How to Begin with 1M

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Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Fri Aug 24, 2018 4:32 pm

gilgamesh wrote:
Fri Aug 24, 2018 2:44 pm
TylerLearning wrote:
Fri Aug 24, 2018 11:12 am
MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am


It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!
Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.

Your principal (based on each situation) shoots out interests, dividends and capital gains. You are ignoring capital gains.

My portfolio has minimal dividends and interests, my returns are mostly capital gains. I’d be very Disappointed with returns if I ignore capital gains. Even worse, if I ignore capital gains, I will give unfair weight to only 2/3rd of returns and draw erroneous conclusions - like you are doing.

Also, your paragraph on you getting $1100 and him getting $500 is all wrong...investing is not that neat. There is no such thing as you getting a certain amount leaving the principal untouched, when it comes to stocks. They are unpredictable. All we have are guidelines based on past performance, such as the 4% rule you’ve been already informed.
Well, I'm glad to have your comments--they certainly have a different tone and perspective from others. I'm looking right at my capital gains, not leaving them out at all. information I'm giving you is coming from the FA himself, so errors aren't mine, they're his. Or "over-promising." AKA drumming up business. "There is no such thing as you getting a certain amount leaving the principal untouched..." This is precisely what my FA and countless other FAs promise, along with that 4% rule.

All across this forum, people are complaining that they've overpaid an FA and gotten poor returns, using the same way of understanding that I'm using based on my FAs information. If FAs are getting a bad rap, they need to do better at explaining what they do instead of burying it in an avalanche of impenetrable jargon.

What do you recommend as a way of evaluating the returns on an investment account, if not costs and earnings? Certainly my FA has stressed again and again that investing is unpredictable and risk-laden.

Thanks again,

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Fri Aug 24, 2018 4:45 pm

MotoTrojan wrote:
Fri Aug 24, 2018 11:39 am
TylerLearning wrote:
Fri Aug 24, 2018 11:12 am
MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am
TylerLearning wrote:
Thu Aug 23, 2018 9:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 11:36 pm


Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.
He’s telling you how much income the portfolio will generate which is easier to predict/assume, but the price of funds can also change. Individual bonds won’t but you don’t need those. Stocks obviously do.

Example: Would you want to put $100 into a bond fund paying 5% if you knew the value of the fund was going down 10% a year? Of course not.

You need to do some more reading. Intro to Bogleheads would be a great book to start. In the meantime get out of this advisors grasp.
Thanks for your comments here. When you say he is predicting/assuming, but the price of funds can change--do you mean he can't really know whether the portfolio will generate that amount?

In any case to get out of his grasp, yes. Although the most recent comments seem to be saying I've underestimated his gifts and evaluated him unfairly.

Thanks for your time.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Fri Aug 24, 2018 5:18 pm

MrJones wrote:
Fri Aug 24, 2018 12:12 am
TylerLearning wrote:
Thu Aug 23, 2018 10:04 pm
Thanks for sharing what you've learned. Um, I'm not a financial novice--as in I've run three free-lance businesses including across Europe and Asia for 40 years--but an investment novice: gawd, that's the truth. What a pickle.

About range of opinions--you don't seem to be recommending the 3-Fund Portfolio others are liking. Excuse me if I'm wrong--I'll surely be re-reading what you've sent. But if this is so, why?
Apologies, investment novice is what I meant. Corrected.

I am indeed recommending a fund portfolio as well. The question is, do you DIY that portfolio or use a "readymade" fund? I'm recommending the latter.

Simplicity is the sole reason. Are you ready to get into the complexities of asset and fund allocation, balanced withdrawals, and most importantly, do your own rebalancing based on either bands, or absolute value, or periodically? If so, by all means, go for the DIY 3 fund.

The lifestrategy find I recommended is indeed a three fund portfolio. It's got international, domestic, and bonds. In fact, it's got both international and domestic bonds, making it technically a four fund portfolio. It does all of the above that I mentioned, automatically within a single fund so you don't have to.
OK yes, I see. Getting closer. I might very well be able to handle allocation and balancing. I think the really hard part is figuring out what the intense jargon refers to--that's the most time-consuming thing... As in: "portfolio" means the stuff you've invested in.

Asked some questions this morning, which disappeared. Along these lines: why don't people (or do people ever) invest at various levels of risk at the same time? Parts low, moderate, and high in terms of risk? Same company?

Also, why is it better to have all money invested at one company rather than more?

Other thoughts: Schwab customer service has been a wonderful recommendation for Vanguard.

Thanks, of course.

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Fri Aug 24, 2018 10:16 pm

You have a lot to learn. Yield is not all the income you’re getting, it is total return that matters (yield plus price change, which can go up or down). Time to get to reading if you want to learn more.

Maybe just do tax-managed balanced and be done. One fund. Or above mentioned Lifestrategy. Those do the work for you.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Fri Aug 24, 2018 10:37 pm

MotoTrojan wrote:
Fri Aug 24, 2018 10:16 pm
You have a lot to learn. Yield is not all the income you’re getting, it is total return that matters (yield plus price change, which can go up or down). Time to get to reading if you want to learn more.

Maybe just do tax-managed balanced and be done. One fund. Or above mentioned Lifestrategy. Those do the work for you.
My advisor's contract promised me such-and-such income, not variable yield plus price change.

I'm delighted that someone like you has the time and interest to learn all about this, and then the generosity to share it with people who are busy in other kinds of lives from your own. Bravo!

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Sat Aug 25, 2018 12:40 pm

TylerLearning wrote:
Fri Aug 24, 2018 10:37 pm
MotoTrojan wrote:
Fri Aug 24, 2018 10:16 pm
You have a lot to learn. Yield is not all the income you’re getting, it is total return that matters (yield plus price change, which can go up or down). Time to get to reading if you want to learn more.

Maybe just do tax-managed balanced and be done. One fund. Or above mentioned Lifestrategy. Those do the work for you.
My advisor's contract promised me such-and-such income, not variable yield plus price change.

I'm delighted that someone like you has the time and interest to learn all about this, and then the generosity to share it with people who are busy in other kinds of lives from your own. Bravo!
Sorry if that came off poorly, no disrespect meant. Just stating that I think you'd do much better to grow your overall understanding rather than asking specific questions. If you just want to run on autopilot then the Lifestrategy Conservative Growth fund someone mentioned earlier, which holds US and International stocks, as well as both types of bonds, in a 40/60 stocks/bonds ratio is a good option similar to what your adviser setup. If you want a little more risk then I'd use the Lifestrategy Moderate Growth fund which is 60/40 stocks/bonds. One fund, you just buy/sell as desired.

That fund will still kick-off dividends (what your adviser is calling income) which you can spend or reinvest by buying more shares (you can setup to do this automatically) but beyond those dividends, which aren't constant but are fairly steady, the overall share price can swing up or down significantly more. That is what total return is; price change (up or down) plus yield (income).

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Sat Aug 25, 2018 12:47 pm

After reading your OP again I think you likely set yourself up poorly by telling the adviser you wanted to maintain your principal and only spend dividends/income. I would recommend you lose this mindset and focus on total return. I would recommend you do not reinvest dividends but instead use those to live on. If they are enough, great. If you need to spend a little more then you should pull that out by selling shares.

If you can keep your total (dividends plus sales) withdrawal rate under ~3.5%, you should be able to maintain that spending (adjusted for inflation each year) forever. That is pretax, but given your SS and some freelance, should allow you to live a higher cost life than you are now ($25K).

Trying to setup a higher yield portfolio to live solely off of income may make you feel better but in reality you are removing diversification and likely exposing yourself to a higher risk of losing principal, not a lower one.

Happy to answer any other questions but it sounds like a fund-of-funds is the answer for you. Only question is, which fund.

