Old dog needs to learn to manage his investments

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Benchie
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Old dog needs to learn to manage his investments

Post by Benchie » Tue Aug 07, 2018 9:06 pm

Hello!

I'm a newbie (my son recommended you), I'm 58, self employed (work 60-70 hours a week), married, 600K saved for retirement, add 25K-30K annually. Worry about money all the time! I figure I need to double that nest egg so we can retire in 10 years.

Here's my question, how to get started self educating myself so I understanding my investments and what do I need to do to feel like I can monitor and direct them myself in the future? Keep in mind that I'm good at my job but definitely not a genius when it comes to finance. I need to keep it fairly simple.

I use an investment advisor at Stifel. I like him but I usually (always) blindly follow his advice, plus he's pushing 70 and may retire soon. We're about 60/40 equities/bonds, when I send him money he makes suggestions and I say yes. That's our relationship. Our returns have been good compared to friends who use different advisors, but I'm totally in the dark and have little spare time to dwell on it. I need to make the time to get a grip on this, it's too important not to.

Any wisdom you could share would be appreciated more than you know.
Thanks!

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pezblanco
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Re: Old dog needs to learn to manage his investments

Post by pezblanco » Tue Aug 07, 2018 10:48 pm

So if you have 600K and you are adding to it 30K/year for 10 years, what sort of return do you need to double your money? Just doing a quick calculation, you only need a return on your money of 3.4%. I assume that you are talking about real rates (i.e. over and above the inflation rate) ... but anyway the answer is the same depending on how you want to interpret it.

So if you assume that the average real return on stocks is say 4.5% and the average real return on bonds is 1%, then you could obtain this rate of return with a 4.5x + 1(1-x) = 1+3.5x = 3.4 or x = .68 or in other words a 68/22 stock/bond portfolio would reach your goal. If you are more optimistic about the real return of stocks, then you could get by with less stock.

I would recommend investing in a simple 3 fund portfolio .... with about 65% or so stock and hope for the best ..... If you have more desire for risk and can work a bit more after the 10 year mark, then maybe go for a higher stock allocation .... it all just depends.

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akblizzard
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Re: Old dog needs to learn to manage his investments

Post by akblizzard » Tue Aug 07, 2018 10:57 pm

Benchie wrote:
Tue Aug 07, 2018 9:06 pm

Here's my question, how to get started self educating myself so I understanding my investments and what do I need to do to feel like I can monitor and direct them myself in the future? Keep in mind that I'm good at my job but definitely not a genius when it comes to finance. I need to keep it fairly simple.
Maybe check out the “Suggested Reading” link. That’s how I did it.

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Wed Aug 08, 2018 8:29 am

Thanks for the helpful replies. I feel like our returns have been good. It’s just that I have put this important stuff in someone else’s hands and don’t fully understand the investments or the costs. I’m committed to educating myself starting today. It’ll be a long road.

chevca
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Re: Old dog needs to learn to manage his investments

Post by chevca » Wed Aug 08, 2018 8:50 am

Your son sounds like a smart guy. Is he a Boglehead? :happy He might be able to share some ideas with you.

Here's a good read on a simple and straight forward approach... viewtopic.php?f=10&t=88005

KESP
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Re: Old dog needs to learn to manage his investments

Post by KESP » Wed Aug 08, 2018 9:02 am

I would suggest ordering The Bogleheads' Guide to the Three-Fund Portfolio. It is a short, easy to understand book that will explain why the three-fund portfolio is all you need. There is also a ton of information on this site which I would also encourage you to read. I think the book gives you a clearer head start and may make everything else you read on this site easier to understand. Full disclosure, I'm a librarian so I like to go to book options first. :happy

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Old dog needs to learn to manage his investments

Post by Sandtrap » Wed Aug 08, 2018 9:27 am

Welcome.
Go through this "short reading list" and when you are done, you will likely not need a financial advisor and you will know more than most folks about how to manage your investments.

Share and review with your son.

Your toolbox. (links included for your convenience)

GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
IPS Statement Worksheet PDF at Morningstar
http://news.morningstar.com/pdfs/inves ... pr2016.pdf
Outline of Investing
https://www.bogleheads.org/wiki/Outline_of_investing
Outline of Financial Planning (with links)
https://www.bogleheads.org/wiki/Outlin ... _planning
Funding Priority (what do I do first?)
https://www.bogleheads.org/wiki/Priori ... vestments
Tax Efficient Fund Placement
https://www.bogleheads.org/wiki/Tax-ef ... _placement
Asset allocation in multiple accounts
https://www.bogleheads.org/wiki/Asset ... accounts
Risk Tolerance (what is your "sleep factor"?)
https://www.bogleheads.org/wiki/Risk_tolerance
Asset Allocation (what is right for you?)
https://www.bogleheads.org/wiki/Asset_allocation
Emergency Fund
https://www.bogleheads.org/wiki/Emergency_fund
Bogle 3 Fund Portfolio Basics and Beyond
https://www.bogleheads.org/wiki/Three- ... _portfolio

Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
Forum Library of Investing Advice with links
https://www.bogleheads.org/wiki/Main_Page

Outstanding write up on the 64/40 allocation by Bernstein.
http://web.archive.org/web/20061214061 ... in6040.pdf
R. Ferri on Bernstein's 60/40
http://www.etf.com/sections/index-inve ... nopaging=1

Free Reading: "If You Can" by Bernstein
https://www.google.com/url?sa=t&rct=j& ... -SB3S580I5

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Wed Aug 08, 2018 9:30 am

Excellent! Perfect suggestions. Thanks!

2b2
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Re: Old dog needs to learn to manage his investments

Post by 2b2 » Wed Aug 08, 2018 10:21 am

You could start by asking your financial advisor how much he is charging you. Also, if he has you in mutual funds, ask about the expense ratios of the funds.
All those expenses and fees are reducing your investment returns.

