investment losses can be carried forward.

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BogleMelon
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by BogleMelon » Sat Apr 15, 2017 11:21 am

All your wondering will be solved if you knew that they are not really "advisers", they are just salesmen. Make sense now?
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Katietsu » Sat Apr 15, 2017 11:30 am

You said you were still working. Are you maxing out all available retirement plan options?

If not, your first priority quite likely should be to move as much of this money into tax advantaged plans as possible. The easiest move to understand would be make an IRA contribution. The second step is to max out all workplace plans and use the inheritance for living expenses if needed. You would need to post more information to know whether this plan is relevant.

As far as your meeting with the advisors, they are being paid to "manage" your investments. You should not expect them to educate you on how to DIY. To me, this would be like asking an auto mechanic to spend an hour teaching me to change my brakes while I paid the mechanic nothing for his time.

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FrugalInvestor
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by FrugalInvestor » Sat Apr 15, 2017 11:35 am

The Merrill and Schwab salespeople did their jobs well. You are now "totally confused" so you obviously need them to 'help' you. Don't fall for it. It's not complicated. Really it's only as complicated as you want to make it (and simpler is typically better!). Take your time and get some more input here and you'll become more comfortable with what to do.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Sandtrap » Sat Apr 15, 2017 11:42 am

1 Post your query in the personal "forum" format so others can help you better.
2 Read the Boglehead Wiki "getting started".
3 Read the Boglehead Wiki "booklist and suggested reading.
4 Ignore the "salesman/advisers/financial experts" that want to sell you financial products, for now.
5 Take your time, months to years, to implement your financial strategy and deploy your assets, you have more to lose than to gain.
6 Have your own vested interest at heart at all times. Nobody else will.
7 Keep it simple. 3 fund portfolio or Vanguard Balanced Index or Target Retirement Fund, and so forth as an example.
8 It is not important to be exact rather than finding out what fits your needs and goals.
9 Even Vanguard VPAS service will have "off the rack" suggestions for your portfolio. Take your time. Learn and understand what "you need" not what others "say you need".
10 When you understand enough to distinguish between good and bad financial advisers, etc, etc, you will know enough to do it yourself without the fees they charge. You may feel it is worth it to delegate or not. But at least at that point you will know exactly why.
11 If your funds are all or predominantely Vanguard, then go with the Vanguard Brokerage, If Schwab, then there. Like computer shopping, shop the software that fits your needs then the computer and O/S to run that software. Same here. Eventually find the funds you like that fit you well and then, then, go with that brokerage to keep costs down. This does not work for everyone but is one consideration out of a million.
12 Consider a mix of brokerages to get what you need: Schwab for checking and physical location and link that to Vanguard for funds, and your local bank for other assets. For example.

Random suggestions.
Hope this is actionably helpful.
Not an expert.

dbr
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by dbr » Sat Apr 15, 2017 11:47 am

There is nothing confusing about any of this. Salesmen sell. They are very good at it and will make a lot of money by taking it away from you. Vanguard is not good at customer service, at least these days. There is no refuge in any case other than learning enough about investing to do it yourself of know how to tell if someone else is giving you good advice. All of these thoughts are standard to the industry and your experience is exactly as might be expected. With any luck this forum plus more reading and study will provide a path out of the morass.

bondsr4me
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by bondsr4me » Sat Apr 15, 2017 1:01 pm

If you want to DIY, just open up a brokerage account at Schwab, Fidelity or Vanguard.

Schwab & Fidelity are very good when it comes to customer service and website technology.
Vanguard, not so much so when it comes to technology and customer service.

Just this week I had reason to contact Schwab, so I used the instant chat system.
It is very, very good. I appreciated this because I had an instant answer to my questions.
With VG, I would have either had to call or use the snail email system.

I admire Jack B. as I do Warren Buffett and Charlie Munger.
It just seems that VG is still stuck in the 50's technology-wise.
I switched my IRA, my wife's IRA and our Joint brokerage account from VG to Schwab.

At some point in the future, if VG gets it together with technology and staffing, I WILL go back...not now tho'.
I really like VG and everything they stand for but not having an adequate "crew" to sail the ship does matter.
I did see where they have hired some 2,000 new crew members...that will take time for them to get trained and ready to handle clients.

I saw in a short blurb in Barron's this morning about a J.D. Power yearly client satisfaction survey that placed Schwab !st and Fido #2.
They are both very good at customer service.

Happy Easter all BH's.

Don

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by aristotelian » Sat Apr 15, 2017 1:33 pm

What are the funds in now? One option is to leave it as is and put your name on it. Are any of the funds in an IRA?

My advice is do not talk to any advisors. Even ones that are supposed to have your best interests in mind still have a profit interest. They are going to try to sell you on their stuff and then take a slice, thinking that they are doing you a favor.

You do not need to invest in anything more complicated than an S&P 500 fund and total bond index fund. You can do this by just going online at Schwab or Vanguard and opening an account.

Read the wiki on investing a windfall. The most important piece of advice there is to wait a few months before making any big decisions. Many investments are much easier to get into than they are to get out of, so you do not want to make a mistake that could cost you a lot of money.

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

dbr
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by dbr » Sat Apr 15, 2017 1:54 pm

One thing about ME and also Schwab, or Fidelity or TDA or anyone else, is that holding an account with them does not require setting up an advisory relationship. That happens only if you ask for it or permit it. In that case you are responsible for the consequences. One of the worst things you can do is ask a fund company for investment advice.

