My Edward Jones IRA is out performing my Vanguard 401K

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sat Oct 20, 2018 1:37 pm

New member here. After reading all the threads on the internet about how Edward Jones has really high fees, I have been considering moving my Edward Jones IRAs to Vanguard or Fidelity based on everyone's recommendations.

However, my current Vanguard 401K (2045 target fund portfolio) has a YTD return of -1.17%. My Edward Jones Guided Solutions IRAs have a YTD return of 4.46%. For the past year or so, my EJ accounts have substantially out performed my Vanguard 401k. Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.

Are there Vanguard funds that are easy to select that would have yielded me returns similar to my EJ account for the year so far? I have no problem paying more in fees if I'm getting a substantially better returns. However, every thread I read said to run from EJ as fast as possible. I do not know much about investing and was hoping someone could explain to me why I should still still leave EJ despite getting much better returns from them.

Thank you,

mhalley
Posts: 6184
Joined: Tue Nov 20, 2007 6:02 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by mhalley » Sat Oct 20, 2018 2:14 pm

No one says that there will not be periods of time when a high fee fund or high fee advisor will not outperform a simple low cost index portfolio. What bogleheads believe is that over long periods of time, the biggest predictor of return is fees, and invariably high fee products will revert to the mean. Look into the legg mason fund and what happened to it.
http://time.com/money/4451841/bill-mill ... son-fired/
See the effect of fees here
https://investor.vanguard.com/investing ... t-of-costs
And here
https://www.sec.gov/investor/alerts/ib_ ... penses.pdf

User avatar
Mel Lindauer
Moderator
Posts: 28650
Joined: Mon Feb 19, 2007 8:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Mel Lindauer » Sat Oct 20, 2018 2:23 pm

You're probably not comparing apples to apples. When doing so, over time, high-cost active funds lose to low-cost index funds the overwhelming majority of time. You can take that to the bank.
Best Regards - Mel | | Semper Fi

Dottie57
Posts: 4671
Joined: Thu May 19, 2016 5:43 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Dottie57 » Sat Oct 20, 2018 2:28 pm

What funds are you invested in?

pkcrafter
Posts: 13107
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by pkcrafter » Sat Oct 20, 2018 2:50 pm

CashedOut wrote:
Sat Oct 20, 2018 1:37 pm
New member here. After reading all the threads on the internet about how Edward Jones has really high fees, I have been considering moving my Edward Jones IRAs to Vanguard or Fidelity based on everyone's recommendations.

However, my current Vanguard 401K (2045 target fund portfolio) has a YTD return of -1.17%. My Edward Jones Guided Solutions IRAs have a YTD return of 4.46%. For the past year or so, my EJ accounts have substantially out performed my Vanguard 401k. Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.
CashedOut, we may be able to provide better answers if you list what you hold at EJ. I suspect the lower return on the Vanguard TR fund is due to the 40% international on the equity side. International is down -9.40% for the year. Total U.S. stock market is up 4.5% Where are you getting the EJ performance figures from? Also, have you held the same portfolio at EJ all year?

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.

User avatar
Taylor Larimore
Advisory Board
Posts: 27529
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Taylor Larimore » Sat Oct 20, 2018 2:54 pm

Bogleheads:

First-time poster.

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

User avatar
mickeyd
Posts: 4629
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by mickeyd » Sat Oct 20, 2018 2:59 pm

Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.
Please list the funds in your account along with their respective ERs. It's difficult to make comparisons w/o such data.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

User avatar
arcticpineapplecorp.
Posts: 3368
Joined: Tue Mar 06, 2012 9:22 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by arcticpineapplecorp. » Sat Oct 20, 2018 3:21 pm

Welcome to the group. I'll give you some additional things to consider

This much we know:

You're paying 1.35% on the first $250,000 invested, 1.30% on the next $250,000 then 1.25% on the next $500,000, 1% on the next $1,500,000 and so on. This is in addition to the fund fees (known as the expense ratio). By the way, if you have Vanguard manage your assets they charge 0.30%, which is much less.
source: https://www.edwardjones.com/images/guid ... ochure.pdf

So one question to ask is are you looking at the return net of fees or before fees? EJ might post the returns before fees but when you subtract out the fees you could be doing worse. We don't know, you'd need to dig deeper there.