2b2

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Wed Aug 08, 2018 11:05 am

Good advice. I did ask him what his fee was and he said .4%. His argument is that my returns are better because of Stifel’s research capabilities. So I do pay more in fees than say a no load index fund but the better returns more than justify that. Of course I never attempted to verify that.

The total costs of the mutual funds is just plain confusing, intentionally confusing it seems to me. Hidden in some cases. It’s bewildering.

soccerrules
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Re: Old dog needs to learn to manage his investments

Post by soccerrules » Wed Aug 08, 2018 11:24 am

Benchie -- keep reading.
The Little Book of Common Sense Investing. It had the biggest impact on my ability to DIY and understand the market and my chances of being successful in investing.

Slow down and read for the next 30 days. The wiki, books and BH forum. Read about Expense Ratios on your funds and then research them (Morningstar website).

Another major catalyst for me to drop the adviser was this.
If you are paying someone 1% (probably higher) adviser fees and expense ratios, that is equal to 25% of your safe withdrawal rate in retirement on your nest egg. The safe withdrawal rate commonly referenced is 4%. You can withdraw 4% of your nest egg starting in your 60's (adjusting for inflation each year) and not run out of money over a 30 year retirement. If you withdraw $40K a year starting, you would give $10K (25%) to adviser and fund fees. That sucks.

welcome to BH!
Don't let your outflow exceed your income or your upkeep will be your downfall.

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FrugalInvestor
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Re: Old dog needs to learn to manage his investments

Post by FrugalInvestor » Wed Aug 08, 2018 11:25 am

2b2 wrote:
Wed Aug 08, 2018 10:21 am
You could start by asking your financial advisor how much he is charging you. Also, if he has you in mutual funds, ask about the expense ratios of the funds.
All those expenses and fees are reducing your investment returns.

2b2
The reason that this is important is because fees are the best predictor of investment returns. Here's an article on the subject....

https://www.thesimpledollar.com/eight-i ... h-out-for/

Investing yourself in something like a simple 3-fund portfolio using very low-cost, diversified funds is almost certain to outperform anything your advisor will recommend because overcoming the advisor's fees (direct and otherwise) is nearly impossible.

The next challenge is determining the appropriate asset allocation given your tolerance for and need to take risk as well as your time horizon.

Once you've accepted and settled on the above, the critical factor in managing your own investments is developing a plan that you can follow no matter what happens. The reason that knowing your risk tolerance is so important is that emotions are the worst enemy of investing success. If your emotions prevent you from sticking with your plan then you may be better off with an advisor. If you can stick with a solid plan then you'll almost certainly be much better off handling your investments yourself.

If this sounds reasonable to you then keep reading the Wiki and recommended books and asking questions here.

Welcome to Bogleheads!

P.S. If you find you need an advisor to keep you on track (unlikely) a fee only advisor would likely be preferable to one who is making money off your funds, your invested assets and your trades.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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Sandtrap
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Re: Old dog needs to learn to manage his investments

Post by Sandtrap » Wed Aug 08, 2018 1:24 pm

Benchie wrote:
Wed Aug 08, 2018 8:29 am
Thanks for the helpful replies. I feel like our returns have been good. It’s just that I have put this important stuff in someone else’s hands and don’t fully understand the investments or the costs. I’m committed to educating myself starting today. It’ll be a long road.
Yes.
When you know enough to pick the "right" financial advisor, and can tell the difference between good and bad advice, you won't need an advisor.

j

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Wed Aug 08, 2018 2:03 pm

I really appreciate you all sharing your advice and experience. It’s wonderful.

I think I’ll spend the next several weeks digesting all of this good information and running some comparisons with the goal of making a positive change before the end of the year. I’m really looking forward to it!

Thanks again!

pkcrafter
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Re: Old dog needs to learn to manage his investments

Post by pkcrafter » Wed Aug 08, 2018 3:22 pm

Benchie wrote:
Wed Aug 08, 2018 2:03 pm
I really appreciate you all sharing your advice and experience. It’s wonderful.

I think I’ll spend the next several weeks digesting all of this good information and running some comparisons with the goal of making a positive change before the end of the year. I’m really looking forward to it!

Thanks again!
Benchie, you are just starting on the learning curve, but you will find that you can, and will ramp up pretty fast. Would you list some of the funds your advisor has you in, including tickers symbols. The 0.4% advisor fee is reasonable if the funds are OK.

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.

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Wed Aug 08, 2018 4:39 pm

Will do Paul. I’ll try to get it tomorrow.
Thanks

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Wed Aug 08, 2018 9:04 pm

Okay, here's what we're in....more info that you wanted I imagine.

Preferreds
TRIPLEPOINT VENTURE GROWTH BDC Corp note TPVY (5.75% due 7/15/22)
DIANA SHIPPING INC SR NOTE DSXN (8.5% Due 5/15/20)
GMAC CAPITAL TR 1 GTD TR PRD SECS SER 2 ALLY’A CASH

Fixed Income
TWO HBRS INVT CORP SR NOTE CONV CASH (6.25% due 1/15/22)
PENNYMAC CORP SR NOTE CONV CASH (5.375% due 5/1/20)
GOLDMAN SACHS CAP II GTD NOTE PERPTL VAR CPN 4.00% S&P: BB MOODY Ba1 CASH

