Advice on Investment plan needed

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Danya
Posts: 17
Joined: Mon Apr 17, 2017 12:40 pm

Advice on Investment plan needed

Postby Danya » Thu Apr 20, 2017 1:02 pm

Hello All,

This is a new world, the forum that is. Something I never knew about. Thanks for such an incredible resource. I look forward to learning and contributing. Please excuse my grammar in advance it's never been a strong suit. After running a business for many years I'm at a point where I need to start managing money vs. making it.

My financial picture is messy and I'm hoping to streamline it and cut the fat. The first question I thought of while putting this all to paper I'm probably paying 1% fee on cash reserves sitting at Merrill, Well I hope not.

My goal is to streamline and maximize my investments.

Questions:

1: I'm considering moving from the Merrill managed to self-directed.
2: Increasing positions in Vanguard 3-4 funds

If you were me what would you do or point me in a direction to research and learn


Summary:
Debt: $105k mortgage @ 3.5%. keeping for deduction.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, Effective tax rate 15%
State of Residence: WA
Age: 50
No Children
Real Estate net rev. 240k yr.
100k cash reserves

Merrill 1.14M, Managed1%fee
$240k cash CMA Taxable Acct
$510k various funds below Taxable Acct
AMER FUNDS NEW
AMERICAN GROWTH FUND
AMERICAN SMALLCAP WORLD
AMERICAN CAPITAL WORLD
BLACKROCK US
BLACKROCK EQTY DIVIDEND
BLACKROCK GLOBAL
CALAMOS GROWTH
CALAMOS MARKET NEUTRAL
DAVIS NEW YORK VENTURE
DELAWARE WEALTH BUILDER
EATON VANCE LARGE CAP
FIRST EAGLE
FRANKLIN INCOME FD ADV
IVY ENERGY FUND CL I
JOHN HANCOCK FDMTL LARGE
LOOMIS SAYLES BOND FD
MAINSTAY LARGE CAP
MFS VALUE FD CL I
NATIXIS GATEWAY FUND CL
ROYCE PENNSYLVNIA MUTUAL
TEMPLETON FOREIGN FD
THORNBURG INTERNATIONAL
THORNBURG INTERNATIONAL

$612k cash liquidated IRA, Broker is working on ETF positions.
I want to review before consenting but considering pulling Merrill funds to self-manage



Fidelity 130k, Taxable Acct
AMZN $31,637.90
CL $10,990.50
COST $6,833.60
FB $14,396.00
HBAN $12,715.00
KEY $12,712.00
MDT $3,236.40
MSFT $10,877.98
NVDA $3,033.00
OGRMF $1,045.00
SBUX $12,032.00
TMUS $6,526.00
TWMJF $747.00
V $9,117.00


Vanguard 57k Taxable Acct
VMMXX $4,031.56
VBMFX $8,308.43
VTIAX $14,482.48
VTSAX $30,328.75

Cash to Invest 300k IRA Acct liquidated from Fidelity
Money Market 500k, 1%
Last edited by Danya on Fri Apr 21, 2017 12:33 am, edited 2 times in total.

pkcrafter
Posts: 11372
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Advice on Investment plan needed

Postby pkcrafter » Thu Apr 20, 2017 1:17 pm

Need to know what kind of accounts the assets are in--Merrill, Fidelity, 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.

Danya
Posts: 17
Joined: Mon Apr 17, 2017 12:40 pm

Re: Advice on Investment plan needed

Postby Danya » Fri Apr 21, 2017 12:34 am

pkcrafter wrote:Need to know what kind of accounts the assets are in--Merrill, Fidelity, Vanguard.

Paul


Hi Paul,

I clarified this in the original post, Thanks Dan

pkcrafter
Posts: 11372
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Advice on Investment plan needed

Postby pkcrafter » Fri Apr 21, 2017 9:21 am

Danya wrote:Hello All,

This is a new world, the forum that is. Something I never knew about. Thanks for such an incredible resource. I look forward to learning and contributing. Please excuse my grammar in advance it's never been a strong suit. After running a business for many years I'm at a point where I need to start managing money vs. making it.