Blender
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Blender » Sat Apr 15, 2017 2:44 pm

Here's another vote for opening a brokerage account at Schwab. I've been very happy with them. You have more options, not that you really need them, and their customer service is top notch. They also have highly competitive commission free ETFs w/ very low ERs and are trying very hard to steal away some of Vanguard's thunder. I also enjoy their trading platform.

But wherever you go, you can do it all yourself. It is not hard, it does not need to be confusing, if you're capable enough to find this forum you're more than capable enough managing your own portfolio.

Christian NY
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sat Apr 15, 2017 2:59 pm

retiredjg wrote:Christian NY, if you go to a Ford dealer, do you expect them to try to sell you a new Toyota or a Chevy? Of course not. It's the same going to Schwab and Merril Edge (and even Vanguard for that matter). So it should not be surprising to hear that each salesperson tried to sell you their own products by saying "ours is the best". That's the world of salesmanship. It is also not unusual to tell a customer "this is hard, you can't do it very well on your own". Well, hogwash.

If you decide to let Vanguard give it a shot, why worry about 16 days? They are swamped with incoming customers. Their customer service is suffering right now. They are slow right now and getting new customer service people up to speed takes time.

It is quite likely that you can manage this portfolio on your own. You do need to learn some basics but you apparently already know quite a bit about that. If you post your information in the format suggested, you may learn all you need to know to do it yourself.
I see your point but not sure if it's a valid comparison. A Ford dealer does not have a fiduciary relationship to me :twisted:
Not sure about Merrill Edge (they sounded more like salesmen) but the Schwab consultant swears that they get a salary and no commissions are involved regardless of what I do. What's the catch? :mrgreen:

Christian NY
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sat Apr 15, 2017 3:02 pm

Blender wrote:Here's another vote for opening a brokerage account at Schwab. I've been very happy with them. You have more options, not that you really need them, and their customer service is top notch. They also have highly competitive commission free ETFs w/ very low ERs and are trying very hard to steal away some of Vanguard's thunder. I also enjoy their trading platform.

But wherever you go, you can do it all yourself. It is not hard, it does not need to be confusing, if you're capable enough to find this forum you're more than capable enough managing your own portfolio.
Yes, absolutely! I can confirm that Charles Schwab was outstanding in terms of customer service both on the phone and in-person. If there is no difference I would go with Schwab. If there is a financial benefit, I'll go with Vanguard.

Christian NY
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sat Apr 15, 2017 3:04 pm

BL wrote:Here is a great free little pdf booklet with almost everything you need in 16 pages by a recommended author, Dr. William Bernstein:
https://www.etf.com/docs/IfYouCan.pdf
You can even read about "advisers" in Hurdle #5.

You could probably do better than using an advisor by just buying a Life Strategy Moderate or a Vanguard Target date fund if you choose not to do the 3-fund portfolio.
Thank you!!! I actually just read this ebook a few days ago because I saw your post where you recommended it to another poster :wink:

ReadyOrNot
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by ReadyOrNot » Sat Apr 15, 2017 3:09 pm

So you do value having a fiduciary relationship. Now ask those salesmen (salaried or commission) if they have a fiduciary relationship with the customer. Maybe then you will understand why you shouldn't trust them for your best interests.

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by aristotelian » Sat Apr 15, 2017 3:19 pm

Christian NY wrote:
Blender wrote:Here's another vote for opening a brokerage account at Schwab. I've been very happy with them. You have more options, not that you really need them, and their customer service is top notch. They also have highly competitive commission free ETFs w/ very low ERs and are trying very hard to steal away some of Vanguard's thunder. I also enjoy their trading platform.

But wherever you go, you can do it all yourself. It is not hard, it does not need to be confusing, if you're capable enough to find this forum you're more than capable enough managing your own portfolio.
Yes, absolutely! I can confirm that Charles Schwab was outstanding in terms of customer service both on the phone and in-person. If there is no difference I would go with Schwab. If there is a financial benefit, I'll go with Vanguard.
If your financial needs are relatively straightforward, there is no financial benefit to Vanguard. Vanguard has better low expense fund selection, but Schwab has all the standard funds you need and they do have great customer service. One small benefit is that at your level ($500K+), you will qualify for $2 trades at VG, but for a simple buy-and-hold portfolio trading fees are not really a consideration.

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Earl Lemongrab » Sat Apr 15, 2017 3:20 pm

I don't think most people need advisers of any sort. It's pretty straightforward to put together a portfolio that will match your needs and capture market returns. People here are happy to help.

Where to go depends a bit on size of portfolio and your style. Merrill Edge is great for those who are comfortable with using ETFs and have enough assets to get free trades. Otherwise, Fidelity or Vanguard will fit the bill for most.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Malinois000 » Sat Apr 15, 2017 3:41 pm

I handle my own stock portfolio at Charles Schwab and have done so for years. I was assigned a direct Sales associate that I contact from time to time but for the most part I handle myself. i have been very pleased with Schwab.

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sat Apr 15, 2017 4:29 pm

Part II
One thing I want to say that I met with 4 people that manage their own funds. These are people close enough that they invited me to their house and 3 out of 4 actually logged into their accounts and showed me exactly what they have. Talk about complexity! They do have the popular instruments we discuss here but then they also got lots of mutual funds, individual stocks, commodities, Put Options, Covered Calls, shorting stock, you name it. They say things like "I am gonna short zero coupon municipal bonds" and other stuff I know nothing about :P
The reason I mention this is that while I appreciate the opportunity to talk to millionaires and learn about what they are doing (some people on the forum said I shouldn't even talk to them), it's important to point out that none of them are pure Bogleheads) While they all agree ETFs and Index funds are *usually* best, they have portfolios comprised of 10-15 funds from 3-4 fund families.
They all recommended different things and (in their opinion) what they recommended is *very* simple.
3 out 4 people are completely DYI. One lady has ~3M at full-service in UBS at 1% fee and self-manages about 800k.