Also, let's say the expense ratios are identical to vanguard (they're not) and the only difference is the 1.35% vs. the 0.30% fee vanguard charges, doesn't that mean that EJ has to outperform by 1.05% a year for the rest of your life? What is the likelihood they can do that? Even if they can (which they can't) how do you think they might do that? That's right, they'd have to take higher risk (because risk and return are inextricably linked. There's no free lunch). So this is something to consider. You may be getting higher returns, simply because you're taking more risk. We don't know until you post your funds.

Finally, the EJ portfolio is likely active management instead of vanguard's passively managed (index) funds (the target date 2045 you mention). You are assuming another risk which is known as "manager risk" that you don't take when you invest in vanguard's target date funds. So you have to realize you're taking additional risk there (the risk that the active manager invests the wrong way, picks the wrong investments, badly mistimes the market and so on).

read the short 2 page paper entitled The arithmetic of active management by William Sharpe:

https://web.stanford.edu/~wfsharpe/art/ ... active.htm
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sat Oct 20, 2018 9:03 pm

Mel Lindauer wrote:
Sat Oct 20, 2018 2:23 pm
You're probably not comparing apples to apples. When doing so, over time, high-cost active funds lose to low-cost index funds the overwhelming majority of time. You can take that to the bank.
I just compared my statements as of 10/19/18, but have been monitoring for the last year. The EJ account has been out performing substantially the entire time. That is why I'm torn as I have not come across anyone praising EJ for being worth their higher fees. I have always left my investing to the advisor or the just the target funds offered by employer 401K plans.

Is there something specific I should be looking at to compare "apples to apples" besides fees?

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sat Oct 20, 2018 9:06 pm

Dottie57 wrote:
Sat Oct 20, 2018 2:28 pm
What funds are you invested in?
Here are the funds:

BARON SMALL CAP CL I BSFIX
CHAMPLAIN MID CAP CL I CIPIX
COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX
EDGEWOOD GROWTH CL I EGFIX
FRANKLIN DYNATECH CL R6 FDTRX
HARTFORD STRATEGIC INCOME CL F HSNFX
JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX
JPMORGAN SMALL CAP GROWTH CL R6 JGSMX
PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX
T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX
T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sat Oct 20, 2018 9:10 pm

pkcrafter wrote:
Sat Oct 20, 2018 2:50 pm
CashedOut wrote:
Sat Oct 20, 2018 1:37 pm
New member here. After reading all the threads on the internet about how Edward Jones has really high fees, I have been considering moving my Edward Jones IRAs to Vanguard or Fidelity based on everyone's recommendations.

However, my current Vanguard 401K (2045 target fund portfolio) has a YTD return of -1.17%. My Edward Jones Guided Solutions IRAs have a YTD return of 4.46%. For the past year or so, my EJ accounts have substantially out performed my Vanguard 401k. Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.
CashedOut, we may be able to provide better answers if you list what you hold at EJ. I suspect the lower return on the Vanguard TR fund is due to the 40% international on the equity side. International is down -9.40% for the year. Total U.S. stock market is up 4.5% Where are you getting the EJ performance figures from? Also, have you held the same portfolio at EJ all year?

Paul
Performance figures are solely based on my statements. Not sure if this is the best thing to look at or not. I just recently started thinking I may want to look more into my investments myself.

Yes, I have been invested in the same funds all year.
Last edited by CashedOut on Sat Oct 20, 2018 9:22 pm, edited 1 time in total.

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sat Oct 20, 2018 9:17 pm

arcticpineapplecorp. wrote:
Sat Oct 20, 2018 3:21 pm
Welcome to the group. I'll give you some additional things to consider

This much we know:

You're paying 1.35% on the first $250,000 invested, 1.30% on the next $250,000 then 1.25% on the next $500,000, 1% on the next $1,500,000 and so on. This is in addition to the fund fees (known as the expense ratio). By the way, if you have Vanguard manage your assets they charge 0.30%, which is much less.
source: https://www.edwardjones.com/images/guid ... ochure.pdf

So one question to ask is are you looking at the return net of fees or before fees? EJ might post the returns before fees but when you subtract out the fees you could be doing worse. We don't know, you'd need to dig deeper there.