You say you have your own business, so you really need some kind of individual IRA. Does you wife work? For your business? You can compare plans here.


https://investor.vanguard.com/what-we-o ... ns?lang=en

You are very short on tax-advantaged space. You might even qualify for IRA or Roth if MAGI is in range. 50 and over can contribute $6500 each. The alternative is non-deductable IRAs. Here are Pros and Cons.

https://www.fool.com/retirement/iras/20 ... assle.aspx

My financial picture is messy and I'm hoping to streamline it and cut the fat. The first question I thought of while putting this all to paper I'm probably paying 1% fee on cash reserves sitting at Merrill, Well I hope not.

My goal is to streamline and maximize my investments.

Well, I'm afraid you are correct--this portfolio is definitely messy. Some more questions below.


Questions:

1: I'm considering moving from the Merrill managed to self-directed.
2: Increasing positions in Vanguard 3-4 funds

This would be a very positive move, but it's going to take some work.


If you were me what would you do or point me in a direction to research and learn


Summary:
Debt: $105k mortgage @ 3.5%. keeping for deduction.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, Effective tax rate 15%
State of Residence: WA
Age: 50
No Children
Real Estate net rev. 240k yr.<--Is this annual income? If so, are you sure your in the 25% bracket.
100k cash reserves

Merrill 1.14M, Managed1%fee
$240k cash CMA Taxable Acct
$510k various funds below Taxable Acct<--You have some very tax-inefficient funds in taxable, which hits a nerve with me. I don't know why people who are supposed to know something about finance put investors in high tax brackets into tax inefficient funds, but we see it all the time! Well, OK, I'll tell you why--they only care about their commissions. Rant over.
AMER FUNDS NEW
AMERICAN GROWTH FUND
AMERICAN SMALLCAP WORLD
AMERICAN CAPITAL WORLD
BLACKROCK US
BLACKROCK EQTY DIVIDEND
BLACKROCK GLOBAL
CALAMOS GROWTH
CALAMOS MARKET NEUTRAL
DAVIS NEW YORK VENTURE
DELAWARE WEALTH BUILDER
EATON VANCE LARGE CAP
FIRST EAGLE
FRANKLIN INCOME FD ADV
IVY ENERGY FUND CL I
JOHN HANCOCK FDMTL LARGE
LOOMIS SAYLES BOND FD
MAINSTAY LARGE CAP
MFS VALUE FD CL I
NATIXIS GATEWAY FUND CL
ROYCE PENNSYLVNIA MUTUAL
TEMPLETON FOREIGN FD
THORNBURG INTERNATIONAL
THORNBURG INTERNATIONAL

$612k cash liquidated IRA, Broker is working on ETF positions.
I want to review before consenting but considering pulling Merrill funds to self-manage<--This has to be your goal. Your expenses and tax losses are far too high.

What do you mean liquidated the IRA? Do you mean you went to all cash, but still in the IRA?



Fidelity 130k, Taxable Acct
AMZN $31,637.90
CL $10,990.50
COST $6,833.60
FB $14,396.00
HBAN $12,715.00
KEY $12,712.00
MDT $3,236.40
MSFT $10,877.98
NVDA $3,033.00
OGRMF $1,045.00
SBUX $12,032.00
TMUS $6,526.00
TWMJF $747.00
V $9,117.00

I don't know what you want to do about the individual stocks, but that can be a low priority.


Vanguard 57k Taxable Acct
VMMXX $4,031.56
VBMFX $8,308.43<--You don't want this in taxable
VTIAX $14,482.48
VTSAX $30,328.75

Cash to Invest 300k IRA Acct liquidated from Fidelity<--This is in an IRA currently at Fidelity? I know you are upset with Fidelity, but you should be more upset about Merrill. Fidelity is a still a good place for an IRA as long as you just self manage. Fidelity and Schwab both added index funds with very low expenses in order to compete with Vanguard and I'm guessing they are operating at a loss, but they still have the expensive side for unaware investors. It is our responsibility as individual investors to be knowledgeable and informed. If we aren't then showmanship goes up and costs go up.
Money Market 500k, 1%<--You need to get this invested as well. Think of all accounts as one single portfolio. That will help you create the most efficient portfolio you can by minimizing duplication, unnecessary funds, and tax management.