Some options:
VSCGX: Vanguard Lifestrategy Conservative Growth. Not as tax-efficient on bonds, but at your spending that shouldn't matter. 40/60 stock/bonds so less risky but also less growth
VSMGX: Vanguard Lifefstrategy Moderate Growth. Similar to above but 60/40 stock/bonds
VTMFX: Vanguard Tax-managed balanced fund. 50/50 stock/bonds and with choices that are more tax-efficient. No International stocks which many see as a big risk, even though US stocks have dominated as of late. I don't think you are spending enough to justify this as your tax-bill should be pretty low.

Malinois000
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Re: How to Begin with 1M

Post by Malinois000 » Sat Aug 25, 2018 1:02 pm

I have a Schwab account with the same balance as yours and my wife has a Vanguard account. I don't think there is much difference - in fact, I prefer Schwab. However, I did not sign up for their advisory services as I invest on my own. No AUM charges if you decide to go that route. In other words, you do not need to leave Schwab - just advise you no longer need or want the advisory services.

Topic Author
TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Sat Aug 25, 2018 1:29 pm

MotoTrojan wrote:
Sat Aug 25, 2018 12:40 pm
TylerLearning wrote:
Fri Aug 24, 2018 10:37 pm
MotoTrojan wrote:
Fri Aug 24, 2018 10:16 pm
You have a lot to learn. Yield is not all the income you’re getting, it is total return that matters (yield plus price change, which can go up or down). Time to get to reading if you want to learn more.

Maybe just do tax-managed balanced and be done. One fund. Or above mentioned Lifestrategy. Those do the work for you.
My advisor's contract promised me such-and-such income, not variable yield plus price change.

I'm delighted that someone like you has the time and interest to learn all about this, and then the generosity to share it with people who are busy in other kinds of lives from your own. Bravo!
Sorry if that came off poorly, no disrespect meant. Just stating that I think you'd do much better to grow your overall understanding rather than asking specific questions. If you just want to run on autopilot then the Lifestrategy Conservative Growth fund someone mentioned earlier, which holds US and International stocks, as well as both types of bonds, in a 40/60 stocks/bonds ratio is a good option similar to what your adviser setup. If you want a little more risk then I'd use the Lifestrategy Moderate Growth fund which is 60/40 stocks/bonds. One fund, you just buy/sell as desired.

That fund will still kick-off dividends (what your adviser is calling income) which you can spend or reinvest by buying more shares (you can setup to do this automatically) but beyond those dividends, which aren't constant but are fairly steady, the overall share price can swing up or down significantly more. That is what total return is; price change (up or down) plus yield (income).
MotoTrojan, I am really grateful for your message. No doubt the body of knowledge I don't have is vast. An expert in my own field, it takes some steadying of the nerves to come here and move among people so different from ones self, utterly out of one's element. Hard even to know what to ask.

I'm relieved that I understand everything you wrote here. And I do understand fluctuations. About buy/sell--I'm getting clearer about how to buy, but the selling is foggy. Is there a such thing as a simulator, like when you're learning to drive or fly? I just have no idea what it looks like to sell something or how to decide what to sell and so on. If I could see all that just once, I'd feel so much better. I feel heroic to ask such a stupid question on the chance that it helps someone else, too...

looking
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Re: How to Begin with 1M

Post by looking » Sat Aug 25, 2018 1:51 pm

i dont understand why you worry, just put all the money into im from schwa into all three funds vg

Topic Author
TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Sat Aug 25, 2018 1:56 pm

looking wrote:
Sat Aug 25, 2018 1:51 pm
i dont understand why you worry, just put all the money into im from schwa into all three funds vg
Thanks for the nudge. My father used to say that freeway signs are for people who already know where they're going, it feels like that. Good to know it's not like that for everyone, yes.

Topic Author
TylerLearning
Posts: 79
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Re: How to Begin with 1M

Post by TylerLearning » Sat Aug 25, 2018 2:17 pm

Malinois000 wrote:
Sat Aug 25, 2018 1:02 pm
I have a Schwab account with the same balance as yours and my wife has a Vanguard account. I don't think there is much difference - in fact, I prefer Schwab. However, I did not sign up for their advisory services as I invest on my own. No AUM charges if you decide to go that route. In other words, you do not need to leave Schwab - just advise you no longer need or want the advisory services.
Thanks for taking the time to reply. My FA set up my money with him to dump back into my savings if I take his name off. And since the FA isn't in Schwab's "network," they won't look at my account. My experiences with Schwab customer service so far have been poor. Generally, it's been hard to put the just-do-this advice into practice so far. But I look forward to feeling the way you do and it's good information.

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Sat Aug 25, 2018 3:01 pm

TylerLearning wrote:
Sat Aug 25, 2018 1:29 pm
MotoTrojan wrote:
Sat Aug 25, 2018 12:40 pm
TylerLearning wrote:
Fri Aug 24, 2018 10:37 pm
MotoTrojan wrote:
Fri Aug 24, 2018 10:16 pm
You have a lot to learn. Yield is not all the income you’re getting, it is total return that matters (yield plus price change, which can go up or down). Time to get to reading if you want to learn more.

Maybe just do tax-managed balanced and be done. One fund. Or above mentioned Lifestrategy. Those do the work for you.
My advisor's contract promised me such-and-such income, not variable yield plus price change.

I'm delighted that someone like you has the time and interest to learn all about this, and then the generosity to share it with people who are busy in other kinds of lives from your own. Bravo!
Sorry if that came off poorly, no disrespect meant. Just stating that I think you'd do much better to grow your overall understanding rather than asking specific questions. If you just want to run on autopilot then the Lifestrategy Conservative Growth fund someone mentioned earlier, which holds US and International stocks, as well as both types of bonds, in a 40/60 stocks/bonds ratio is a good option similar to what your adviser setup. If you want a little more risk then I'd use the Lifestrategy Moderate Growth fund which is 60/40 stocks/bonds. One fund, you just buy/sell as desired.

That fund will still kick-off dividends (what your adviser is calling income) which you can spend or reinvest by buying more shares (you can setup to do this automatically) but beyond those dividends, which aren't constant but are fairly steady, the overall share price can swing up or down significantly more. That is what total return is; price change (up or down) plus yield (income).
MotoTrojan, I am really grateful for your message. No doubt the body of knowledge I don't have is vast. An expert in my own field, it takes some steadying of the nerves to come here and move among people so different from ones self, utterly out of one's element. Hard even to know what to ask.

I'm relieved that I understand everything you wrote here. And I do understand fluctuations. About buy/sell--I'm getting clearer about how to buy, but the selling is foggy. Is there a such thing as a simulator, like when you're learning to drive or fly? I just have no idea what it looks like to sell something or how to decide what to sell and so on. If I could see all that just once, I'd feel so much better. I feel heroic to ask such a stupid question on the chance that it helps someone else, too...
This is why I suggested a one-stop fund; there is no decision on what to sell, you just sell as needed to maintain your lifestyle (monthly withdrawal, quarterly, annually, whatever you like). You can even automate that.

As to how to get out of your current situation, you have a small gain overall which will be taxable so I'd frankly consider selling everything and taking the cash and putting into one of the lifestrategy funds. If you plan to still hold onto more cash than you'd use in checking, I'd open an Ally or similar high-yield savings account to get closer to 2% interest.

I think you'll feel relieved knowing you have a highly diverse portfolio that balances itself out daily and all you have to do is withdraw a sensible amount. Again as I noted, I'd take your dividends in cash (Vanguard can help ensure this is your setup) and then sell shares as needed for additional spending power since dividends will be a little short of your needs.

Many people get nervous but a single fund really is all many need and this fund has thousands of bonds (not sure number) and well over 10,000 stocks. Can't get any more diverse.