Mutual Funds (open end funds)
BLACKROCK EQUITY DIVIDEND INVESTOR CL C MCDVX
DWS RREEF GLOBAL INFRA CL C TOLCX
GABELLI SMALL CAP GROWTH CL C GCCSX
PRINCIPAL GLOBAL DIVERSIFIED INCOME CL C PGDCX
FIRST EAGLE GLOBAL CL C FESGX
GOLDMAN SACHS STRATEGIC INCOME CL C GSZCX
NEUBERGER BERMAN EQUITY INCOME CL C NBHCX
TOUCHSTONE MID CAP CL C TMCJX
FEDERATED KAUFMANN LARGE CAP CL C KLCCX
IVY ASSET STRATEGY CL C WASCX
JPMORGAN VALUE ADVANTAGE CL C JVACX
CLEARBRIDGE AGGRESSIVE GROWTH CL C SAGCX
PIMCO INCOME CL C PONCX
PIONEER STRATEGIC INCOME CL C PSRCX
BRANDYWINEGLOBAL GLOBAL OPPTYS BOND CL C LGOCX
TEMPLETON GLOBAL BOND CL C TEGBX
OPPENHEIMER DEVELOPING MARKETS CL C ODVCX

Mutual funds (closed end funds)
NUVEEN CREDIT STRATEGIES INCOME FUND JQC

pkcrafter
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Re: Old dog needs to learn to manage his investments

Post by pkcrafter » Wed Aug 08, 2018 11:45 pm

Benchie wrote:
Wed Aug 08, 2018 9:04 pm
Okay, here's what we're in....more info that you wanted I imagine.

Preferreds
TRIPLEPOINT VENTURE GROWTH BDC Corp note TPVY (5.75% due 7/15/22)
DIANA SHIPPING INC SR NOTE DSXN (8.5% Due 5/15/20)
GMAC CAPITAL TR 1 GTD TR PRD SECS SER 2 ALLY’A CASH

Fixed Income
TWO HBRS INVT CORP SR NOTE CONV CASH (6.25% due 1/15/22)
PENNYMAC CORP SR NOTE CONV CASH (5.375% due 5/1/20)
GOLDMAN SACHS CAP II GTD NOTE PERPTL VAR CPN 4.00% S&P: BB MOODY Ba1 CASH

Mutual Funds (open end funds)
BLACKROCK EQUITY DIVIDEND INVESTOR CL C MCDVX
DWS RREEF GLOBAL INFRA CL C TOLCX
GABELLI SMALL CAP GROWTH CL C GCCSX
PRINCIPAL GLOBAL DIVERSIFIED INCOME CL C PGDCX
FIRST EAGLE GLOBAL CL C FESGX
GOLDMAN SACHS STRATEGIC INCOME CL C GSZCX
NEUBERGER BERMAN EQUITY INCOME CL C NBHCX
TOUCHSTONE MID CAP CL C TMCJX
FEDERATED KAUFMANN LARGE CAP CL C KLCCX
IVY ASSET STRATEGY CL C WASCX
JPMORGAN VALUE ADVANTAGE CL C JVACX
CLEARBRIDGE AGGRESSIVE GROWTH CL C SAGCX
PIMCO INCOME CL C PONCX
PIONEER STRATEGIC INCOME CL C PSRCX
BRANDYWINEGLOBAL GLOBAL OPPTYS BOND CL C LGOCX
TEMPLETON GLOBAL BOND CL C TEGBX
OPPENHEIMER DEVELOPING MARKETS CL C ODVCX

Mutual funds (closed end funds)
NUVEEN CREDIT STRATEGIES INCOME FUND JQC
:shock: Now for the rest of the story...

Benchie, this is one of the most expensive portfolios ever posted here. Class C funds carry a 1% commission in the expense ratio making the total expense ratio of these funds close, and in some cases, exceeding 2%. That is close to 100x the cost of fidelity or Vanguard index funds. So, your friendly advisor is "only" charging you 0.4%? Add the 1% commissions to that (12b-1 fee), plus the additional costs in the expense ratio and he falls into the ranks of a charlatan. No wonder he's considering retirement, you're paying for it. He has taken advantage of your trust!

Seriously, it is terrible and you have to get out of there asap, but not before you come up with a workable new plan, which we can help you with.

You can plug ticker symbols into the quote box at the top of this Morningstar page and then click on expense ratio to see for yourself.

Here is ODVCX

http://financials.morningstar.com/fund/ ... ture=en_US


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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BeBH65
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Re: Old dog needs to learn to manage his investments

Post by BeBH65 » Thu Aug 09, 2018 1:14 am

Hello Benchie,

Welcome to the forum.

You have already received a lot of good feedback.

The most important one is:
pkcrafter wrote:
Wed Aug 08, 2018 11:45 pm
Benchie, this is one of the most expensive portfolios ever posted here. Class C funds carry a 1% commission in the expense ratio making the total expense ratio of these funds close, and in some cases, exceeding 2%. That is close to 100x the cost of fidelity or Vanguard index funds. So, your friendly advisor is "only" charging you 0.4%? Add the 1% commissions to that (12b-1 fee), plus the additional costs in the expense ratio and he falls into the ranks of a charlatan. No wonder he's considering retirement, you're paying for it. He has taken advantage of your trust!

Seriously, it is terrible and you have to get out of there asap, but not before you come up with a workable new plan, which we can help you with.
Daily people post their portfolio's here.
Getting this feedback from a veteran with more then 10 year on the forum and many thousand posts should wake you up. I have rarely seen such a strong wording on this forum. We pride ourselves that "debates and discussions are conducted in civil tones" (from forum rules)/

Higher up someone calculated the return you need to get to realize your goal. In itself a very realistic objective
... was it not for all the money your "adviser" wants on top of this. To pay him the return of your portfolio needs to almost double as this guy collects about as much as you need to reach your goal!

Luckily you have a smart son that directed you here. We can help you. And we do not charge you anything.

To be able to give you targetted feedback we need to have more information.
Please consider updating your Opening Post (with the pencil symbol next to it) with the information according to the template mentioned in Asking_portfolio_questions
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Thu Aug 09, 2018 7:25 am

Ugh, I was afraid of that and I’m not particularly surprised. I do feel stupid for not addressing this sooner. But I’ve felt stupid before and survived.