One man is in his 70s and also owns a big warehouse and a yacht) He has 8.1M in his portfolio which I saw with my own eyes (I've known him for many years and the money was made in commercial construction) and despite his age the allocation is ~80/20. He also is heavily into Put Options which I did not have time to fully grasp.
He is somewhat eccentric and appears to like making bold statements. In another post, I quoted him on Japan:
"50% of the world's wealth and companies are in the U.S. and they are all churning profit. That [Japan] will never happen here!"
Similar to that statement he made another one which I understand from reading the forum that most people here will disagree with (I mean the second part of it):
"ETFs/Index funds are actually the best instrument for stock, they have low fee and outperform both mutual funds and picking stocks yourself. BUT....NEVER EVER BUY ETFs/index funds for Bonds!"
"When you buy ETFs/index funds for bonds it's a disaster waiting to happen. Those need a hands-on manager to manage it!"
Hey, the man is entitled to have an opinion, right? :P
Anyway, this is the reason the portfolio has a mix of ETFs and mutual funds for bonds. On the International, the returns from ETFs are just too low, someone helped me pick the funds that performed better. But I am totally open to criticism and willing to be beat up by Bogleheads)) To avoid a post that is too long, I'll post the actual portfolio in the next post.

Christian NY
Posts: 66
Joined: Fri Apr 14, 2017 3:46 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sat Apr 15, 2017 4:36 pm

I think the recommendation is to post details about the personal situation along with portfolio questions. I am 44, single, currently working but the job situation is somewhat unstable. I own a house, have a mortgage but the balance is low, no car loan, no other debt. I am saving ~$4500 a month at the time of this writing but not sure what the future holds in that respect.
I know it's recommended to fully take advantage of 401k & IRA however this question is about an individual taxable account in the amount of ~$500k.

Here it is.
VOO Vanguard 500 Index Fund 27%
VOE Vanguard Mid-Cap Value ETF 10%
VBR Vanguard Small-Cap Value ETF 10%
POGRX PRIMECAP Odyssey Growth Fund 8%
PONDX PIMCO Income Fund Class D 10%
PDBZX Prudential Total Return Bond 7%
BND Vanguard Total Bond Market ETF 8%
VNQ Vanguard REIT ETF 5%
FMIJX FMI International Fund 10%
BEXFX Baron Emerging Markets Fund 5%

70% Stock
25% Bond
5% Real Estate

Pale Horse
Posts: 69
Joined: Tue Jul 16, 2013 2:43 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Pale Horse » Sat Apr 15, 2017 4:48 pm

1. Open Vanguard account.

2. Drop money here: Vanguard Target Retirement 2035 Fund (VTTHX) or Vanguard Target Retirement 2030 Fund (VTHRX)

3. Leave it alone.

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dratkinson
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Location: Centennial CO

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by dratkinson » Sat Apr 15, 2017 5:04 pm

DIY investing is not that hard; you can learn to do it. The solution is to keep things simple and own the whole market; you can do that with only 3 funds.



There is a lot of background investing knowledge (60+ years of academic research) required to guide your investing decisions. Fortunately the forum has this knowledge so you don't need to reinvest that wheel before you get started. The forum just needs your information to begin connecting-the-dots.

So the forum can help you, please edit your OP (original post, or original poster) with ALL of the information requested in the sticky "Asking Portfolio Questions". Why? It will describe your financial situation in enough detail for the forum to get started.
--Add your updated information to the bottom of your OP. Why? So all of your information is in one place. So new folks reading your topic will be able to hit the ground running. (It's easier if you edit your information offline, then post when complete.)
--Create a new reply to this topic saying you've updated your OP. Why? So the system will send out email notifications telling all of us that a "new reply" has been received. Why? Because editing your OP doesn't send out an email notification.



What can the forum do for you?

Example. Posting our inherited taxable investments is insufficient information. Why? Owning taxable bonds and REIT in the 10% or 15% fed tax brackets, in a no-income tax state, is acceptable. However, we do not know that that is your situation.

Example. Based on your risk tolerance, you'll need some good bond fund(s) to help reduce your market risk and stabilize your investments during a market crash. While it's appropriate to use taxable bonds in tax-advantaged accounts (401k, IRA, inherited IRA,...), but depending upon your tax brackets (fed, state, city), tax-exempt municipal bond would be better in your taxable accounts (personal taxable accounts, inherited taxable accounts,...).

Example. You can simplify your investments by using all-in-one funds (containing: US stocks, int'l stocks, bonds), but be aware that most use taxable bonds so are not appropriate for use in taxable accounts in higher tax brackets.

As the forum knows this investing background information, you can be quickly guided toward a tax-efficient personal investing solution. But we need ALL your information. Please supply all of the information requested in the sticky "Asking Portfolio Questions".



Due diligence. While it's nice to have someone jump-start our investing solution, it's our due diligence requirement to learn the background information for ourselves. That's easy, too.

Suggested reading.
--Get from your local library The Boglehead's Guide to Investing. Read it for a structured walk-through of the topic.
--Begin reading in the Wiki (link: screen top right) while waiting for your book. Read "Getting Started" and all else that interests you.

Find the Wiki topic on recommended ā€œbooksā€ (search term) and read several over the coming years. Ensure you read one on bonds, so you know what bonds to use/avoid.