Link to tax efficiency


https://www.bogleheads.org/wiki/Tax-eff ... _placement

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.

Danya
Posts: 17
Joined: Mon Apr 17, 2017 12:40 pm

Re: Advice on Investment plan needed

Postby Danya » Fri Apr 21, 2017 11:42 am

Paul,

Thanks so much! this is some great information to digest. I believe I'm responding correctly inline with different color.
I'll respond to questions in green, read/absorb the rest.

pkcrafter wrote:
Danya wrote:Hello All,

This is a new world, the forum that is. Something I never knew about. Thanks for such an incredible resource. I look forward to learning and contributing. Please excuse my grammar in advance it's never been a strong suit. After running a business for many years I'm at a point where I need to start managing money vs. making it.

You say you have your own business, so you really need some kind of individual IRA. Does you wife work? For your business? You can compare plans here.

It's rather complicated but 4 years ago started a pension when company began its bell curve down (should have done much earlier). Funded it to the max which is most of the Merrill IRA funds. 2016 dissolved pension distributed assets, winding down company to manage solely, 2017 and forward plan to fund to the max IRA, SEP or whatever is possible. Wife mostly doesn't work. Accountant says to put wife as employee in 2017. Have Vanguard meeting setup for next week to discuss too.

https://investor.vanguard.com/what-we-o ... ns?lang=en

You are very short on tax-advantaged space. You might even qualify for IRA or Roth if MAGI is in range. 50 and over can contribute $6500 each. The alternative is non-deductable IRAs. Here are Pros and Cons.

https://www.fool.com/retirement/iras/20 ... assle.aspx

My financial picture is messy and I'm hoping to streamline it and cut the fat. The first question I thought of while putting this all to paper I'm probably paying 1% fee on cash reserves sitting at Merrill, Well I hope not.

My goal is to streamline and maximize my investments.

Well, I'm afraid you are correct--this portfolio is definitely messy. Some more questions below.


Questions:

1: I'm considering moving from the Merrill managed to self-directed.
2: Increasing positions in Vanguard 3-4 funds

This would be a very positive move, but it's going to take some work.


If you were me what would you do or point me in a direction to research and learn


Summary:
Debt: $105k mortgage @ 3.5%. keeping for deduction.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, Effective tax rate 15%
State of Residence: WA
Age: 50
No Children
Real Estate net rev. 240k yr.<--Is this annual income? If so, are you sure your in the 25% bracket. That what it says on 16 tax return. Have alot of write offs including final year of pension funding
100k cash reserves

Merrill 1.14M, Managed1%fee
$240k cash Acct Taxable
$284k various funds below in CMA Taxable Acct<--You have some very tax-inefficient funds in taxable, which hits a nerve with me. I don't know why people who are supposed to know something about finance put investors in high tax brackets into tax inefficient funds, but we see it all the time! Well, OK, I'll tell you why--they only care about their commissions. Rant over.
Thanks for your honesty I was aware but didn't have time. Glad I still have something to work with
AMER FUNDS NEW
AMERICAN GROWTH FUND
AMERICAN SMALLCAP WORLD
AMERICAN CAPITAL WORLD
BLACKROCK US
BLACKROCK EQTY DIVIDEND
BLACKROCK GLOBAL
CALAMOS GROWTH
CALAMOS MARKET NEUTRAL
DAVIS NEW YORK VENTURE
DELAWARE WEALTH BUILDER
EATON VANCE LARGE CAP
FIRST EAGLE
FRANKLIN INCOME FD ADV
IVY ENERGY FUND CL I
JOHN HANCOCK FDMTL LARGE
LOOMIS SAYLES BOND FD
MAINSTAY LARGE CAP
MFS VALUE FD CL I
NATIXIS GATEWAY FUND CL
ROYCE PENNSYLVNIA MUTUAL
TEMPLETON FOREIGN FD
THORNBURG INTERNATIONAL
THORNBURG INTERNATIONAL

$612k cash liquidated IRA, Broker is working on ETF positions.
I want to review before consenting but considering pulling Merrill funds to self-manage<--This has to be your goal. Your expenses and tax losses are far too high.