Thank you for taking the time to look at what we have. Good news is, this adds incentive to find a somewhat simpler and less costly plan that meets our goals. I’m already on that path.

I haven’t earned this group of wise advisors but please know I’m very grateful.

Thanks again for everything.

cresive
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Re: Old dog needs to learn to manage his investments

Post by cresive » Thu Aug 09, 2018 7:49 am

Benchie wrote:
Tue Aug 07, 2018 9:06 pm
Hello!

I'm a newbie (my son recommended you), I'm 58, self employed (work 60-70 hours a week), married, 600K saved for retirement, add 25K-30K annually. Worry about money all the time! I figure I need to double that nest egg so we can retire in 10 years.

Here's my question, how to get started self educating myself so I understanding my investments and what do I need to do to feel like I can monitor and direct them myself in the future? Keep in mind that I'm good at my job but definitely not a genius when it comes to finance. I need to keep it fairly simple.

I use an investment advisor at Stifel. I like him but I usually (always) blindly follow his advice, plus he's pushing 70 and may retire soon. We're about 60/40 equities/bonds, when I send him money he makes suggestions and I say yes. That's our relationship. Our returns have been good compared to friends who use different advisors, but I'm totally in the dark and have little spare time to dwell on it. I need to make the time to get a grip on this, it's too important not to.

Any wisdom you could share would be appreciated more than you know.
Thanks!

Welcome to the club!!!!

As for your anxiety, I bet you are doing much better than you think. For instance, when you mention doubling your savings in 10 years, you are really there already. If you go by the rule of 72 and assume a 7% total return, then you have already made it--the rule of 72 is divide your rate of returns into 72 and that will give you the number of years it will take to double your investment. This is a gross rule of thumb and only takes into account the average return and does not account for inflation, which a previous post gave a more detailed assessment you can use. However, if you are contributing $25K/year into the accounts, that will more than make up for the difference between gross and net returns. Since you are asking a basic question, I wanted to give you a basic tool to assess where you are. There are many calculators on line that can do Monte Carlo estimates when you are ready to get down to the nitty gritty of retirement.

By the way, I began to look at my accounts after being executor for a couple estates. I decided to get my paperwork in order and part of that was organizing my retirement. It was then that I found the statement, "You should organize your retirement funds at least 10 years before you retire, so that you can correct any glaring issues." I took that to heart and started reading and researching all i could. The reason I say this is that you are 10 years out, doing okay and will only hone your retirement plan---GREAT JOB!!

Good luck,
Ben

gmaynardkrebs
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Re: Old dog needs to learn to manage his investments

Post by gmaynardkrebs » Thu Aug 09, 2018 8:24 am

You'll probably end up on one of the online calculators. In my experience, they invariably give you a higher equity allocation than someone your age should have, because they are largely based on past returns that are unlikely to be repeated. While 60/40 is not unreasonable, it's higher than where I would want to be were I in your situation. What if the market crashes, just when you are ready to retire? Are you going to work until you're 80 to make up for that? Moreover, when you tell the calculator that you want to double your nest egg fairly quickly, it's probably going to get aggressive and push the equity allocation even higher.

However, I agree that the first thing you should do is get rid of the guy who put his kids through college with the fees you've paid him.

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Thu Aug 09, 2018 7:44 pm

pkcrafter wrote:
Wed Aug 08, 2018 11:45 pm


To be able to give you targetted feedback we need to have more information.
Please consider updating your Opening Post (with the pencil symbol next to it) with the information according to the template mentioned in Asking_portfolio_questions

I definitely will fill out that template when I get back to you all to seek your advice, before we move any money. It'll kind of give you the big picture.

The Vanguard Three and Four Fund Portfolios sure make a lot of sense to me. I like the simplicity as well as their success. It really seems to be about adopting a philosophy for investing. I also like the fact that if I happen to kick the bucket before my wife it's not some bewildering thing for her to deal with and she could just let it be...or dip into it for the celebration. :wink:

I am wondering what is typically the smart way to move the money to Vanguard if and when we do it? All at once or bit by bit?

Thanks, back to reading...

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Misenplace
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Re: Old dog needs to learn to manage his investments

Post by Misenplace » Thu Aug 09, 2018 8:50 pm

PKcrafter is right, you are being fleeced. The problem is, you are not the only one. I see this all the time doing taxes for the elderly as an AARP volunteer. Invariably, the client says "he must be fine, he sends me a Christmas card every year with a picture of his family and a holiday letter."

By the way, at 58 you are not an old dog, so it is time to learn some new tricks. Working through the template recommended here will take many hours, perhaps 30 to 40 hours, and at the end you will really understand what you have and where it is. But to put it in perspective, since you are being fleeced on the order of 2% on 600K today, that is $12,000 (or more) this year alone. That means your effective return on 40 hours of work is at least $300/hour. For.One.Year. Go sharpen that pencil and get to work. Be sure to include your cost basis in each fund, both long term and short term.

I would move it all to Vanguard in one go, but first determine how much it would cost to sell it at the current brokerage vs at Vanguard. Vanguard can tell you what it would cost to sell at their side, but it is going to be trickier to get straight answers from your so called advisor. You don't need to tell him that you are moving, and probably shouldn't since he obviously does not have your best interests in mind, you just need to ask him how much it would cost if you were to "exit this position."

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Thu Aug 09, 2018 9:12 pm

Thank you. I appreciate your good advice and directness!

jalbert
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Re: Old dog needs to learn to manage his investments

Post by jalbert » Fri Aug 10, 2018 12:24 am

Is this a taxable account or tax-qualified account? If it is a taxable account, you will need to understand the embedded capital gains and losses to understand the tax consequences of re-allocating the assets and then to see what strategies are feasible.
Risk is not a guarantor of return.