Play money investing. Once you've got the basics down---owning the total market as simply/cheaply/tax efficiently as possible---then you can use a 5% "play money" allocation to branch out into picking individual stocks/bonds/commodities, selling/buying calls/puts,.... Or not.

Just be aware that if you lose this money, that's your proof that you "don't have the lobes" for this type of investing.



Welcome.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

anil686
Posts: 646
Joined: Thu May 08, 2014 12:33 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by anil686 » Sat Apr 15, 2017 5:21 pm

Christian NY wrote:Part II
One thing I want to say that I met with 4 people that manage their own funds. These are people close enough that they invited me to their house and 3 out of 4 actually logged into their accounts and showed me exactly what they have. Talk about complexity! They do have the popular instruments we discuss here but then they also got lots of mutual funds, individual stocks, commodities, Put Options, Covered Calls, shorting stock, you name it. They say things like "I am gonna short zero coupon municipal bonds" and other stuff I know nothing about :P
The reason I mention this is that while I appreciate the opportunity to talk to millionaires and learn about what they are doing (some people on the forum said I shouldn't even talk to them), it's important to point out that none of them are pure Bogleheads) While they all agree ETFs and Index funds are *usually* best, they have portfolios comprised of 10-15 funds from 3-4 fund families.
They all recommended different things and (in their opinion) what they recommended is *very* simple.
3 out 4 people are completely DYI. One lady has ~3M at full-service in UBS at 1% fee and self-manages about 800k.

One man is in his 70s and also owns a big warehouse and a yacht) He has 8.1M in his portfolio which I saw with my own eyes (I've known him for many years and the money was made in commercial construction) and despite his age the allocation is ~80/20. He also is heavily into Put Options which I did not have time to fully grasp.
He is somewhat eccentric and appears to like making bold statements. In another post, I quoted him on Japan:
"50% of the world's wealth and companies are in the U.S. and they are all churning profit. That [Japan] will never happen here!"
Similar to that statement he made another one which I understand from reading the forum that most people here will disagree with (I mean the second part of it):
"ETFs/Index funds are actually the best instrument for stock, they have low fee and outperform both mutual funds and picking stocks yourself. BUT....NEVER EVER BUY ETFs/index funds for Bonds!"
"When you buy ETFs/index funds for bonds it's a disaster waiting to happen. Those need a hands-on manager to manage it!"
Hey, the man is entitled to have an opinion, right? :P
Anyway, this is the reason the portfolio has a mix of ETFs and mutual funds for bonds. On the International, the returns from ETFs are just too low, someone helped me pick the funds that performed better. But I am totally open to criticism and willing to be beat up by Bogleheads)) To avoid a post that is too long, I'll post the actual portfolio in the next post.
You should always do your due diligence and talking with people and finding out how they view investments are never a bad thing. I would direct you to probably the wisest investor alive at this time who knows more about investing than many on this forum - Warren E. Buffet. Please read his shareholder letter this year - it will explain why many people have portfolios constructed like the ones you list above and why it benefits the financial services industry and not the people you talked with as much as they would like to think. Frankly, he has no axe to grind and no reason to tell others to invest in a low cost SP index fund - but despite that - he gives that advice to institutions, endowments, Lebron James and other celebrities as well as to the public at large. Another question you should ask is why would the wisest investor of our times recommend such a strategy?

ETFs and mutual funds are the same type of investments - just different wrappers. Vanguard ETF and mutual funds are part of the same share class so they behave the same both in tax efficiency and performance. Other company ETFs may be more tax efficient than the corresponding mutual funds they offer.

Bond ETF/index funds are almost all actively managed. Just because it says index does not mean it is indexed like a stock index. It is designed to track a benchmark - that is all. Indexed bond funds are not looking to outperform the benchmark - they are looking to match it by holding a certain number of bonds that diversify their risk and match the duration and credit quality of a said index. Please read Bogle's Common Sense on Mutual funds for the full story on Bond index funds. The bottom line is that there will be little difference in performance between a very good actively managed bond fund and an index bond fund that has the same duration, type of bonds, and credit quality in general. That is because the costs associated with the very good actively managed bond fund will eat away the excess return. However, an actively managed bond fund not pegged to an index may assume more risk and may actually underperform an indexed bond fund.

JMO on some of the thoughts you posted and hope it helps...

btenny
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by btenny » Sat Apr 15, 2017 5:28 pm

Relax. We can help you to learn to do it your self. It is not that hard. Your rich friend seem like a smart old investor who likes to do things his way which is more complicated (puts etc.) than most would do. Most here like simple 5 or so fund portfolios and simple strategies that we set and forget for months or years. We self manage and do OK. I know I have not changed my fund choices much in years and have been at my retirement allocation (40/60 +-) for a long time. I only adjust it once a year when I buy/sell stuff to rebalance. I have been doing it myself for 14 years and keeping up with the market for that whole time and getting a pretty smooth ride. You can do it too. Just slow down and move carefully as you get smarter about the market and investing. No need to hurry and invest that windfall and give those sales guys a big bonus day.

As far as I can tell everything you quoted your friend as saying about Japan and ETF for stocks and mutual funds for bonds is mostly correct. Many bond funds are actively managed mutual funds and have a little higher fee and slightly better returns that index bond ETFs. But the ETF bond funds are also good and will work fine for investors. Their lower cost gives them advantages. Likewise buying stocks as ETF indexes is also pretty sound advice. But good low cost mutual funds of the index persuasion are also good investments. And your friends comment about Japan is just a reference to the US markets being very highly priced currently like Japan was in 1980.