Also, let's say the expense ratios are identical to vanguard (they're not) and the only difference is the 1.35% vs. the 0.30% fee vanguard charges, doesn't that mean that EJ has to outperform by 1.05% a year for the rest of your life? What is the likelihood they can do that? Even if they can (which they can't) how do you think they might do that? That's right, they'd have to take higher risk (because risk and return are inextricably linked. There's no free lunch). So this is something to consider. You may be getting higher returns, simply because you're taking more risk. We don't know until you post your funds.

Finally, the EJ portfolio is likely active management instead of vanguard's passively managed (index) funds (the target date 2045 you mention). You are assuming another risk which is known as "manager risk" that you don't take when you invest in vanguard's target date funds. So you have to realize you're taking additional risk there (the risk that the active manager invests the wrong way, picks the wrong investments, badly mistimes the market and so on).

read the short 2 page paper entitled The arithmetic of active management by William Sharpe:

https://web.stanford.edu/~wfsharpe/art/ ... active.htm
I just posted my funds in a prior reply. I hope what I posted is enough info for everyone give some input.

My EJ advisor told me the rate of return listed on my statement is after fees. To be honest, I'm not sure if it is or if it isn't. I just look at the beginning balance and the ending balance and it seems to make sense.

Besides the 1.35% charged by EJ, my advisor told me the only other fees I'm being charged per fund is approx .2% on average. So that puts me at 1.55%?

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sat Oct 20, 2018 9:21 pm

mickeyd wrote:
Sat Oct 20, 2018 2:59 pm
Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.
Please list the funds in your account along with their respective ERs. It's difficult to make comparisons w/o such data.
I just posted my funds in a prior reply. I'm not sure what the expense ratios are (sorry me being new to asking all these questions and learning). However, my EJ advisor said there is an average .2% fee per fund I'm in on top of the 1.35% EJ charges. He said there are no other fees besides these. Does that sound correct?

User avatar
Taylor Larimore
Advisory Board
Posts: 27529
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Taylor Larimore » Sat Oct 20, 2018 9:40 pm

CashedOut:

Please add the (months) you have owned each of your funds. Use the "Edit" link (looks like a crayon) at the top/right of your post.

The reason I ask is that Edward Jones salespeople often exchange underperforming funds for overperforming funds. This has two purposes: 1) The Portfolio always looks great because it holds only winning funds. 2) The salesperson gets another commission.

I went to Morningstar to learn the 10-year cost of the first 5 funds you listed:

BSFIX---$1,283
CIPIX--- $1,143
CCWRX ---$846
EGFIX-- $1,299
FDTRX-----$652

(VTSAX-----$51 Vanguard Total Stock Market Index Fund Admiral)
"If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds." -- Morningstar
Thank you for the edits -- and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
StormShadow
Posts: 599
Joined: Thu Feb 09, 2012 6:20 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by StormShadow » Sat Oct 20, 2018 10:03 pm

CashedOut wrote:
Sat Oct 20, 2018 1:37 pm
For the past year or so, my EJ accounts have substantially out performed my Vanguard 401k. Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.... I do not know much about investing and was hoping someone could explain to me why I should still still leave EJ despite getting much better returns from them.
To answer your question, I have a homework assignment for you:
Break down your EJ account into percentages.

What percent of the portfolio is stock funds and bond funds. Ideally, you would break this down into percentage of large cap, mid cap, small cap, international stocks as well as bond fund ratings (AAA, AA, A, B... etc). Once you do that, figure out the Vanguard equivalent (roughly equivalent stock:bond percentage). Subtract the difference in EJ fees (Vanguard doesn't have one) and adjust for difference in expense ratio (Vanguard will be cheaper)... THEN you would have a good head-to-head comparison.

My guess is you'll find the task to be too tedious and you'll give up. You won't be alone, because it is set up like that intentionally.