What do you mean liquidated the IRA? Do you mean you went to all cash, but still in the IRA?
Yes I had the 22 funds sold and it's sitting as cash.Their advisor created the portfolio.


Fidelity 130k, Taxable Acct
AMZN $31,637.90
CL $10,990.50
COST $6,833.60
FB $14,396.00
HBAN $12,715.00
KEY $12,712.00
MDT $3,236.40
MSFT $10,877.98
NVDA $3,033.00
OGRMF $1,045.00
SBUX $12,032.00
TMUS $6,526.00
TWMJF $747.00
V $9,117.00

I don't know what you want to do about the individual stocks, but that can be a low priority.
This was instead of going to Vegas. Up 25% since I bought last year.

Vanguard 57k Taxable Acct
VMMXX $4,031.56
VBMFX $8,308.43<--You don't want this in taxable
VTIAX $14,482.48
VTSAX $30,328.75

Cash to Invest 300k IRA Acct liquidated from Fidelity<--This is in an IRA currently at Fidelity? I know you are upset with Fidelity, but you should be more upset about Merrill. Fidelity is a still a good place for an IRA as long as you just self manage. Fidelity and Schwab both added index funds with very low expenses in order to compete with Vanguard and I'm guessing they are operating at a loss, but they still have the expensive side for unaware investors. It is our responsibility as individual investors to be knowledgeable and informed. If we aren't then showmanship goes up and costs go up.
Yes that's currently 300k IRA in cash at Fidelity. Upset with Fidelity out of principal. With Merrill I knew what they were doing so no one to blame but myself. :(

Money Market 500k, 1%<--You need to get this invested as well. Think of all accounts as one single portfolio. That will help you create the most efficient portfolio you can by minimizing duplication, unnecessary funds, and tax management.
[color=#008040]I've had this sitting aside for sometime to buy more real estate. Can't get financing because on paper I don't make much.
Seattle is a tough market right now and considering scrapping that idea.


Link to tax efficiency[/color]

https://www.bogleheads.org/wiki/Tax-eff ... _placement



Thanks again Paul for the advice. I'm going to start reading and look forward to hearing back. Dan
Last edited by Danya on Fri Apr 21, 2017 1:54 pm, edited 1 time in total.

User avatar
patrick013
Posts: 1395
Joined: Mon Jul 13, 2015 7:49 pm

Re: Advice on Investment plan needed

Postby patrick013 » Fri Apr 21, 2017 12:27 pm

I was thinking the other day - why would anyone have an
Advisor when they have the best advisor available right
at hand, the S&P 500 Index.

But then you have to have some asset allocation decision and
place a few index mutual funds (or ETF's) in tax-efficient locations.

At your age 60% stock and 40% bonds asset allocation is common.
Here's a link to tax placement - Tax-efficient Fund Placement.

Also - Bogleheads' Guide To Investing.

My secret portfolio would be 60% 500 index ETF, and 40% VG Bond Index (VBILX)
as I am not a big fan of International.

Selling your high fee and high risk assets will incur taxes (15%), if that is your goal.
Also, at VG their products are commission free. No rush, the market is a
little high priced, but your best alternatives are lower risk/low fee products.
age in bonds, buy-and-hold, 10 year business cycle

pkcrafter
Posts: 11372
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Advice on Investment plan needed

Postby pkcrafter » Fri Apr 21, 2017 1:41 pm

Danya:
It's rather complicated but 4 years ago started a pension when company began its bell curve down (should have done much earlier). Funded it to the max which is most of the Merrill IRA funds.

You are showing 1.14M at Merrill, but then show 510k so that's a little confusing. You also say
2016 dissolved pension distributed assets,

Are you saying you removed a lot of money from a tax-deferred account to taxable?

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.

Danya
Posts: 17
Joined: Mon Apr 17, 2017 12:40 pm

Re: Advice on Investment plan needed

Postby Danya » Fri Apr 21, 2017 1:47 pm

pkcrafter wrote:Danya:
It's rather complicated but 4 years ago started a pension when company began its bell curve down (should have done much earlier). Funded it to the max which is most of the Merrill IRA funds.