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Sat Aug 25, 2018 3:08 pm

I will add that if you stay at Schwab you probably don't want a Vanguard fund as they'll charge with transactions, but I would wager they have similar funds. Or you can start fresh at Vanguard.

Topic Author
TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Sat Aug 25, 2018 3:15 pm

MotoTrojan wrote:
Sat Aug 25, 2018 3:08 pm
I will add that if you stay at Schwab you probably don't want a Vanguard fund as they'll charge with transactions, but I would wager they have similar funds. Or you can start fresh at Vanguard.
Yes, perhaps a fresh start is the way to go. Thanks again for thinking on my behalf, it's kind of you.

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Sat Aug 25, 2018 5:44 pm

TylerLearning wrote:
Sat Aug 25, 2018 3:15 pm
MotoTrojan wrote:
Sat Aug 25, 2018 3:08 pm
I will add that if you stay at Schwab you probably don't want a Vanguard fund as they'll charge with transactions, but I would wager they have similar funds. Or you can start fresh at Vanguard.
Yes, perhaps a fresh start is the way to go. Thanks again for thinking on my behalf, it's kind of you.
Please do let us know what you end up doing. Happy investing and life living!

RUsure
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Re: How to Begin with 1M

Post by RUsure » Sat Aug 25, 2018 7:59 pm

I am very sorry for your loss. What do you plan to do about health insurance until age 65? I am not an expert in Medi-Cal but I'm pretty sure you will cease to qualify if your income reaches 138% of the poverty line ( which equals $16,743 for a single in 2018).

Medlabscientist
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Re: How to Begin with 1M

Post by Medlabscientist » Sat Aug 25, 2018 10:00 pm

Investing is probably one of the simplest things in the world

Step #1. Go online and take an investing risk tolerance quiz, they are everywhere and they are free.

Step #2. The risk tolerance quiz will tell you that what your allocation should be between stocks/bonds Ie 60%/40%. Write this down on a sheet of paper.

Step#3. Open a brokerage account at Fidelity or Vanguard

Step #4. Call customer service and have them roll your account over from your old account into your new account.

Step #5. Fire your financial advisor

Step #6. Put 40% of your money into a Total Bond market index fund or ETF (or whatever percentage your risk tolerance indicates). You are looking for a intermediate term treasury bond fund with a low expense ratio.

Step#7. Put the 60% of your money that goes into stocks (or whatever percentage your risk tolerance indicates) into a globally diverse portfolio of index funds or etfs. If you really find this complicated you can just use the Vanguard total stock market index fund (VTI) or (VT) etf version. Or you can pick individual indexs and spread it out between the S&P 500, Large Cap Foreign, Emerging Markets, and Small cap US.

Step #8. Rebalance the portfolio once per year

Step#9. Live off he dividends and never touch the principle.

angelescrest
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Re: How to Begin with 1M

Post by angelescrest » Sun Aug 26, 2018 7:11 am

Given that the OP has his money in a taxable account, does it make any sense to use two or three funds, with the bond portion in something like municipal bonds?

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peterinjapan
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Re: How to Begin with 1M

Post by peterinjapan » Sun Aug 26, 2018 7:51 am

Investopedia has a great email that it sends out daily, explaining terms like yield and moving averages and so on. I know most of it, but I like to stay on the list to see what concepts I've not understoof yet.

https://www.investopedia.com/corp/emailcampaign.aspx

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BL
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Re: How to Begin with 1M

Post by BL » Sun Aug 26, 2018 9:14 am

I think Vanguard is ideal for someone who is unsure of investing. They have great low-cost (low-ER) funds and won't lead you into expensive choices like others may or may not.

Contacting the V PAS would give you some idea of what they suggest for investing. It could be 4-10 low-ER funds covering US and International equities + US and International bonds. It would cost 0.30% annually, but they could also be fired at any time leaving you with reasonable funds. I believe they would arrange to sell monthly or whatever you choose to get an income (have not used them, but have everything at V).

Suggestions here would all work, depending on your personality and tolerance.
1. Single balanced fund: L.S. Conservative or Moderate. The bonds give off taxable dividends.
2. 3-fund portfolio. Bonds give off taxable dividends unless in municipal bonds (doesn't sound like you would gain if in lower tax brackets).
3. Leave most in Prime or federal Money Market, and buy 10,000 a week of either LS Conservative or Total Stock Market until 40% there. Gives you time to adjust to your new status.
4. Let PAS handle it all.

We generally don't promote buying individual stocks here, although some have a very small part of their portfolio in those. Your one example was a stock, don't know if most everything you have now is stocks or not.
Total Stock market has thousands of stocks, so if one goes bad the rest help keep up the value. Still, markets can drop 10-50% in a short time, and one must be expecting that to happen sometimes. Don't panic sell!

Read!
Wiki (start with Getting Started). Also there are videos.
Bogleheads books on investing and retirement.
Jane Bryant Quinn's How to make your money Last.
Dr. Bernstein's great little pdf for free:
https://www.etf.com/docs/IfYouCan.pdf

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gilgamesh
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Re: How to Begin with 1M

Post by gilgamesh » Sun Aug 26, 2018 9:58 am

TylerLearning wrote:
Fri Aug 24, 2018 4:32 pm
gilgamesh wrote:
Fri Aug 24, 2018 2:44 pm
TylerLearning wrote:
Fri Aug 24, 2018 11:12 am
MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am


It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!
Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.

Your principal (based on each situation) shoots out interests, dividends and capital gains. You are ignoring capital gains.

My portfolio has minimal dividends and interests, my returns are mostly capital gains. I’d be very Disappointed with returns if I ignore capital gains. Even worse, if I ignore capital gains, I will give unfair weight to only 2/3rd of returns and draw erroneous conclusions - like you are doing.

Also, your paragraph on you getting $1100 and him getting $500 is all wrong...investing is not that neat. There is no such thing as you getting a certain amount leaving the principal untouched, when it comes to stocks. They are unpredictable. All we have are guidelines based on past performance, such as the 4% rule you’ve been already informed.
Well, I'm glad to have your comments--they certainly have a different tone and perspective from others. I'm looking right at my capital gains, not leaving them out at all. information I'm giving you is coming from the FA himself, so errors aren't mine, they're his. Or "over-promising." AKA drumming up business. "There is no such thing as you getting a certain amount leaving the principal untouched..." This is precisely what my FA and countless other FAs promise, along with that 4% rule.

All across this forum, people are complaining that they've overpaid an FA and gotten poor returns, using the same way of understanding that I'm using based on my FAs information. If FAs are getting a bad rap, they need to do better at explaining what they do instead of burying it in an avalanche of impenetrable jargon.

What do you recommend as a way of evaluating the returns on an investment account, if not costs and earnings? Certainly my FA has stressed again and again that investing is unpredictable and risk-laden.

Thanks again,
That’s all they can do...if you insist on getting a return and leaving principal alone, all they can do is come up with dividend and interest pay. Then they state the latter hoping you know it’s not written in stone. But, you hold onto the imprecise first statement and make it rigid.

Let’s take GE for instance...for the longest time they kept paying the same dividends, doesn’t mean your principal was safe. It was declining with the stock price. Then eventually your deivdend declined too.

Dividend is just the underlying company selling your principal and distributing it as dividend - nothing more. It’s done without your immediate knowledge, which psychologically pleases many. I suggest you don’t fall into this trap, but it’s ok! if you do as many here does the same. Little impact for most as the final outcome isn’t affected muchand thus it’s ok!

But, at the beginner stage it could be harmful...as you can extrapolate this error into other thinking processes.