Rwsawbones
Posts: 43
Joined: Fri Jan 20, 2017 11:21 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Rwsawbones » Sat Oct 20, 2018 10:06 pm

I have no experience with firm in this posting but i am a geriatrician which means I have a lot of widows as patients. People often ask doctors about legal and financial matters. I warn them that doctors don’t know much about such matters and even worse we sound like we do. I have noticed that they often pay 50 to 200 bps (typically 100 bps) just for the advice. Some of these widows have significant assets but need to live on them for some time. They do not consider that with one million which should net them about 40k per year after fees net them less than 30k The advisor and firm net 1/3 or more the funds per year. $10,000 per year per million for only a few hours work per year is my idea of elder abuse. Young Women (and girls) May suffer physical abuse. In middle and old age they may suffer elder financial abuse. I do not know which is worse, often the same person suffers both. They suffer the financial abuse because often very intelligent well educated women (sometimes also men) feel that simple finance is beyond their capabilities. None of this is news to Bogleheads. Physical abuse raises our indignation. We need a #metoo movement for our elders usually women. As individuals we need to involve our significant others in finance before it is too late. My wife does not like dealing with investment but does find the 10k plus cost per million motivating. Many of her widowed friends do suffer this abuse.

jacoavlu
Posts: 580
Joined: Sun Jan 06, 2013 12:06 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by jacoavlu » Sat Oct 20, 2018 10:06 pm

Cashedout: short term performance data means almost nothing. Especially when comparing two dissimilar portfolios.

The most important thing you can realize is just how much that 1.35% fee costs you. I did some rough calculations. Assuming a $10,000 initial balance, $5,000 annual contribution, and 6% return before fees, the net balance subtracting fees after 30 years is about $367k with 1.35% fee, compared with a balance of $466k with a 0.3% fee (if you used Vanguards advisor service). That’s over $80k in fees to EJ.

And that’s a more than fair comparison. Because over the course of 30 years, you’ll certainly pay additional transactional fees as your EJ agent moves you in and out of funds. And data has shown that those actively managed funds are almost certain to underperform the broad indices over decades.

Good on you for wanting to take more ownership and control over your money. You’re on the right path.

User avatar
grabiner
Advisory Board
Posts: 22908
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by grabiner » Sat Oct 20, 2018 10:07 pm

CashedOut wrote:
Sat Oct 20, 2018 9:06 pm
Dottie57 wrote:
Sat Oct 20, 2018 2:28 pm
What funds are you invested in?
Here are the funds:

BARON SMALL CAP CL I BSFIX
CHAMPLAIN MID CAP CL I CIPIX
COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX
EDGEWOOD GROWTH CL I EGFIX
FRANKLIN DYNATECH CL R6 FDTRX
HARTFORD STRATEGIC INCOME CL F HSNFX
JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX
JPMORGAN SMALL CAP GROWTH CL R6 JGSMX
PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX
T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX
T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX
While you didn't give the percentages, this does suggest that the single Vanguard fund should not be used for a comparison, because the two portfolios are quite different. Your stock funds are mostly growth funds; this is neither good nor bad, but it means that you will outperform blend indexes when growth outperforms value, and underperform when value outperforms growth. You probably have much less in international stock than Vanguard does. Your bond funds are shorter-term than the index, but lower quality (Hartford Strategic Income has a lot of junk bonds).

You can see how each fund, or part of your portfolio, relates to an appropriate benchmark. For example, is your international growth fund outperforming an international growth index? (It is over the last year, although I don't know whether you have held it for the whole year.)

But the more important issue isn't the past performance of your individual funds. An index fund holds the average of all investors' holdings, so it should be average before expenses. In one year, some funds will outperform an index, and others will underperform, but this is not an indication of what will happen next year. The one part of past performance which is reproducible is expenses. If you pay a fund manager 1%, the fund is guaranteed to underperform the stocks it holds by 1%. And if you pay an advisor 1%, your portfolio is guaranteed to underperform the funds you hold by 1%.
Wiki David Grabiner

User avatar
arcticpineapplecorp.
Posts: 3368
Joined: Tue Mar 06, 2012 9:22 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by arcticpineapplecorp. » Sat Oct 20, 2018 10:16 pm

CashedOut wrote:
Sat Oct 20, 2018 9:06 pm
Dottie57 wrote:
Sat Oct 20, 2018 2:28 pm
What funds are you invested in?
Here are the funds:

BARON SMALL CAP CL I BSFIX 1.05%
CHAMPLAIN MID CAP CL I CIPIX 0.93%
COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX 0.71%
EDGEWOOD GROWTH CL I EGFIX 1.9%
FRANKLIN DYNATECH CL R6 FDTRX 0.51%
HARTFORD STRATEGIC INCOME CL F HSNFX 0.60%
JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX 0.89%
JPMORGAN SMALL CAP GROWTH CL R6 JGSMX 0.81%
PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX 0.42%
T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX 0.56%
T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX 0.30%
we don't know the overall expenses because we don't know the percentages you have in each of the funds above. However, I did a quick search of all the tickers above and put the net expense ratios in red. Are you getting some kind of special pricing? Because I don't see a single fund you listed that is 0.20% or less. You said the average expense ratio is 0.20%. The cheapest fund is the last one (treausry, t.rowe price) and it's more than 0.20% (at .30%). So how are your total expenses 0.20% when there's not a single fund above that is that cheap?