And since he has a very high 80/20 stock/bond ratio I suspect he is trying to use "puts" to provide some risk insurance against a big drop in the market. Your friend is trying to limit his downside risk. I would not invest that way due to complexity and extra costs. Most here at Bogleheads would not do it either. Instead we just set our allocation at acceptable risk ratios (40/60 or so in retirement for me) and let the market provide the return. Most here like to set their allocation at age in bonds so for you that would be 60% stocks and 40% bonds.

Hope this helps. Good Luck.

stlutz
Posts: 4200
Joined: Fri Jan 02, 2009 1:08 am

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by stlutz » Sat Apr 15, 2017 5:35 pm

Debt: Mortgage $42k, no other debt
Tax Filing Status: Single
State of Residence: NY
Age: 44
Desired Asset allocation: 75/25
Desired International allocation: 15% of stocks
One suggestion: This might be a good opportunity to just pay the mortgage off. There is always debate about whether that is the best thing to do mathematically, but it really is wonderful to have that freedom at age 44.

A few additional questions:

--What tax bracket are you in? This would influence what type of bond fund you would want to use.
--What other assets do you actually have? It's always good to look at your portfolio as a whole and not just at the pieces.
--Have you ever bought or sold an ETF? Would be good to know if the simplicity of mutual funds or the flexibility of ETFs is more valuable to you.

You actually might want to consider starting a new thread purely with the "Asking Portfolio Questions" info (viewtopic.php?t=6212) and leave all mention of Schwab, Merrill etc. out of it. Then compare whether you think the suggestions you get here are more or less helpful than what you got from these investment firms and then move forward from there.

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dratkinson
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Location: Centennial CO

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by dratkinson » Sat Apr 15, 2017 6:08 pm

stlutz wrote:... You actually might want to consider starting a new thread purely with the "Asking Portfolio Questions" info (viewtopic.php?t=6212) and leave all mention of Schwab, Merrill etc. out of it. Then compare whether you think the suggestions you get here are more or less helpful than what you got from these investment firms and then move forward from there.
+1 Suggest starting a new topic with only your information. There is no need to discuss conflicting advice from salesmen and friends. Why? Because that information is superfluous to your primary goal of developing an investing strategy for your situation.

Just supply all of the requested information that accurately describes your current financial situation.

It's easier if you copy the sticky "Asking Portfolio Questions", and then edit it with your information. Omit nothing.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

MarvinK
Posts: 94
Joined: Wed Apr 12, 2017 8:04 pm
Location: DC

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by MarvinK » Sat Apr 15, 2017 7:42 pm

You can certainly DIY. You're already here.

After looking at the mix below, the two suggestions I have are:
-Use the index funds that are "Tax-managed" or "Tax-free" if possible. Two Vanguard examples: VTMFX (A Tax-Managed Balanced Fund) and VTEAX (Tax Free Muni Bonds)
-REIT typically has capital gains. Usually you want that in an IRA NOT a taxable account.

-Best Wishes!

Here it is.
VOO Vanguard 500 Index Fund 27%
VOE Vanguard Mid-Cap Value ETF 10%
VBR Vanguard Small-Cap Value ETF 10%
POGRX PRIMECAP Odyssey Growth Fund 8%
PONDX PIMCO Income Fund Class D 10%
PDBZX Prudential Total Return Bond 7%
BND Vanguard Total Bond Market ETF 8%
VNQ Vanguard REIT ETF 5%
FMIJX FMI International Fund 10%
BEXFX Baron Emerging Markets Fund 5%

70% Stock
25% Bond
5% Real Estate

Doubleeagle4me
Posts: 43
Joined: Sun Jan 18, 2015 7:03 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Doubleeagle4me » Sat Apr 15, 2017 8:23 pm

Put a chunk in schwa intelligent portfolio. Put some in a year and a half ago. It's been out performing the market.
Something about emotionless portfolio and rebalancing works. Plus there is practically no fee.

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patrick013
Posts: 2010
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by patrick013 » Sat Apr 15, 2017 8:48 pm

Christian NY wrote: I know it's recommended to fully take advantage of 401k & IRA however this question is about an individual taxable account in the amount of ~$500k.

Here it is.
VOO Vanguard 500 Index Fund 27%
VOE Vanguard Mid-Cap Value ETF 10%
VBR Vanguard Small-Cap Value ETF 10%
POGRX PRIMECAP Odyssey Growth Fund 8%
PONDX PIMCO Income Fund Class D 10%
PDBZX Prudential Total Return Bond 7%
BND Vanguard Total Bond Market ETF 8%
VNQ Vanguard REIT ETF 5%
FMIJX FMI International Fund 10%
BEXFX Baron Emerging Markets Fund 5%
If I went to an advisor I'm sure I'd get 30-40% Intl for a recommendation.
When I go to a robo-advisor I usually get Preferreds, Global REITS, etc..
Things that are higher risk or just aren't investment grade, like High Yield
Bond Funds, for another example.

I'm happy with a 2-fund portfolio - the 500 or TSM and Interm Trsy Fund.

Let me adjust yours with my opinion.

30% - VOO Vanguard 500 Index Fund
10% - VOE Vanguard Mid-Cap Value ETF
10% - VBR Vanguard Small-Cap Value ETF
10% - VNQ Vanguard REIT ETF
10% - BEXFX Baron Emerging Markets Fund
30% - VFIUX Vanguard Intermediate Treasury Fund

Emerging markets has better forecasts than Intl developed stocks.
Why not VG Emerging Market ETF ? Baron's is at 1.45% expense ratio.
Intermediate treasury has the best liquidity in a market crash. Perhaps
ticker BIV might be used also. Value and REIT are adequately allocated.