Fa’s are not overpromising...they may be under promising by saying all you have is the dividend and interest - most of the times, they are in fact under promising. Living on dividends and interest alone is less than 4% rule. So, 4% overpromises more than your FA....your questions ties their hands as it’s all imprecise.

How do you evaluate returns? Then you mentioned cost and earnings. Earnings alas is almost precisely tied to risk. But you have total control over cost. Read some of the books recommended and you will internalize this. Minimize cost, especially when minimizing costs gives you higher earnings. That’s the first thing you have to understand unequivocal all angles - ALL ANGLES, INSIDE OUT.

Then understand how your earnings and risks are tied. Risk can be complicated - like in laymen terms like you put it earlier (airplane analogy) also mathematically.

Even though mathematically, at times this can be wrong, I create a picture of this risk way - when you take higher risk you can earn more than if you were to take lesser risk but can at the same time loose more. However, over history of the USA the loss is temporary. So, if your investement horizon is long you can take more risk and ride out the loosing sessions (needs tremendous self control - most don’t have this, thus the single fund recommendation). But in retirement you have sequence risk - study this inside out as that complicates all of this.

Then there are some like me who doesn’t necessarily believe my retirement cannot be worse than past. But that really doesn’t matter at this stage.

I think if you are willing to take a few months and Rigorously study you will be fine with the 3 fund portfolio. If not that all-in-one Vanguard is the best choice.

I will post a link soon, that hopefully sheds more light on earnings and risks - stocks have higher earnings and are “riskier”, bonds have historically low return but are good at reducing volatility.
Last edited by gilgamesh on Sun Aug 26, 2018 10:11 am, edited 1 time in total.

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gilgamesh
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Re: How to Begin with 1M

Post by gilgamesh » Sun Aug 26, 2018 10:06 am

These historic figures may help

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can’t find a link to a page where you can set ant asset allocation and date range and it will give you the return. If I find it, will post later

Topic Author
TylerLearning
Posts: 79
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Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 8:26 pm

MotoTrojan wrote:
Sat Aug 25, 2018 3:01 pm
TylerLearning wrote:
Sat Aug 25, 2018 1:29 pm
MotoTrojan wrote:
Sat Aug 25, 2018 12:40 pm
TylerLearning wrote:
Fri Aug 24, 2018 10:37 pm
MotoTrojan wrote:
Fri Aug 24, 2018 10:16 pm
You have a lot to learn. Yield is not all the income you’re getting, it is total return that matters (yield plus price change, which can go up or down). Time to get to reading if you want to learn more.

Maybe just do tax-managed balanced and be done. One fund. Or above mentioned Lifestrategy. Those do the work for you.
My advisor's contract promised me such-and-such income, not variable yield plus price change.

I'm delighted that someone like you has the time and interest to learn all about this, and then the generosity to share it with people who are busy in other kinds of lives from your own. Bravo!
Sorry if that came off poorly, no disrespect meant. Just stating that I think you'd do much better to grow your overall understanding rather than asking specific questions. If you just want to run on autopilot then the Lifestrategy Conservative Growth fund someone mentioned earlier, which holds US and International stocks, as well as both types of bonds, in a 40/60 stocks/bonds ratio is a good option similar to what your adviser setup. If you want a little more risk then I'd use the Lifestrategy Moderate Growth fund which is 60/40 stocks/bonds. One fund, you just buy/sell as desired.

That fund will still kick-off dividends (what your adviser is calling income) which you can spend or reinvest by buying more shares (you can setup to do this automatically) but beyond those dividends, which aren't constant but are fairly steady, the overall share price can swing up or down significantly more. That is what total return is; price change (up or down) plus yield (income).
MotoTrojan, I am really grateful for your message. No doubt the body of knowledge I don't have is vast. An expert in my own field, it takes some steadying of the nerves to come here and move among people so different from ones self, utterly out of one's element. Hard even to know what to ask.

I'm relieved that I understand everything you wrote here. And I do understand fluctuations. About buy/sell--I'm getting clearer about how to buy, but the selling is foggy. Is there a such thing as a simulator, like when you're learning to drive or fly? I just have no idea what it looks like to sell something or how to decide what to sell and so on. If I could see all that just once, I'd feel so much better. I feel heroic to ask such a stupid question on the chance that it helps someone else, too...
This is why I suggested a one-stop fund; there is no decision on what to sell, you just sell as needed to maintain your lifestyle (monthly withdrawal, quarterly, annually, whatever you like). You can even automate that.

As to how to get out of your current situation, you have a small gain overall which will be taxable so I'd frankly consider selling everything and taking the cash and putting into one of the lifestrategy funds. If you plan to still hold onto more cash than you'd use in checking, I'd open an Ally or similar high-yield savings account to get closer to 2% interest.

I think you'll feel relieved knowing you have a highly diverse portfolio that balances itself out daily and all you have to do is withdraw a sensible amount. Again as I noted, I'd take your dividends in cash (Vanguard can help ensure this is your setup) and then sell shares as needed for additional spending power since dividends will be a little short of your needs.

Many people get nervous but a single fund really is all many need and this fund has thousands of bonds (not sure number) and well over 10,000 stocks. Can't get any more diverse.
Such excellent information. Lifestrategy + Ally--sounds doable enough. Should I expect there to be costs (fees and so on) If I have the FA sell everything and just return it all to me in cash? Appreciating your help.

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TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 8:40 pm

RUsure wrote:
Sat Aug 25, 2018 7:59 pm
I am very sorry for your loss. What do you plan to do about health insurance until age 65? I am not an expert in Medi-Cal but I'm pretty sure you will cease to qualify if your income reaches 138% of the poverty line ( which equals $16,743 for a single in 2018).
Thank you for the condolence.

And oh, your question is a big help! As I said at the outset, any investing I do has to be coordinated with sorting out estate matters, insurance, taxes and so on. I really don't know the answer to your question, and countless calls to Medi-Cal haven't given me one. (As in: they're not more expert than you.) Any suggestions?

One thing: I've been filing as head of household for a very long time, but I understand that will change for 2018, partly because of a new law and partly because my son is 23 (in 2018). Does that sound right? And thus your reference to filing as single?

Odd question surely, but--is there any advantage to filing as married? (Long story.)

I have a vague notion that there's a form of Medi-Cal which lets you co-pay. I go to the doctor once every 20 years or so.

So good of you to bring this up.

Topic Author
TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 8:50 pm

Medlabscientist wrote:
Sat Aug 25, 2018 10:00 pm
Investing is probably one of the simplest things in the world

Step #1. Go online and take an investing risk tolerance quiz, they are everywhere and they are free.

Step #2. The risk tolerance quiz will tell you that what your allocation should be between stocks/bonds Ie 60%/40%. Write this down on a sheet of paper.

Step#3. Open a brokerage account at Fidelity or Vanguard

Step #4. Call customer service and have them roll your account over from your old account into your new account.

Step #5. Fire your financial advisor

Step #6. Put 40% of your money into a Total Bond market index fund or ETF (or whatever percentage your risk tolerance indicates). You are looking for a intermediate term treasury bond fund with a low expense ratio.

Step#7. Put the 60% of your money that goes into stocks (or whatever percentage your risk tolerance indicates) into a globally diverse portfolio of index funds or etfs. If you really find this complicated you can just use the Vanguard total stock market index fund (VTI) or (VT) etf version. Or you can pick individual indexs and spread it out between the S&P 500, Large Cap Foreign, Emerging Markets, and Small cap US.

Step #8. Rebalance the portfolio once per year

Step#9. Live off he dividends and never touch the principle.
Thank you, I'm going to print out your good advice along with everyone else's, so thank you. I've explained previously why some of why your Steps don't speak to my situation. But it's refreshing to see how easy it looks to someone in the sciences. Best to you,

Topic Author
TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 8:51 pm

angelescrest wrote:
Sun Aug 26, 2018 7:11 am
Given that the OP has his money in a taxable account, does it make any sense to use two or three funds, with the bond portion in something like municipal bonds?
Thank you for the question. Anyone?