You are showing 1.14M at Merrill, but then show 510k so that's a little confusing. You also say
2016 dissolved pension distributed assets,

Are you saying you removed a lot of money from a tax-deferred account to taxable?

Paul


It's still in the tax deferred account but the pension assets had to be distributed to participants (employees, owner)
My mistake at Merrill there is
Merrill 1.14M, Managed 1%fee
$240k cash Taxable Acct
$284k CMA Taxable Acct
$612k IRA Acct , the IRA is all in cash now.
corrected above.

pkcrafter
Posts: 11372
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Advice on Investment plan needed

Postby pkcrafter » Fri Apr 21, 2017 3:36 pm

What is the overall asset allocation you want?

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.

Danya
Posts: 17
Joined: Mon Apr 17, 2017 12:40 pm

Re: Advice on Investment plan needed

Postby Danya » Sat Apr 22, 2017 12:16 pm

I'm still trying to understand how best to layout an efficient portfolio but considering 75%/25%
Right now I'm thinking the strategy should be:

1: Liquidate Merrill $284k CMA Taxable Funds. Long term gain 50.7k. how to minimize tax?
2: Consolidate or split funds, probably at Fidelity and/or Vanguard
3: After consolidation I would have:

Taxable:
$524k Taxable Acct
IRA:
$912k IRA Acct

Keep the
57k in Vanguard funds, but move VBMFX into nontaxable acct. $8,308.43
130k Fidelity individual stocks.

And
500k Money Market 1%. Put in play after the taxable and IRA is dealt with.

_____________________________________________________________________
Regarding question of Asset Allocation; get advice here, from Vanguard advisor in a week. and from what I've researched I should be about 75%/25%

Would you consider real estate equity in the picture? Say at 4.5M equity with cash flow of 240k yr.
And if splitting between two Fidelity and Vanguard should I pick similar funds in each so the model matches?

Current Vanguard Portfolio:
53% VTSAX
25% VTIAX
14% VBMFX
7% VMMXX

Vanguard Tool Recommendation, based on 750k
42% $315,000.00 Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
28% $210,000.00 Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
21% $157,500.00 Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
9% $67,500.00 Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

Rick Ferri's Lazy:
40% Vanguard Total Bond Market Index Fund VBTLX
40% Vanguard Total Stock Market Index Fund VTSAX
20% Vanguard Total International Stock Index Fund VTIAX

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SeeMoe
Posts: 788
Joined: Sat Jul 18, 2015 11:30 am
Location: Near Philly..

Re: Advice on Investment plan needed

Postby SeeMoe » Sat Apr 22, 2017 1:34 pm

Best to talk it over with a trusted Vanguard Group advisor. Then go from there!
My 60/40 AA would be tax Managed Capital Appreciation fund. A large Cap growth fund and a value fund. Then tax exempt Limited, intermediate and a long term state tax exempt fund. Maybe some total bond index too if your tax rate is low. All taxable bonds in the DCP(s).

SeeMoe.. :P
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

trueblueky
Posts: 1080
Joined: Tue May 27, 2014 3:50 pm

Re: Advice on Investment plan needed

Postby trueblueky » Sat Apr 22, 2017 1:58 pm

I would make a spreadsheet with the basis and current price of each fund that is in a taxable account. This helps you know, from a tax view, where to begin to reduce the number of funds. It may take a while to unwind those.

I would immediately stop automatic reinvestment of dividends in the taxable account. This would eventually eliminate the possibility of short-term capital gains.

Don't let the tax tail wag the dog, but do watch the tail.

Danya
Posts: 17
Joined: Mon Apr 17, 2017 12:40 pm

Re: Advice on Investment plan needed

Postby Danya » Sat Apr 22, 2017 2:48 pm

trueblueky wrote:I would make a spreadsheet with the basis and current price of each fund that is in a taxable account. This helps you know, from a tax view, where to begin to reduce the number of funds. It may take a while to unwind those.

I would immediately stop automatic reinvestment of dividends in the taxable account. This would eventually eliminate the possibility of short-term capital gains.

Don't let the tax tail wag the dog, but do watch the tail.


Do you pick based on what tax bracket you would fall into?
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