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Fri Aug 10, 2018 3:00 am

It’s all IRA money, SIMPLE, Roth and traditional.

The Wizard
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Re: Old dog needs to learn to manage his investments

Post by The Wizard » Fri Aug 10, 2018 4:04 am

Benchie wrote:
Fri Aug 10, 2018 3:00 am
It’s all IRA money, SIMPLE, Roth and traditional.
Excellent, so no tax consequences to moving all to a low cost provider next week.
Muy bien, molto bene...
Attempted new signature...

Benchie
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Re: Old dog needs to learn to manage his investments

Post by Benchie » Fri Aug 10, 2018 7:10 am

Thanks for confirming that!

rixer
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Re: Old dog needs to learn to manage his investments

Post by rixer » Fri Aug 10, 2018 9:19 am

A single, balanced, Vanguard Lifestrategy fund would likely put you in a decent place to be without much to fuss about. Then you can concentrate on what your business does so well.

bkweathe
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Re: Old dog needs to learn to manage his investments

Post by bkweathe » Fri Aug 10, 2018 9:52 am

It really seems to be about adopting a philosophy for investing. I also like the fact that if I happen to kick the bucket before my wife it's not some bewildering thing for her to deal with
YES!!!!

Becoming a Boglehead is very much about adopting a philosophy for investing. And it does result in a portfolio that a Boglehead's spouse (like my wife) will be able to manage easily.

You have gotten some great suggestions of educational resources. I hope you'll take advantage of many of them. Because becoming a Boglehead means adopting a specific investment philosophy, I suggest that one of your first steps should be to learn that philosophy. The best way I know to do that is with these videos: https://www.bogleheads.org/wiki/Boglehe ... philosophy
They're informative, short, entertaining, & free. Please watch them with your wife very soon, if you haven't already. How about a date night tonight?

If you are using Sandtrap's toolbox (a collection of excellent resources!), you might have already come across these videos. They're among the first items listed on the Getting Started page.

Brad

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Re: Old dog needs to learn to manage his investments

Post by pkcrafter » Fri Aug 10, 2018 9:59 am

Benchie wrote:
Thu Aug 09, 2018 7:44 pm

The Vanguard Three and Four Fund Portfolios sure make a lot of sense to me. I like the simplicity as well as their success. It really seems to be about adopting a philosophy for investing. I also like the fact that if I happen to kick the bucket before my wife it's not some bewildering thing for her to deal with and she could just let it be...or dip into it for the celebration. :wink:

I am wondering what is typically the smart way to move the money to Vanguard if and when we do it? All at once or bit by bit?

Thanks, back to reading...
Benchie, a target date fund or Lifestrategy fund could be a good choice, but you have to choose the TR fund by the asset allocation you want, not date because they are pretty aggressive.

Vanguard target date funds (allocations are automatically adjusted over time)

https://investor.vanguard.com/mutual-fu ... etirement/#/

Lifestrategy funds have fixed asset allocations and I prefer that.

LS funds

https://investor.vanguard.com/mutual-fu ... mpgn=PS:RE

When you decide to transfer you may want to sell all current funds before transfer, but you should check cost of selling the funds where they are now. You can transfer all the funds to Vanguard, but you have to make sure Vanguard carries all of them or some won't transfer and the transfer will be incomplete.

https://investor.vanguard.com/investing ... buy-shares

You want to contact Vanguard to start the transfer--you want a custodian to custodian direct transfer (technically not a rollover). Vanguard will give you the paperwork and initiate the transfer. Don't transfer more than one account at a time.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Old dog needs to learn to manage his investments

Post by gmaynardkrebs » Fri Aug 10, 2018 10:10 am

rixer wrote:
Fri Aug 10, 2018 9:19 am
A single, balanced, Vanguard Lifestrategy fund would likely put you in a decent place to be without much to fuss about. Then you can concentrate on what your business does so well.
Just bear in mind that even some of the conservative-moderate Lifetstrategy and Target Date Vanguard funds were down 30% and in some cases quite a bit more in the 2008 crisis. A lot of retirees and near-retirees who thought they were being conservative and safe with these soothingly named and marketed funds were not expecting anything like that, and were quite upset. The fact that the market would eventually recover and then some was no sure thing, and never can be.
Benchie, a target date fund or Lifestrategy fund could be a good choice, but you have to choose the TR fund by the asset allocation you want, not date because they are pretty aggressive.
Good advice.

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Re: Old dog needs to learn to manage his investments

Post by Charlie Foxtrot » Fri Aug 10, 2018 11:45 am

pkcrafter wrote:
Fri Aug 10, 2018 9:59 am

You want to contact Vanguard to start the transfer--you want a custodian to custodian direct transfer (technically not a rollover). Vanguard will give you the paperwork and initiate the transfer. Don't transfer more than one account at a time.

Paul
Benchie, this point that Paul made is critical - even more than which custodian you choose or how you choose to invest your money. DO NOT contact your old custodian to initiate the transaction - get your new custodian (Vanguard, for example) to initiate the custodian to custodian direct transfer. You do not want to have your old custodian send you a check that you then rollover to your new custodian because there are potentially some really bad things that could happen: 1) for some reason you don't get the rollover completed within 60 days which makes it a taxable event; 2) even if it's IRA money, it becomes a taxable event if you do more than one rollover within a 365 day period; 3) you could get hit with a 10% penalty for withdrawing your IRA before age 59 1/2. Besides, it is much, much easier to let the custodians work out the details. You will probably have to complete some forms from both custodians to confirm that you are giving them permission to do the direct transfer, but then you can just sit back and wait for it to happen.
"Man plans... God laughs"

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Re: Old dog needs to learn to manage his investments

Post by Benchie » Fri Aug 10, 2018 1:53 pm

I'm a little surprised that you folks seem to be leaning toward the Lifestrategy fund rather than the Three or Four Fund Portfolio? After so many years of having a dozen mutual funds putting it all in one fund seems a little, all eggs in one basket to me. Even though the single funds risk is spread widely. Is it not unusual to put it all in one fund?