Topic Author
TylerLearning
Posts: 79
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Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 9:02 pm

gilgamesh wrote:
Sun Aug 26, 2018 9:58 am
TylerLearning wrote:
Fri Aug 24, 2018 4:32 pm
gilgamesh wrote:
Fri Aug 24, 2018 2:44 pm
TylerLearning wrote:
Fri Aug 24, 2018 11:12 am
MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am


It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!
Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.

Your principal (based on each situation) shoots out interests, dividends and capital gains. You are ignoring capital gains.

My portfolio has minimal dividends and interests, my returns are mostly capital gains. I’d be very Disappointed with returns if I ignore capital gains. Even worse, if I ignore capital gains, I will give unfair weight to only 2/3rd of returns and draw erroneous conclusions - like you are doing.

Also, your paragraph on you getting $1100 and him getting $500 is all wrong...investing is not that neat. There is no such thing as you getting a certain amount leaving the principal untouched, when it comes to stocks. They are unpredictable. All we have are guidelines based on past performance, such as the 4% rule you’ve been already informed.
Well, I'm glad to have your comments--they certainly have a different tone and perspective from others. I'm looking right at my capital gains, not leaving them out at all. information I'm giving you is coming from the FA himself, so errors aren't mine, they're his. Or "over-promising." AKA drumming up business. "There is no such thing as you getting a certain amount leaving the principal untouched..." This is precisely what my FA and countless other FAs promise, along with that 4% rule.

All across this forum, people are complaining that they've overpaid an FA and gotten poor returns, using the same way of understanding that I'm using based on my FAs information. If FAs are getting a bad rap, they need to do better at explaining what they do instead of burying it in an avalanche of impenetrable jargon.

What do you recommend as a way of evaluating the returns on an investment account, if not costs and earnings? Certainly my FA has stressed again and again that investing is unpredictable and risk-laden.

Thanks again,
That’s all they can do...if you insist on getting a return and leaving principal alone, all they can do is come up with dividend and interest pay. Then they state the latter hoping you know it’s not written in stone. But, you hold onto the imprecise first statement and make it rigid.

Let’s take GE for instance...for the longest time they kept paying the same dividends, doesn’t mean your principal was safe. It was declining with the stock price. Then eventually your deivdend declined too.

Dividend is just the underlying company selling your principal and distributing it as dividend - nothing more. It’s done without your immediate knowledge, which psychologically pleases many. I suggest you don’t fall into this trap, but it’s ok! if you do as many here does the same. Little impact for most as the final outcome isn’t affected muchand thus it’s ok!

But, at the beginner stage it could be harmful...as you can extrapolate this error into other thinking processes.

Fa’s are not overpromising...they may be under promising by saying all you have is the dividend and interest - most of the times, they are in fact under promising. Living on dividends and interest alone is less than 4% rule. So, 4% overpromises more than your FA....your questions ties their hands as it’s all imprecise.

How do you evaluate returns? Then you mentioned cost and earnings. Earnings alas is almost precisely tied to risk. But you have total control over cost. Read some of the books recommended and you will internalize this. Minimize cost, especially when minimizing costs gives you higher earnings. That’s the first thing you have to understand unequivocal all angles - ALL ANGLES, INSIDE OUT.

Then understand how your earnings and risks are tied. Risk can be complicated - like in laymen terms like you put it earlier (airplane analogy) also mathematically.

Even though mathematically, at times this can be wrong, I create a picture of this risk way - when you take higher risk you can earn more than if you were to take lesser risk but can at the same time loose more. However, over history of the USA the loss is temporary. So, if your investement horizon is long you can take more risk and ride out the loosing sessions (needs tremendous self control - most don’t have this, thus the single fund recommendation). But in retirement you have sequence risk - study this inside out as that complicates all of this.

Then there are some like me who doesn’t necessarily believe my retirement cannot be worse than past. But that really doesn’t matter at this stage.

I think if you are willing to take a few months and Rigorously study you will be fine with the 3 fund portfolio. If not that all-in-one Vanguard is the best choice.

I will post a link soon, that hopefully sheds more light on earnings and risks - stocks have higher earnings and are “riskier”, bonds have historically low return but are good at reducing volatility.
Well, every sentence here is good to have, and I do understand what you've written (!). I'm lucky to have them while I'm sorting through the many practical matters ahead. It's nice of you to have hung in there with me this long.

MotoTrojan
Posts: 6565
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Re: How to Begin with 1M

Post by MotoTrojan » Mon Aug 27, 2018 9:06 pm

TylerLearning wrote:
Mon Aug 27, 2018 8:51 pm
angelescrest wrote:
Sun Aug 26, 2018 7:11 am
Given that the OP has his money in a taxable account, does it make any sense to use two or three funds, with the bond portion in something like municipal bonds?
Thank you for the question. Anyone?
OP only spends $25K/yr so I don’t think they’ll be in a tax-bracket that would make that a win. I think a self-balancing fund will be an excellent choice and likely the most tax-efficient too.

OP what state do you live in? What’s your marginal federal and state tax-rate? I doubt this would help but happy to review if it’s applicable.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 9:08 pm

peterinjapan wrote:
Sun Aug 26, 2018 7:51 am
Investopedia has a great email that it sends out daily, explaining terms like yield and moving averages and so on. I know most of it, but I like to stay on the list to see what concepts I've not understoof yet.

https://www.investopedia.com/corp/emailcampaign.aspx
Konnichiwa, peterinjapan. Oh, it's a really good idea to sign up. I come across their information pretty often, but this will be better. Arigato gozaimasu, honto ni.

Topic Author
TylerLearning
Posts: 79
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Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 9:26 pm

MotoTrojan wrote:
Mon Aug 27, 2018 9:06 pm
TylerLearning wrote:
Mon Aug 27, 2018 8:51 pm
angelescrest wrote:
Sun Aug 26, 2018 7:11 am
Given that the OP has his money in a taxable account, does it make any sense to use two or three funds, with the bond portion in something like municipal bonds?
Thank you for the question. Anyone?
OP only spends $25K/yr so I don’t think they’ll be in a tax-bracket that would make that a win. I think a self-balancing fund will be an excellent choice and likely the most tax-efficient too.

OP what state do you live in? What’s your marginal federal and state tax-rate? I doubt this would help but happy to review if it’s applicable.
Well, if I'm trying to live on, say, $30,000 instead, does it continue to be the most tax-efficient? I mean, I'm 62, just inherited the 1M--is there any hope that I will not have to live like a church mouse till I'm dead?

I live in California. Haven't owed taxes for many years--this year paid $950 Federal on money that came to me from a trust. A reminder that I've been self-employed and freelance for a long time. Between that and (very) newly being free of closing my parents' estate, it's awkward to plan for what I'll need since I am in a position to start a new life now but don't know what kind, really.

If nothing else, as someone said above, my Medi-Cal will likely be cancelled, so my expenses will change just from that. Haven't bought health insurance in the U.S. for over 20 years (the payment was automatically deducted from paycheck abroad).

Don't know why some of my FA's choices for me are taxable and others not. And then there's "tax advantaged," which he doesn't talk about.

Lucky to have your thoughts and questions.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 10:01 pm

BL wrote:
Sun Aug 26, 2018 9:14 am
I think Vanguard is ideal for someone who is unsure of investing. They have great low-cost (low-ER) funds and won't lead you into expensive choices like others may or may not.