So there you have a whole portfolio without fee or wait or confusion
or non-investment grade products. Also, wait anyway. The market
is stuck at all time highs meaning a market correction is very possible.
I hate buying stocks without a good entry point or having a crash occur
shortly after a large purchase. Ruins my morning coffee a bit. :)
age in bonds, buy-and-hold, 10 year business cycle

retiredjg
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by retiredjg » Sun Apr 16, 2017 5:56 am

Christian NY wrote:I see your point but not sure if it's a valid comparison. A Ford dealer does not have a fiduciary relationship to me :twisted:
Not sure about Merrill Edge (they sounded more like salesmen) but the Schwab consultant swears that they get a salary and no commissions are involved regardless of what I do. What's the catch? :mrgreen:
Well......look at what the Schwab consultant suggested you buy (Thomas Partners and Spectrum) and see if you think your best interests were foremost in his mind.

I don't know what the catch is other than I'm not sure that a fiduciary relationship actually exists.

retiredjg
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by retiredjg » Sun Apr 16, 2017 5:59 am

Christian NY wrote: If there is no difference I would go with Schwab. If there is a financial benefit, I'll go with Vanguard.
If you need advice or management, go with Vanguard. If you plan to do it yourself, Schwab should do nicely if you are willing to use ETFs instead of mutual funds. Schwab's mutual fund lineup is weak. Their strength lies in ETFs.

retiredjg
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by retiredjg » Sun Apr 16, 2017 6:21 am

Christian NY wrote:I know it's recommended to fully take advantage of 401k & IRA however this question is about an individual taxable account in the amount of ~$500k.
Unless the taxable account is for a different goal, it is best to build your portfolio around your 401k using the taxable account and IRAs.

The two best funds for taxable are a total stock market index (or building blocks thereof) and a total international index. If you choose to put bonds in taxable (opinions vary on this) they should be tax-exempt bonds if you are in a higher tax bracket.


Here it is.
VOO Vanguard 500 Index Fund 27%
VOE Vanguard Mid-Cap Value ETF 10%
VBR Vanguard Small-Cap Value ETF 10%
POGRX PRIMECAP Odyssey Growth Fund 8%
PONDX PIMCO Income Fund Class D 10%
PDBZX Prudential Total Return Bond 7%
BND Vanguard Total Bond Market ETF 8%
VNQ Vanguard REIT ETF 5%
FMIJX FMI International Fund 10%
BEXFX Baron Emerging Markets Fund 5%

70% Stock
25% Bond
5% Real Estate
If this represents the $500k in taxable, there are several funds that should not be in taxable because they are not tax-efficient (you are paying unnecessary taxes). If this represents your entire portfolio, we can't do anything with this information because we don't know what is where.


If you really want help with this, post your information in the format suggested in the link at the bottom of this message. We don't need any more information about what Schwab said or what your friends said. We need to know about your situation and we can best help you if you format it as suggested.

In fact, I think if you will gather and post the information in the manner we use that a lot of your confusion will just go away and you will be ready to start doing this yourself at whatever location you choose.

afan
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Joined: Sun Jul 25, 2010 4:01 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by afan » Sun Apr 16, 2017 9:14 am

You sound somewhat worried about the future of your current job. Depending on your circumstances, you may want a lower allocation to stocks in case you need to live off your investments if things go badly at work. If you could easily get a similar position if your current company goes under, then perhaps you are only looking at a few weeks out of the labor force, or no time at all.

If getting a similar job would be difficult or impossible, then you should have a more conservative portfolio.

You do not need anyone to manage your money for you.
The Schwab financial consultants- the client facing reps you get to know- do not get compensated by commissions. But they do get paid based on how much money you keep at Schwab and the extent to which you use the higher cost Schwab services. For example, your consultant will get more money if you go with Thomas Partners than if you manage the money yourself.
The advisors get paid a (large) percent of assets under management. They do not get paid on commissions beyond this.
The Schwab Intelligent Portfolios do not charge an explicit assets under management fee, but they do make a profit on the large cash positions built into the portfolios. For most people that cash position is too large and represents a drag on returns. I think some people on this forum may have calculated the effective equivalent AUM fee of the Intelligent Portfolios cash position. If you are curious you could try to look it up. But you do not need this product in any case.

Once you decide how much risk is appropriate, based on your possible need for money on short notice or over an extended period of time, the rest is EXTREMELY simple.

Put the "stocks" component in a broad US stock market index mutual fund or ETF with minimal fees. There are a number of these, Vanguard and Schwab both offer them.

You COULD, but do not have to, put some of your stock allocation in a broad international stock index fund. International stocks and US stocks are highly correlated and it probably does not matter a lot whether you do this at all. If you do it, it probably does not matter a lot how much you put in. One can make a case for any figure between 20% and 60% international. As the broad range implies, there are not great reasons for picking a particular figure.

Put the "bonds" portion in a low fee bond fund. Use your tax bracket to decide between a taxable and a tax free fund. Here an actively managed fund, like Vanguard Intermediate Term Tax Exampt, is fine. An index fund like the Vanguard Tax Exempt Bond fund is also fine. If you are better off in taxable bonds, then again, a low cost active or passive fund is fine. I think Vanguard has the best bond funds in both active and passive categories.