The actual physical transfer of the money was a worry of mine. Thank you for spelling that out.

I feel guilty for not thanking each of you individually. Your advice is invaluable. At the risk of embarrassing myself, it chokes me up a little bit. You all remind me of the great wise man in my life, who passed away many years ago. He was an old Southern gentleman and my father-in-law, courteous in a way that seems lost today, very conservative with money and had a deep understand of the markets and most other things as well. Sadly he was gone before I could turn to him for advice but happily he left his lovely wife in fine financial shape. Anyway, that's a clumsy way of telling you all how I appreciate the excellent advice.

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Re: Old dog needs to learn to manage his investments

Post by rixer » Fri Aug 10, 2018 4:59 pm

Benchie wrote:
Fri Aug 10, 2018 1:53 pm
I'm a little surprised that you folks seem to be leaning toward the Lifestrategy fund rather than the Three or Four Fund Portfolio? After so many years of having a dozen mutual funds putting it all in one fund seems a little, all eggs in one basket to me. Even though the single funds risk is spread widely. Is it not unusual to put it all in one fund?

The actual physical transfer of the money was a worry of mine. Thank you for spelling that out.

I feel guilty for not thanking each of you individually. Your advice is invaluable. At the risk of embarrassing myself, it chokes me up a little bit. You all remind me of the great wise man in my life, who passed away many years ago. He was an old Southern gentleman and my father-in-law, courteous in a way that seems lost today, very conservative with money and had a deep understand of the markets and most other things as well. Sadly he was gone before I could turn to him for advice but happily he left his lovely wife in fine financial shape. Anyway, that's a clumsy way of telling you all how I appreciate the excellent advice.
What's the difference in risk between Lifestrategy Moderate Growth and the recommended 4 fund portfolio at 60-40? Unless you don't plan to stay the course, to me the LS seems like the same exact thing but you are hands free and emotional decisions don't come into play when it's time to rebalance.
I honestly don't think it's a bad place to be. But I'm just guessing like everyone else. :|

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Re: Old dog needs to learn to manage his investments

Post by Benchie » Fri Aug 10, 2018 5:19 pm

That makes good sense. It just takes an attitude adjustment to have it all in a single fund I guess. Interestingly I took the risk aversion test here and my answers suggested we should be 70% stock and 30% bonds! We are currently 60/40 but my age would make it 40/60. I was thinking of perhaps moving it to 50/50 but I see that’s not an option with that particular fund.

I’m still reading but the Boglehead advice and philosophy lines up with our natural instincts and lifestyle choices. This will be an easy and positive change to make. Should have done it years ago.

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Re: Old dog needs to learn to manage his investments

Post by jalbert » Fri Aug 10, 2018 7:37 pm

You could hold a 50:50 mix of VSCGX and VSMGX to get to 50% stock, but once you have more than one fund and have to rebalance from time to time, you might as well hold the underlying index funds. This also gives you the opportunity to set a different percentage for int’l stocks as a percentage of your stock allocation than 40% as is held by LifeStrategy funds. You also don’t need to hold international bonds unless you prefer to do so. I would in fact prefer holding short-term TIPS to int’l bonds.

If you want to be 50% stocks, you could hold:

35% total US stock index (vtsax)
15% total int’l stock index (vtiax)
35% total US bond index (vbtlx)
15% short-term TIPS index (vtapx)

I put tickers for Vanguard funds in parentheses but Ishares and Fidelity also have very good offerings for these asset classes.

Such a portfolio, or a LifeStrategy fund is an extremely diversified portfolio, more diversified than some portfolios with 20-30 funds designed by advisors. What matters is the diversity of the underlying assets held in the funds, not how many funds are held. These stock index funds hold virtually every liquid, investable publicly-traded stock in the world, all investment-grade publicly traded bonds in the US, and exposure to inflation-linked bonds.

Another consideration is whether you may be able to consolidate holdings. My understanding is that a SIMPLE IRA may be rolled over to a different type of tax-deferred IRA once you have held the SIMPLE IRA for 2 years (you should confirm). Thus, the funds in the SIMPLE and trad IRA could be consolidated into a single IRA.

Another question is whether you have employees participating in the SIMPLE IRA. If not, you might consider using a SEP-IRA instead for the larger contribution limit. It would also be easier to establish at a new provider. Either way, I think you could set up either a SIMPLE or SEP IRA at the new provider and roll both the SIMPLE and trad IRA into the new IRA. If the SIMPLE IRA is set up with employees, you may be able to leave it in place and just direct the assets to a different fund provider. I’m by no means an expert on SIMPLE IRAs so you should verify any of the above discussion of them independently.

The Roth IRA would just roll over to a Roth IRA at the new provider. You can open it any time and to start directing new contributions there and do the rollover at your convenience. You could put that in LifeStrategy Moderate Growth VSMGX and then manage the asset allocation in the tax-deferred accounts for simplicity.

If you plan to allocate to multiple funds in an account, just do rollovers to a money market fund and once the funds arrive there, do exchanges into the funds you wish to hold.

Good luck.
Risk is not a guarantor of return.