Contacting the V PAS would give you some idea of what they suggest for investing. It could be 4-10 low-ER funds covering US and International equities + US and International bonds. It would cost 0.30% annually, but they could also be fired at any time leaving you with reasonable funds. I believe they would arrange to sell monthly or whatever you choose to get an income (have not used them, but have everything at V).

Suggestions here would all work, depending on your personality and tolerance.
1. Single balanced fund: L.S. Conservative or Moderate. The bonds give off taxable dividends.
2. 3-fund portfolio. Bonds give off taxable dividends unless in municipal bonds (doesn't sound like you would gain if in lower tax brackets).
3. Leave most in Prime or federal Money Market, and buy 10,000 a week of either LS Conservative or Total Stock Market until 40% there. Gives you time to adjust to your new status.
4. Let PAS handle it all.

We generally don't promote buying individual stocks here, although some have a very small part of their portfolio in those. Your one example was a stock, don't know if most everything you have now is stocks or not.
Total Stock market has thousands of stocks, so if one goes bad the rest help keep up the value. Still, markets can drop 10-50% in a short time, and one must be expecting that to happen sometimes. Don't panic sell!

Read!
Wiki (start with Getting Started). Also there are videos.
Bogleheads books on investing and retirement.
Jane Bryant Quinn's How to make your money Last.
Dr. Bernstein's great little pdf for free:
https://www.etf.com/docs/IfYouCan.pdf
Thanks for your recommendations. Not everyone here is agreeing on the best strategy, and it takes time to figure out how to evaluate what I'm reading. One thing: I see how to engage a V PAS, but not how to get out of it. "Fire at any time"? Some things I've heard about Schwab, for example, haven't turned out to be true or practicable, so it's a long row to hoe to get a handle on the whole thing. But I do see I've been reading the right things.

Reminder of context: someone else found the FA who invested for me. "I" am now, a year later, trying to figure out what's up.

The one example I posted was in a question about which part of the information on my statement I should share, but nobody answered. Looks like a mix of things, not only stocks, no.

Don't know about the taxableness aspect of the whole matter (your 1. and 2.) Your 3. is a new suggestion and very helpful, thank you.

Best,

Topic Author
TylerLearning
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Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Mon Aug 27, 2018 10:07 pm

gilgamesh wrote:
Sun Aug 26, 2018 10:06 am
These historic figures may help

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can’t find a link to a page where you can set ant asset allocation and date range and it will give you the return. If I find it, will post later
Gilgamesh, this link is precious, oooooooh WOW.

I am waiting eagerly for the other page you mention--crossing fingers you can post it. Thanks in advance!!

looking
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Re: How to Begin with 1M

Post by looking » Mon Aug 27, 2018 10:59 pm

TylerLearning wrote:
Sun Aug 19, 2018 3:00 pm
Hello, I tried to post a group thank you this morning when I was on the run and saw everyone's replies: "It is very moving to be alone with a problem and see these thoughtful, knowledgeable, and kind responses. Let me take a day or two to really digest these suggestions--I know I'll have more questions." I don't see that this message appears anywhere, so sorry.

Honestly, I don't see instructions for how to reply. What am I missing? Should I reply to each person here in one message? Or... how to respond to each person? Always with the quote?

Wish I could say these are the dumbest questions I've ever asked, but nay...

_______________________________________________

Hello, I’ve been reading here extensively for several months. Of course touched and impressed by everyone.

I recently inherited 1M (final distribution about an hour ago). 62 (longevity in my family). Nearly retired (means working freelance less). No family except son, 23 (lives abroad). No debt, car, cellphone, or TV. Paid off my house. Savings: high. Live in California.

I need to move forward from an essentially cash-and-savings life. In a chaotic period of grief for my parent, a family friend set me up with a “financial advisor.” Since last year, my $700,000 has earned just under $9000 and, AUM-ing me at .75%, I’ve paid him nearly the same. I so much want to extricate myself from him, but… how? It sounds tricky. And what to do next? I can barely make heads or tails of my statement (Schwab).

I’ve gotten increasingly concerned about making my own decisions, reading here about loads, exit and hidden fees, bonuses, tax implications, ERs, ladders, AAs, target dates and endless considerations that I won’t know to consider.

In my life I've handled complex financial situations (two low- and no-overhead businesses; changing countries) but know nothing about caring for this new sum or what's next: investing—but also trust, will, taxes, life and death insurance, and so on. Other information:

What I have

1. In the high 200,000s/low 300,000s: Chase account, earning pennies (hiding from advisor)
2. $1800: Bank of America checking for bills, with credit card, earning pennies.
3. The Schwab-advisor account (see above).
4. I qualify for Medi-Cal health insurance, and free tax preparation.
Now I’m living from freelance earnings + savings—about $25,00/year

*

What I expect

No retirement accounts or pensions.
Freelance income as long as I’m able: $6-10,000
Will qualify for Medicare.
About $1060 at 66-1/2 from Social Security.

*

Hopes, wild and other

1. To live off interest and dividends from investment.
2. To be a little freer with money than I’ve been for a long time.
3. To have an occasional housecleaner and a monthly gardener.
4. To repair and upgrade the house: $20-30,000?
5. To be able to do something(s) a bit big: take a trip where I’m not squirreling leftovers in the hotel mini-fridge? Buy a good painting? Buy a little room (pied à terre) in another country?
6. To leave my principal (most?) and house to my son.

*

Note 1. If I lose the money, there’s no more where that came from.

Note 2. I saw how the “home care” people sucked six figures from my parent (98 years old) in the last year or less—> don’t-want-to-be-a-burden-to-my-son.

*

Thank you in advance to anyone with advice about how to maximize what I have. A three-fund portfolio? Vanguard advisor? Schwab advisor?No advisor? CDs? FIDC everything? Hourly financial planner? All new and daunting to me.

Best,
put vg growth and income and forget it, it'll be reaching another $500k

MotoTrojan
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Re: How to Begin with 1M

Post by MotoTrojan » Tue Aug 28, 2018 10:55 am

Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds. I still think overall you’ll be most happy in tbe Lifestrategy moderate growth 60/40 fund. Easy and still pretty tax-efficient at your income level. Multiple funds will cause its own inefficiencies unless you really take the time to manage things. PAS would help but that comes at a 0.3% cost which likely eats up the tax difference, if any.

Do you have tax-advantaged accounts? 401k IRA Roth etc?

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billthecat
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Re: How to Begin with 1M

Post by billthecat » Tue Aug 28, 2018 1:30 pm

MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds.
Buying VCADX seems pretty straight forward.
We cannot direct the winds but we can adjust our sails.

WhiteMaxima
Posts: 1994
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Re: How to Begin with 1M

Post by WhiteMaxima » Tue Aug 28, 2018 2:33 pm

Doubling it to 2 mil. Actually it only takes you 10 years assuming you can get 7% annual return. How to make 7% a year? That't I would like to hear from your guys.

MotoTrojan
Posts: 6565
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Tue Aug 28, 2018 3:09 pm

billthecat wrote:
Tue Aug 28, 2018 1:30 pm
MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds.
Buying VCADX seems pretty straight forward.
Based on reading the full thread I believe the OP would benefit having a single fund. PAS could help with rebalancing but I don't think it would pay for itself. Given OPs desire to spend $30K/yr + $12K SS I'd be surprised if the tax-adjusted yield was higher for munis to begin with.

Topic Author
TylerLearning
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Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 28, 2018 6:45 pm

looking wrote:
Mon Aug 27, 2018 10:59 pm
TylerLearning wrote:
Sun Aug 19, 2018 3:00 pm

What I expect

No retirement accounts or pensions.
Freelance income as long as I’m able: $6-10,000
Will qualify for Medicare.
About $1060 at 66-1/2 from Social Security.