I would like to hear your (or your advisor's) explanation of that one.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

BogleMelon
Posts: 1482
Joined: Mon Feb 01, 2016 11:49 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by BogleMelon » Sat Oct 20, 2018 10:19 pm

OP, during a marathon, it doesn't matter who is in the lead for a few minutes, and that is after assuming that EJ outperformed and there isn't any "gottcha's".

EJ strategy is active management with high fees over years. ~1.25% on top of funds ER is crazy high, that expense amount is based on your ending balance, not on your gains, and when it compounds it adds up to tens if not hundreds of thousands through lifetime! That is a bad strategy to follow, regardless of the results. If you still have good results out of EJ startegy, then this is pure luck, no more. Gambling your home deed in Vegas, is still considered a bad strategy, even though you won a million dollars that night, instead of losing your house!

Study after another proven that active management investing with high fees have slim to none chances to outperform index funds with low ER. Others can guide you to books or wiki articles here.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Wakefield1
Posts: 857
Joined: Mon Nov 14, 2016 10:10 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Wakefield1 » Sat Oct 20, 2018 10:45 pm

Rwsawbones wrote:
Sat Oct 20, 2018 10:06 pm
I have no experience with firm in this posting but i am a geriatrician which means I have a lot of widows as patients. People often ask doctors about legal and financial matters. I warn them that doctors don’t know much about such matters and even worse we sound like we do. I have noticed that they often pay 50 to 200 bps (typically 100 bps) just for the advice. Some of these widows have significant assets but need to live on them for some time. They do not consider that with one million which should net them about 40k per year after fees net them less than 30k The advisor and firm net 1/3 or more the funds per year. $10,000 per year per million for only a few hours work per year is my idea of elder abuse. Young Women (and girls) May suffer physical abuse. In middle and old age they may suffer elder financial abuse. I do not know which is worse, often the same person suffers both. They suffer the financial abuse because often very intelligent well educated women (sometimes also men) feel that simple finance is beyond their capabilities. None of this is news to Bogleheads. Physical abuse raises our indignation. We need a #metoo movement for our elders usually women. As individuals we need to involve our significant others in finance before it is too late. My wife does not like dealing with investment but does find the 10k plus cost per million motivating. Many of her widowed friends do suffer this abuse.
Big Bank that rolls over a 95 year old shut in's 2 year CD (as of Oct. 2018 maturing) at .2% APY? (((That's .2% not 2% !)

User avatar
Chris001122
Posts: 154
Joined: Tue Mar 09, 2010 12:50 pm
Location: The Upcountry, South Carolina

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Chris001122 » Sun Oct 21, 2018 8:07 am

My dad, at age 65 and retiring, asked me to go with him on his trip to Edward Jones. An old neighborhood acquaintance had hungout his shingle and become an Edward Jones advisor. Also, a former work friend of my dad had put at least some (probably most) of his retirement next egg with this same gentleman. He was very pleased and was spending his gains like a paycheck every month to supplement his social security check. My dad clearly wanted to be part of this club and have a little extra to spend every month.

We met with the Edward Jones man after being greeted in the clean orderly new office by a professional female (his assistant) and told to wait much like we were in a doctors office. Then we finally were allowed to have council with the man who gave my dad a suggestion of five different area to invest, which my dad thought was very good. I asked the man what the funds were invested in. They were categories like "growth", "aggressive growth", "moderate growth", and so on. After quite a lot of questioning with my insistence on getting an answer, he responded that 4 of the 5 categories were 100% common stock and 1 of the 5 categories were 100% bonds.

So, with my dad at age 65, this Edward Jones advisor was suggesting my dad go into 80% stocks and 20% bonds. I successfully convinced my dad to avoid this situation and he didn't give his entire nest egg to this man and his company. A few years later, my dad did put some money with this guy, wisely not asking me, and now my dad gets his little monthly stipend that he feels okay to spend 100% of.