After you have done this you have completed almost all of the work. Every now and then, say once a year or when there seem to be substantial changes in your life circumstances, ask yourself whether the asset allocation is still appropriate and adjust it if need be. The need to adjust could arise either because market returns take you away from your desired allocation or because you decide you should be higher or lower in stocks, based on what else is going on in your life. This should take you at the outside 10 minutes a year if you really think something has changed. It should take under a minute most years.

Note that, since the asset allocation is based on very noisy projections about expected risk and return, it makes no sense to become wedded to a tight range. If you think 60% stocks is about right, then given the precision of your prediction 65%, 70%, 55% and 50% are also fine.

If you paid someone 0.01%- one basis point- to do this annual review and adjustment for you- then you would be paying an effective hourly rate of $312 if they spend 10 minutes or $3,120 if they spend one minute. I do not believe that anyone worth $312/hour would be offering their services to you through one of these advisor arrangements. I don't believe there exists anyone worth $3,000/hour.

You do not need anyone to do this for you.
There is almost nothing to be done, which is why so many people are eager to charge you a bunch of money to do almost nothing. It is a great business.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Christian NY
Posts: 66
Joined: Fri Apr 14, 2017 3:46 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Sun Apr 16, 2017 9:29 am

Ok! I have decided to do this myself, no advisors/no fees.
I know the advantages of 401k and IRA but the fact is that the money is sitting on a bank account. My question is about an individual taxable brokerage account.

My biggest question is, does the portfolio above look ok? What would you change, if anything?
Thank you and happy Easter!

dbr
Posts: 25339
Joined: Sun Mar 04, 2007 9:50 am

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by dbr » Sun Apr 16, 2017 9:40 am

Christian NY wrote:Ok! I have decided to do this myself, no advisors/no fees.
I know the advantages of 401k and IRA but the fact is that the money is sitting on a bank account. My question is about an individual taxable brokerage account.

My biggest question is, does the portfolio above look ok? What would you change, if anything?
Thank you and happy Easter!
I think it is unnecessary to invest in so many funds though the issue does not rise to being "wrong." I suppose you are saying you don't have a total stock fund and therefore want to construct a proxy. That is ok but in my opinion not required. REITs, EM are probably also unneeded, but not a mistake.

If you are happy with it then why not? I get a sense that you are trying too hard to find a perfect portfolio rather than one that is good enough, but that is also not really for me to say.

afan
Posts: 3217
Joined: Sun Jul 25, 2010 4:01 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by afan » Sun Apr 16, 2017 9:52 am

VOO Vanguard 500 Index Fund 27%
VOE Vanguard Mid-Cap Value ETF 10%
VBR Vanguard Small-Cap Value ETF 10%
POGRX PRIMECAP Odyssey Growth Fund 8%
PONDX PIMCO Income Fund Class D 10%
PDBZX Prudential Total Return Bond 7%
BND Vanguard Total Bond Market ETF 8%
VNQ Vanguard REIT ETF 5%
FMIJX FMI International Fund 10%
BEXFX Baron Emerging Markets Fund 5%
You have more funds and higher fees than you need.

Get rid of the FMI, PRIMECAP, PIMCO and Prudential funds. Allocate the money as below, based on your desired mix of stocks and bonds.

If you want international exposure, get rid of the horribly overpriced BEXFX and FMIJX and replace with a broad international index fund.

Get rid of S&P 500 index, Mid cap value, small cap value and replace with total stock market.
Get rid of the REIT fund and put the money into stocks or bonds as your asset allocation dictates.

You give up a lot of yield to have money in treasuries vs a broader mix of taxable bonds. You face no credit risk, but you still have interest rate risk, so it is hardly as if treasuries are risk free. I would get a broad fund that included government and corporate bonds. An investment grade bond fund, or a bond index fund.

All of these changes presume you would not pay significant capital gains taxes on selling funds in your taxable account to get to a simple 2 or 3 fund portfolio. If you would have capital gains taxes to get out of the Vanguard index funds, then hold on to them.

Even if you would face capital gains taxes, it would be worth it to get out from under the high cost funds.
The REIT fund is not a good thing to have in a taxable account, even if you are convinced you want to be in REITs. So I would get rid of that as well, even if it cost taxes to do so. If you really want REITs, then hold them in a retirement account. Or not at all.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

retiredjg
Posts: 31503
Joined: Thu Jan 10, 2008 12:56 pm

Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by retiredjg » Sun Apr 16, 2017 10:05 am

Christian NY wrote:My biggest question is, does the portfolio above look ok?
No.

What would you change, if anything?
These are OK:
  • VOO Vanguard 500 Index Fund 27%
    VOE Vanguard Mid-Cap Value ETF 10%
    VBR Vanguard Small-Cap Value ETF 10%

This might be OK depending on your tax bracket which I don't think we know.
  • BND Vanguard Total Bond Market ETF 8%

These are either unnecessary, too high cost, or simply should not be in a taxable account:
  • POGRX PRIMECAP Odyssey Growth Fund 8%
    PONDX PIMCO Income Fund Class D 10%
    PDBZX Prudential Total Return Bond 7%
    VNQ Vanguard REIT ETF 5%
    FMIJX FMI International Fund 10%
    BEXFX Baron Emerging Markets Fund 5%

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CAsage
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by CAsage » Sun Apr 16, 2017 12:08 pm

While the money you are asking about is in a taxable account, the best overall plan can include making sure you are taking advantage of opening a Roth IRA, Traditional IRA or 401k, which is why several prior responses have asked about the whole picture. With more cash in hand, you have more choices about what kind of account to open. Just something to look into, as well as paying off your mortgage. Keep it simple, fewer funds are good.
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by dratkinson » Sun Apr 16, 2017 5:00 pm

Your route forward. To help you map a route to your financial goals (kids education, retirement,...), we need to know your exact starting location---your financial description as requested in the sticky "Asking Portfolio Questions". No complete starting information = no route forward.