Hopes, wild and other

1. To live off the earnings from investment.
2. To be a little freer with money than I’ve been for a long time.
3. To have an occasional housecleaner and a monthly gardener.
4. To repair and upgrade the house: $20-30,000?
5. To be able to do something(s) a bit big: take a trip where I’m not squirreling leftovers in the hotel mini-fridge? Buy a good painting? Buy a little room (pied à terre) in another country?
6. To leave my principal (most?) and house to my son.

Note 1. If I lose the money, there’s no more where that came from.

Note 2. I saw how the “home care” people sucked six figures from my parent (98 years old) in the last year or less—> don’t-want-to-be-a-burden-to-my-son.

Thank you in advance to anyone with advice about how to maximize what I have. A three-fund portfolio? Vanguard advisor? Schwab advisor?No advisor? CDs? FIDC everything? Hourly financial planner? All new and daunting to me.

Best,
put vg growth and income and forget it, it'll be reaching another $500k
Thanks for replying when you're in a hurry.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 28, 2018 6:51 pm

MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds. I still think overall you’ll be most happy in tbe Lifestrategy moderate growth 60/40 fund. Easy and still pretty tax-efficient at your income level. Multiple funds will cause its own inefficiencies unless you really take the time to manage things. PAS would help but that comes at a 0.3% cost which likely eats up the tax difference, if any.

Do you have tax-advantaged accounts? 401k IRA Roth etc?
Thanks, I think your message here is pretty definitive--the tip about the PAS and taxes is just great.

No, I don't really have anything but what I just received from the estate. And whatever the FA I don't know is getting for me, I guess. Minus what I'm paying him, of course.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 28, 2018 6:55 pm

billthecat wrote:
Tue Aug 28, 2018 1:30 pm
MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds.
Buying VCADX seems pretty straight forward.
Thanks, I'll look into that.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 28, 2018 6:58 pm

WhiteMaxima wrote:
Tue Aug 28, 2018 2:33 pm
Doubling it to 2 mil. Actually it only takes you 10 years assuming you can get 7% annual return. How to make 7% a year? That't I would like to hear from your guys.
Question noted.

MotoTrojan
Posts: 6565
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Tue Aug 28, 2018 7:51 pm

TylerLearning wrote:
Tue Aug 28, 2018 6:51 pm
MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds. I still think overall you’ll be most happy in tbe Lifestrategy moderate growth 60/40 fund. Easy and still pretty tax-efficient at your income level. Multiple funds will cause its own inefficiencies unless you really take the time to manage things. PAS would help but that comes at a 0.3% cost which likely eats up the tax difference, if any.

Do you have tax-advantaged accounts? 401k IRA Roth etc?
Thanks, I think your message here is pretty definitive--the tip about the PAS and taxes is just great.

No, I don't really have anything but what I just received from the estate. And whatever the FA I don't know is getting for me, I guess. Minus what I'm paying him, of course.
Consider a Roth IRA for years you make wages (not investment income).

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 28, 2018 8:01 pm

MotoTrojan wrote:
Tue Aug 28, 2018 7:51 pm
TylerLearning wrote:
Tue Aug 28, 2018 6:51 pm
MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds. I still think overall you’ll be most happy in tbe Lifestrategy moderate growth 60/40 fund. Easy and still pretty tax-efficient at your income level. Multiple funds will cause its own inefficiencies unless you really take the time to manage things. PAS would help but that comes at a 0.3% cost which likely eats up the tax difference, if any.

Do you have tax-advantaged accounts? 401k IRA Roth etc?
Thanks, I think your message here is pretty definitive--the tip about the PAS and taxes is just great.

No, I don't really have anything but what I just received from the estate. And whatever the FA I don't know is getting for me, I guess. Minus what I'm paying him, of course.
Consider a Roth IRA for years you make wages (not investment income).
OK, will do, if "wages" includes income earned from freelance work. I understand this is a kind of tax strategy.

MotoTrojan
Posts: 6565
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Tue Aug 28, 2018 10:48 pm

TylerLearning wrote:
Tue Aug 28, 2018 8:01 pm
MotoTrojan wrote:
Tue Aug 28, 2018 7:51 pm
TylerLearning wrote:
Tue Aug 28, 2018 6:51 pm
MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds. I still think overall you’ll be most happy in tbe Lifestrategy moderate growth 60/40 fund. Easy and still pretty tax-efficient at your income level. Multiple funds will cause its own inefficiencies unless you really take the time to manage things. PAS would help but that comes at a 0.3% cost which likely eats up the tax difference, if any.

Do you have tax-advantaged accounts? 401k IRA Roth etc?
Thanks, I think your message here is pretty definitive--the tip about the PAS and taxes is just great.

No, I don't really have anything but what I just received from the estate. And whatever the FA I don't know is getting for me, I guess. Minus what I'm paying him, of course.
Consider a Roth IRA for years you make wages (not investment income).
OK, will do, if "wages" includes income earned from freelance work. I understand this is a kind of tax strategy.
Exactly. You can contribute these funds up to $5500 (or $6500) and the gains can be withdrawn tax-free.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 28, 2018 11:03 pm

MotoTrojan wrote:
Tue Aug 28, 2018 10:48 pm
TylerLearning wrote:
Tue Aug 28, 2018 8:01 pm
MotoTrojan wrote:
Tue Aug 28, 2018 7:51 pm
TylerLearning wrote:
Tue Aug 28, 2018 6:51 pm
MotoTrojan wrote:
Tue Aug 28, 2018 10:55 am
Ah CA. High state tax but I doubt your income/spending will justify the complexity of CA tax exempt bonds. I still think overall you’ll be most happy in tbe Lifestrategy moderate growth 60/40 fund. Easy and still pretty tax-efficient at your income level. Multiple funds will cause its own inefficiencies unless you really take the time to manage things. PAS would help but that comes at a 0.3% cost which likely eats up the tax difference, if any.

Do you have tax-advantaged accounts? 401k IRA Roth etc?
Thanks, I think your message here is pretty definitive--the tip about the PAS and taxes is just great.

No, I don't really have anything but what I just received from the estate. And whatever the FA I don't know is getting for me, I guess. Minus what I'm paying him, of course.
Consider a Roth IRA for years you make wages (not investment income).
OK, will do, if "wages" includes income earned from freelance work. I understand this is a kind of tax strategy.
Exactly. You can contribute these funds up to $5500 (or $6500) and the gains can be withdrawn tax-free.
Well, thanks. For information and patience. Wish I had the temperament and time to enjoy all this. Thanks for sharing your knowledge so generously--your posts will certainly be very important when I start making final decisions. One might not know it from reading on this site, but there are 55 million of us freelancers in the U.S., who have no "safety net" besides cash savings and no plan to change that: I don't know any of them who invests their money. A different world... Very best wishes, and thanks again.

User avatar
gilgamesh
Posts: 1500
Joined: Sun Jan 10, 2016 9:29 am

Re: How to Begin with 1M

Post by gilgamesh » Wed Aug 29, 2018 6:12 am

TylerLearning wrote:
Mon Aug 27, 2018 10:07 pm
gilgamesh wrote:
Sun Aug 26, 2018 10:06 am
These historic figures may help

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can’t find a link to a page where you can set ant asset allocation and date range and it will give you the return. If I find it, will post later
Gilgamesh, this link is precious, oooooooh WOW.

I am waiting eagerly for the other page you mention--crossing fingers you can post it. Thanks in advance!!
https://www.flickr.com/gp/10712628@N02/65v7qL

I could not find the page. But here is a screen capture of the results I saved a while back... You choose AA and time frame with the sliders at the bottom, and results are displayed graphically as above. You may want to do a search and see whether you can find it or someone else may recognize it and post the link.