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Re: Old dog needs to learn to manage his investments

Post by pkcrafter » Fri Aug 10, 2018 7:53 pm

Benchie wrote:
Fri Aug 10, 2018 1:53 pm
I'm a little surprised that you folks seem to be leaning toward the Lifestrategy fund rather than the Three or Four Fund Portfolio? After so many years of having a dozen mutual funds putting it all in one fund seems a little, all eggs in one basket to me. Even though the single funds risk is spread widely. Is it not unusual to put it all in one fund?
Benchie, I specifically recommended a TR or LS fund because you said this...
I also like the fact that if I happen to kick the bucket before my wife it's not some bewildering thing for her to deal with and she could just let it be...or dip into it for the celebration.
An LS or TR fund rebalances automatically, and it's one of the best options for someone who doesn't want to mess with investments or even rebalance. If that's not a problem, then sure, the 3-4 fund portfolio is great. You might go with the 3-4 fund and tell your wife if something happens where she has to manage, she can switch to an LS fund in a tax-advantaged account with no problem, no tax.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Old dog needs to learn to manage his investments

Post by ExitStageLeft » Fri Aug 10, 2018 8:07 pm

Benchie wrote:
Fri Aug 10, 2018 1:53 pm
...
I feel guilty for not thanking each of you individually. Your advice is invaluable. At the risk of embarrassing myself, it chokes me up a little bit. You all remind me of the great wise man in my life, who passed away many years ago. He was an old Southern gentleman and my father-in-law, courteous in a way that seems lost today, very conservative with money and had a deep understand of the markets and most other things as well. Sadly he was gone before I could turn to him for advice but happily he left his lovely wife in fine financial shape. Anyway, that's a clumsy way of telling you all how I appreciate the excellent advice.
Thank you for sharing that. You just described my FIL who passed away five years ago. Getting a little choked up myself. Is it dusty in here?

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Re: Old dog needs to learn to manage his investments

Post by jalbert » Fri Aug 10, 2018 8:20 pm

pkcrafter wrote:
Fri Aug 10, 2018 7:53 pm
Benchie wrote:
Fri Aug 10, 2018 1:53 pm
I'm a little surprised that you folks seem to be leaning toward the Lifestrategy fund rather than the Three or Four Fund Portfolio? After so many years of having a dozen mutual funds putting it all in one fund seems a little, all eggs in one basket to me. Even though the single funds risk is spread widely. Is it not unusual to put it all in one fund?
Benchie, I specifically recommended a TR or LS fund because you said this...
I also like the fact that if I happen to kick the bucket before my wife it's not some bewildering thing for her to deal with and she could just let it be...or dip into it for the celebration.
An LS or TR fund rebalances automatically, and it's one of the best options for someone who doesn't want to mess with investments or even rebalance. If that's not a problem, then sure, the 3-4 fund portfolio is great. You might go with the 3-4 fund and tell your wife if something happens where she has to manage, she can switch to an LS fund in a tax-advantaged account with no problem, no tax.

Paul
All sensible advice. I would add that the LifeStrategy and Target Retirement funds were designed with the objective of being a complete, diversified portfolio solution in a single fund.

Another point is that Vanguard Target Retirement funds begin incorporating short-term TIPS (inflation-indexed bonds) as one gets close to retirement. LifeStrategy Funds do not include TIPS. The rationale is that inflation is a significant risk for retirees.

Another strategy to get to 50% stock would be to combine a LifeStrategy fund with a short-term TIPS fund. Eg:

84% VSMGX
16% VTAPX
Last edited by jalbert on Sat Aug 11, 2018 10:49 pm, edited 1 time in total.
Risk is not a guarantor of return.

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Re: Old dog needs to learn to manage his investments

Post by Benchie » Fri Aug 10, 2018 8:41 pm

This is all extraordinarily helpful. I feeling really good about this thanks to you all.

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Re: Old dog needs to learn to manage his investments

Post by gmaynardkrebs » Sat Aug 11, 2018 10:32 am

Benchie wrote:
Fri Aug 10, 2018 5:19 pm
That makes good sense. It just takes an attitude adjustment to have it all in a single fund I guess. Interestingly I took the risk aversion test here and my answers suggested we should be 70% stock and 30% bonds! We are currently 60/40 but my age would make it 40/60. I was thinking of perhaps moving it to 50/50 but I see that’s not an option with that particular fund.
FWIW, I'm an even older dog than you, which gives me and you the distinct advantage of ignoring what them smart young whippersnappers on BH are tellin' us. :D

The risk adjustment questionnaires are ludicrous. In my experience, even when I choose the most risk averse answers they offer, I end up with an excessive equity allocation. Based on what you say here, a 70s/30b allocation is more risk than you can afford to take. If you had $6M, different story. Don't let them talk you into something you don't want. If you are thinking of 50/50, that is what you should do. That is entirely reasonable for a couple in your situation. I don't agree with the 60/40 Lifestrategy suggestion either.

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Re: Old dog needs to learn to manage his investments

Post by freedom-head » Sat Aug 11, 2018 10:49 am

Benchie, I recently made the leap from an AUM advisor to Vanguard. I was paying a base fee of over $14,000 per year and really didn't understand him. The custodian website fell far short of Vanguard's. I realized that part of what was keeping me in that relationship was my inclination toward avoidance of conflict. Definitely an emotional choice. He was so nice, was working toward getting his girls off to college and arranging celebratory vacations (while I was carefully evaluating the cost of my health insurance). Once I recognized the error of my decision, I contacted Vanguard. They needed information regarding my holdings and my permission to initiate the transfer. That done, they accomplished the transfer. Nothing needed to be sold to make the transfer between custodians (it was explained to me as like moving house; you just move the furniture, you don't need to sell it first.) I moved into a target retirement fund while I continued reading. I then spoke with one of Vanguard's advisors (at no cost) and was able to achieve the same allocation at lower cost using three funds. That strategy, rather than the target retirement fund, allows me to position the Roth assets more aggressively than Traditional.

Vanguard really makes it all so easy. I feel much more confident in the security of my retirement holdings. And I continue o learn from this site :sharebeer

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Re: Old dog needs to learn to manage his investments

Post by Benchie » Sat Aug 11, 2018 2:00 pm

That’s so helpful. Thank you for sharing that, because there is an emotional relationship with the advisor. Yet leaving is absolutely the right thing to do. I may follow your lead.