Suggestion. Look thought the requests-for-help topics posted by others in this forum section. Notice how those posting the most succinct descriptions of their current financial situations, received the quickest and most succinct replies mapping possible routes forward. The OPs then mix and match to choose their preferred route from all the possible routes suggested.

But without knowing your exact starting location, the only accurate route forward remaining is, "You can't get there from here."



Data point: inherited investments. As you received a stepped-up cost basis on inherited investments, if that happened recently, then it's possible you will owe little in taxes to convert to more appropriate investments. Meaning you could convert everything this year.

But which more appropriate investments? That depends upon a complete description of your financial situation.

When you do post your complete financial description, please include your cost basis and current value of each inherited investment. Why? In case all can not be converted this year, then we'll have the information needed to suggest a tax efficient conversion order. How? To save time/effort, we can cross that bridge if/when we come to it.

Student exercise. It is part of your due diligence responsibility to search the IRS website for how to determine your "inherited cost basis" (search term). You will use that information this year, to map out a route (we'll help) that avoids tax obstacles. You will use this information next tax season, to report your cost basis on shares sold.
Last edited by dratkinson on Sun Apr 16, 2017 7:23 pm, edited 1 time in total.
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by bertilak » Sun Apr 16, 2017 6:16 pm

Christian NY wrote:... the Schwab consultant swears that they get a salary and no commissions are involved regardless of what I do. What's the catch? :mrgreen:
Try to guess what his salary (and continued employment) depend on! (Hint: It is not your well-being nor investment success.) Does the term "commission" encompass "bonus?"
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Lobster » Sun Apr 16, 2017 6:21 pm

retiredjg wrote:
Christian NY wrote:My biggest question is, does the portfolio above look ok?
No.

What would you change, if anything?
These are OK:
  • VOO Vanguard 500 Index Fund 27%
    VOE Vanguard Mid-Cap Value ETF 10%
    VBR Vanguard Small-Cap Value ETF 10%

This might be OK depending on your tax bracket which I don't think we know.
  • BND Vanguard Total Bond Market ETF 8%

These are either unnecessary, too high cost, or simply should not be in a taxable account:
  • POGRX PRIMECAP Odyssey Growth Fund 8%
    PONDX PIMCO Income Fund Class D 10%
    PDBZX Prudential Total Return Bond 7%
    VNQ Vanguard REIT ETF 5%
    FMIJX FMI International Fund 10%
    BEXFX Baron Emerging Markets Fund 5%
Agree with retiredjg. Income funds and active funds in taxable generate taxable income in the form of dividends and capital gains, which eats away at your portfolio each year.

While I understand you have this account in taxable, you should plan around your entire portfolio. For example if you decided on an 80/20 portfolio and can hold all 20% of bonds in 401k/IRA accounts, it would be more tax efficient than trying to hold an 80/20 in taxable and an 80/20 in tax advantaged.

You have to do the math to determine whether selling those expensive funds and taking the tax hit will be worth the tax reduction moving forward. Over the long term your returns will be better by holding holding tax-efficient index funds in your taxable account.

Good luck :sharebeer
Submit to the relentless rules of humble arithmetic and avoid the tyranny of compounding costs.

confusedinvestor
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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by confusedinvestor » Mon Apr 17, 2017 1:49 am

Schwab will be cheaper vs Vanguard for a BH Style 3/4 Fund DIY portfolio .

http://www.cnbc.com/2017/02/02/charles- ... e-war.html

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by onourway » Mon Apr 17, 2017 6:10 am

One very simple thing you may be overlooking Christian - complex portfolios do not indicate greater returns.

Complex portfolios typically grow out of a couple of scenarios. 1) you hire an investment advisor who puts you in all sorts of funds because a) it makes it look complicated and convinces people they can't mange things themselves and b) it makes more money for the advisor. 2) people who manage things themselves often get interested enough in their investments that they treat it as a hobby.

Really, truly, you do not need any more than 1 fund on the low end, 5 funds on the absolute upper end to get better returns than the majority of individual investors. Focus on simplicity and keeping costs down.

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Re: My Story so far. Totally confused! Vanguard, Charles Schwab, Merrill Edge. Managing own portfolio... or NOT?

Post by Christian NY » Mon Apr 17, 2017 9:08 am

dbr wrote:
Christian NY wrote:Ok! I have decided to do this myself, no advisors/no fees.
I know the advantages of 401k and IRA but the fact is that the money is sitting on a bank account. My question is about an individual taxable brokerage account.

My biggest question is, does the portfolio above look ok? What would you change, if anything?
Thank you and happy Easter!
I think it is unnecessary to invest in so many funds though the issue does not rise to being "wrong." I suppose you are saying you don't have a total stock fund and therefore want to construct a proxy. That is ok but in my opinion not required. REITs, EM are probably also unneeded, but not a mistake.

If you are happy with it then why not? I get a sense that you are trying too hard to find a perfect portfolio rather than one that is good enough, but that is also not really for me to say.
dbr, yes, you are absolutely right! I am trying hard to find a perfect portfolio because while I have the money I won't be able to back it back again due to personal circumstances. However, once I decide on the funds, I will relax as suggested on this forum and leave it alone for at least one year when it's time to rebalance. I am also learning a lot while trying to find that perfect portfolio so for me it's time well spent :greedy
Last edited by Christian NY on Mon Apr 17, 2017 9:14 am, edited 1 time in total.

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