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 29, 2018 12:58 pm

gilgamesh wrote:
Wed Aug 29, 2018 6:12 am
TylerLearning wrote:
Mon Aug 27, 2018 10:07 pm
gilgamesh wrote:
Sun Aug 26, 2018 10:06 am
These historic figures may help

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can’t find a link to a page where you can set ant asset allocation and date range and it will give you the return. If I find it, will post later
Gilgamesh, this link is precious, oooooooh WOW.

I am waiting eagerly for the other page you mention--crossing fingers you can post it. Thanks in advance!!
https://www.flickr.com/gp/10712628@N02/65v7qL

I could not find the page. But here is a screen capture of the results I saved a while back... You choose AA and time frame with the sliders at the bottom, and results are displayed graphically as above. You may want to do a search and see whether you can find it or someone else may recognize it and post the link.
Really nice of you to find and post this, Gilgamesh. Can I ask you: what kind of search terms did you use to find this? Along with the kinds of links you're sharing, I keep looking for something that would simulate what a statement, trade, sale, or withdrawal would look like. I'm finding that without something like that, the notion of investing in such-and-such feels a bit like throwing the money off a cliff. Advice for how to search?

And I'll remember your help when I use your links, thank so much.

User avatar
gilgamesh
Posts: 1500
Joined: Sun Jan 10, 2016 9:29 am

Re: How to Begin with 1M

Post by gilgamesh » Wed Aug 29, 2018 3:27 pm

TylerLearning wrote:
Wed Aug 29, 2018 12:58 pm
gilgamesh wrote:
Wed Aug 29, 2018 6:12 am
TylerLearning wrote:
Mon Aug 27, 2018 10:07 pm
gilgamesh wrote:
Sun Aug 26, 2018 10:06 am
These historic figures may help

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can’t find a link to a page where you can set ant asset allocation and date range and it will give you the return. If I find it, will post later
Gilgamesh, this link is precious, oooooooh WOW.

I am waiting eagerly for the other page you mention--crossing fingers you can post it. Thanks in advance!!
https://www.flickr.com/gp/10712628@N02/65v7qL

I could not find the page. But here is a screen capture of the results I saved a while back... You choose AA and time frame with the sliders at the bottom, and results are displayed graphically as above. You may want to do a search and see whether you can find it or someone else may recognize it and post the link.
Really nice of you to find and post this, Gilgamesh. Can I ask you: what kind of search terms did you use to find this? Along with the kinds of links you're sharing, I keep looking for something that would simulate what a statement, trade, sale, or withdrawal would look like. I'm finding that without something like that, the notion of investing in such-and-such feels a bit like throwing the money off a cliff. Advice for how to search?

And I'll remember your help when I use your links, thank so much.
I found those links about 3 yees ago. I tried every imaginable search term to find you the link and I had no success. I put a lot of effort and as I failed,bI think that particular page may not be available any more.

I’m type A like I suspect you are...once I need to solve something, I’m like a Rottweiler on a bone. 3 years ago I spent every breathing moment to learn this stuff...I’m sure I was dreaming about this stuff. There’s no way for me to tell you which branch/search of my learning lead to the links. Sorry!...but in all my learning I found blog posts my Kitces to be absolutely fabulous. He has no agenda, just pure smarts...I would advice you to read everything he had written...Kitces

Statement? That shouldn’t be so complicating...what’s holding you back there?

Trade, sale has everything to do with whether you are doing it inside a retirement account or taxable. If the former you can do to your hearts content as long as it’s within the same institution. If you are jumping institutions then you have to follow some rollover rules.

If it’s taxable, then my rule is better prepare so there’s no such trades and sales until you are ready to retire. Tax loss harvesting is IMO is peanuts...either you pay taxes now or later, benefits are minimal given human capital. That last sentence may not make much sense, but basically invest your taxable account so you don’t have to withdraw (ideally not have to touch it to rebalance) from it until after retirement.

Withdrawal? Oh boy! That can be easy or infinitely complicated based on how far you want to venture into the rabbit hole. It’s infinite...just study sequence risk and and it’d be fine now.

Sorry! I couldn’t help you with the search terms...when I was learning, even when I thought I was correct and others were wrong, I bit my tongue and listened to all advice. Only thing that mattered was gaining knowledge and saving face was irrelevant ...I’m glad you’ve learned that too (just an archaic observation...doesn’t mean much) :sharebeer

Topic Author
TylerLearning
Posts: 79
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 29, 2018 8:53 pm

gilgamesh wrote:
Wed Aug 29, 2018 3:27 pm
TylerLearning wrote:
Wed Aug 29, 2018 12:58 pm
gilgamesh wrote:
Wed Aug 29, 2018 6:12 am
TylerLearning wrote:
Mon Aug 27, 2018 10:07 pm
gilgamesh wrote:
Sun Aug 26, 2018 10:06 am
These historic figures may help

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can’t find a link to a page where you can set ant asset allocation and date range and it will give you the return. If I find it, will post later
Gilgamesh, this link is precious, oooooooh WOW.

I am waiting eagerly for the other page you mention--crossing fingers you can post it. Thanks in advance!!
https://www.flickr.com/gp/10712628@N02/65v7qL

I could not find the page. But here is a screen capture of the results I saved a while back... You choose AA and time frame with the sliders at the bottom, and results are displayed graphically as above. You may want to do a search and see whether you can find it or someone else may recognize it and post the link.
Really nice of you to find and post this, Gilgamesh. Can I ask you: what kind of search terms did you use to find this? Along with the kinds of links you're sharing, I keep looking for something that would simulate what a statement, trade, sale, or withdrawal would look like. I'm finding that without something like that, the notion of investing in such-and-such feels a bit like throwing the money off a cliff. Advice for how to search?

And I'll remember your help when I use your links, thank so much.
I found those links about 3 yees ago. I tried every imaginable search term to find you the link and I had no success. I put a lot of effort and as I failed,bI think that particular page may not be available any more.

I’m type A like I suspect you are...once I need to solve something, I’m like a Rottweiler on a bone. 3 years ago I spent every breathing moment to learn this stuff...I’m sure I was dreaming about this stuff. There’s no way for me to tell you which branch/search of my learning lead to the links. Sorry!...but in all my learning I found blog posts my Kitces to be absolutely fabulous. He has no agenda, just pure smarts...I would advice you to read everything he had written...Kitces

Statement? That shouldn’t be so complicating...what’s holding you back there?

Trade, sale has everything to do with whether you are doing it inside a retirement account or taxable. If the former you can do to your hearts content as long as it’s within the same institution. If you are jumping institutions then you have to follow some rollover rules.

If it’s taxable, then my rule is better prepare so there’s no such trades and sales until you are ready to retire. Tax loss harvesting is IMO is peanuts...either you pay taxes now or later, benefits are minimal given human capital. That last sentence may not make much sense, but basically invest your taxable account so you don’t have to withdraw (ideally not have to touch it to rebalance) from it until after retirement.

Withdrawal? Oh boy! That can be easy or infinitely complicated based on how far you want to venture into the rabbit hole. It’s infinite...just study sequence risk and and it’d be fine now.

Sorry! I couldn’t help you with the search terms...when I was learning, even when I thought I was correct and others were wrong, I bit my tongue and listened to all advice. Only thing that mattered was gaining knowledge and saving face was irrelevant ...I’m glad you’ve learned that too (just an archaic observation...doesn’t mean much) :sharebeer
Gilgamesh, thanks for all this, for looking for the link, and also for sharing a little of your own learning curve.
No matter how many posts I post or questions I ask, there always seem to be more terms, considerations, concepts, and so on.
At this point, if I don't take the whole wad and simply burn it, I'll surely be referring back to your excellent and friendly posts.

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