Thanks to everyone who’s taken the time to share their good advice!

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Re: Old dog needs to learn to manage his investments

Post by friar1610 » Sat Aug 11, 2018 4:08 pm

gmaynardkrebs wrote:
Sat Aug 11, 2018 10:32 am
Benchie wrote:
Fri Aug 10, 2018 5:19 pm
That makes good sense. It just takes an attitude adjustment to have it all in a single fund I guess. Interestingly I took the risk aversion test here and my answers suggested we should be 70% stock and 30% bonds! We are currently 60/40 but my age would make it 40/60. I was thinking of perhaps moving it to 50/50 but I see that’s not an option with that particular fund.
FWIW, I'm an even older dog than you, which gives me and you the distinct advantage of ignoring what them smart young whippersnappers on BH are tellin' us. :D

The risk adjustment questionnaires are ludicrous. In my experience, even when I choose the most risk averse answers they offer, I end up with an excessive equity allocation. Based on what you say here, a 70s/30b allocation is more risk than you can afford to take. If you had $6M, different story. Don't let them talk you into something you don't want. If you are thinking of 50/50, that is what you should do. That is entirely reasonable for a couple in your situation. I don't agree with the 60/40 Lifestrategy suggestion either.
Another "senior dog" here. I share Benchie's concerns about having things organized as simply and conservatively as is reasonable in the event I'm the first to exit the scene. That means that it makes sense to me to organize and allocate our portfolio such that it is in place now for my widow if I die next week. The income streams remaining for my widow will be less than what we jointly have coming in now and I don't want to leave her with an overly equity-heavy portfolio that could take a big hit at the same time I take mine. So I answer those asset allocation questionnaires as if I am answering for her after my demise - only one SS, a much reduced pension, a need to tap the portfolio now rather than in the future, higher tax bracket, etc. This generally yields a more conservative recommendation and tempers my willingness to take risk. Under that scenario, I usually see a recommendation for 40/60 vs. the 50/50 or 60/40 I get when I do the questionnaire as if we were both going to live together until the end. Or, if I knew she were going to go first in which case I might even go to 70/30. Thinking things through this way (at 73) may not be applicable to the younger Benchie, but just passing it on for consideration.
Friar1610

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Re: Old dog needs to learn to manage his investments

Post by tesuzuki2002 » Sat Aug 11, 2018 4:13 pm

Benchie wrote:
Tue Aug 07, 2018 9:06 pm
Hello!

I'm a newbie (my son recommended you), I'm 58, self employed (work 60-70 hours a week), married, 600K saved for retirement, add 25K-30K annually. Worry about money all the time! I figure I need to double that nest egg so we can retire in 10 years.

Here's my question, how to get started self educating myself so I understanding my investments and what do I need to do to feel like I can monitor and direct them myself in the future? Keep in mind that I'm good at my job but definitely not a genius when it comes to finance. I need to keep it fairly simple.

I use an investment advisor at Stifel. I like him but I usually (always) blindly follow his advice, plus he's pushing 70 and may retire soon. We're about 60/40 equities/bonds, when I send him money he makes suggestions and I say yes. That's our relationship. Our returns have been good compared to friends who use different advisors, but I'm totally in the dark and have little spare time to dwell on it. I need to make the time to get a grip on this, it's too important not to.

Any wisdom you could share would be appreciated more than you know.
Thanks!

I would say you’re doing good. That 600k in 10 years should be over 1million... with no new contributions. Keep doing what you are doing. Look at mapping out your investments in a simple 3 fund. So you can manage it. Sounds like as you age you can let your son manage it.. if he sent you here.. he knows what he is doing.

Congrats!!

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Re: Old dog needs to learn to manage his investments

Post by gmaynardkrebs » Sat Aug 11, 2018 4:57 pm

tesuzuki2002 wrote:
Sat Aug 11, 2018 4:13 pm
That 600k in 10 years should be over 1million... with no new contributions.
With no new contributions, to achieve $1M in today's dollars would require a 5.1% real return over the next 10 years. The odds of achieving that with a 60/40 portfolio are quite low.

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Re: Old dog needs to learn to manage his investments

Post by BL » Sat Aug 11, 2018 5:21 pm

Seems like you have received good advice here.

Suggest you have your list of funds when you call Vanguard to move the accounts. They would recognize which might not easily transfer and which have to be cashed in before moving. Not sure how preferred and some other fixed income will transfer. Also agree that all those Class C funds are a dead give-away about costing way too much and sending a 1% 12b-1 kickback to your advisor. There could also be a back-end load charged when you sell if you have held them less than 1 year. Still, you need to dump them with their high ER.

If you should decide that it is too much time or effort to set up even a simple one or 3-fund portfolio, Vanguard PAS would charge only 0.3%/year to put you into a few low-ER funds. You can even call them and get a list of what they suggest; then decide if you want to go it alone or not. If you later decide to do it yourself, you wouldn't have a bad selection to deal with, like you have now.

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Re: Old dog needs to learn to manage his investments

Post by jalbert » Sat Aug 11, 2018 11:04 pm

gmaynardkrebs wrote:
Sat Aug 11, 2018 4:57 pm
tesuzuki2002 wrote:
Sat Aug 11, 2018 4:13 pm
That 600k in 10 years should be over 1million... with no new contributions.
With no new contributions, to achieve $1M in today's dollars would require a 5.1% real return over the next 10 years. The odds of achieving that with a 60/40 portfolio are quite low.
I have no quantitative opinion about the expected return of a 60/40 portfolio, but to get from 600K to $1M in 10 years would only require an annual nominal return of about 5.24% without any new contributions. If inflation runs 2% annually as the Fed says they are targeting, that is just a real return of about 3.24%.
Risk is not a guarantor of return.

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