Does it make sense to me? No. But he's my dad, I love him, I think he is making a mistake. But it's his money and I wish him well. It's not my money until he decides to will it to me.

My dad hasn't lost all of his money and he continues to remain pleased, I think. But like most Bogleheads, I choose a different path. I think the statistics are with us in the long run.
"It's always been a mistake to bet against the United States since 1776." - Warren Buffett

User avatar
oldcomputerguy
Posts: 3459
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by oldcomputerguy » Sun Oct 21, 2018 8:19 am

CashedOut wrote:
Sat Oct 20, 2018 1:37 pm
However, my current Vanguard 401K (2045 target fund portfolio) has a YTD return of -1.17%. My Edward Jones Guided Solutions IRAs have a YTD return of 4.46%. For the past year or so, my EJ accounts have substantially out performed my Vanguard 401k. Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.
Welcome to the forum.

I agree with Stormshadow above, it's important when comparing portfolios to have some idea of the stock-to-bond ratio. Theoretically a portfolio with a higher amount of equities will outperform a similar portfolio with a lower percent, but it will entail carrying more risk. (Risk and return are entwined.) While you have provided the list of funds in your EJ portfolio, we don't yet know how much is in each fund. If you could provide that, either as percentages of the total or (if you wish) in dollar amounts, we could give you better responses.

For the record, the Vanguard 2045 target fund is currently 90% stocks and 10% bonds with 36% of the fund in international stocks, and an expense ratio of 0.15%, much cheaper than any of the funds your EJ guy has you in.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sun Oct 21, 2018 10:46 am

arcticpineapplecorp. wrote:
Sat Oct 20, 2018 10:16 pm
CashedOut wrote:
Sat Oct 20, 2018 9:06 pm
Dottie57 wrote:
Sat Oct 20, 2018 2:28 pm
What funds are you invested in?
Here are the funds:

BARON SMALL CAP CL I BSFIX 1.05%
CHAMPLAIN MID CAP CL I CIPIX 0.93%
COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX 0.71%
EDGEWOOD GROWTH CL I EGFIX 1.9%
FRANKLIN DYNATECH CL R6 FDTRX 0.51%
HARTFORD STRATEGIC INCOME CL F HSNFX 0.60%
JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX 0.89%
JPMORGAN SMALL CAP GROWTH CL R6 JGSMX 0.81%
PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX 0.42%
T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX 0.56%
T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX 0.30%
we don't know the overall expenses because we don't know the percentages you have in each of the funds above. However, I did a quick search of all the tickers above and put the net expense ratios in red. Are you getting some kind of special pricing? Because I don't see a single fund you listed that is 0.20% or less. You said the average expense ratio is 0.20%. The cheapest fund is the last one (treausry, t.rowe price) and it's more than 0.20% (at .30%). So how are your total expenses 0.20% when there's not a single fund above that is that cheap?

I would like to hear your (or your advisor's) explanation of that one.
WOW :shock:

I'm not getting any special pricing that I'm aware of. I will definitely be discussing this with my EJ advisor! Thank you so much for the info!

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sun Oct 21, 2018 11:06 am

oldcomputerguy wrote:
Sun Oct 21, 2018 8:19 am
CashedOut wrote:
Sat Oct 20, 2018 1:37 pm
However, my current Vanguard 401K (2045 target fund portfolio) has a YTD return of -1.17%. My Edward Jones Guided Solutions IRAs have a YTD return of 4.46%. For the past year or so, my EJ accounts have substantially out performed my Vanguard 401k. Do these results make sense? I think my EJ account is mostly mutual funds and/or index funds my advisor selected.
Welcome to the forum.

I agree with Stormshadow above, it's important when comparing portfolios to have some idea of the stock-to-bond ratio. Theoretically a portfolio with a higher amount of equities will outperform a similar portfolio with a lower percent, but it will entail carrying more risk. (Risk and return are entwined.) While you have provided the list of funds in your EJ portfolio, we don't yet know how much is in each fund. If you could provide that, either as percentages of the total or (if you wish) in dollar amounts, we could give you better responses.

For the record, the Vanguard 2045 target fund is currently 90% stocks and 10% bonds with 36% of the fund in international stocks, and an expense ratio of 0.15%, much cheaper than any of the funds your EJ guy has you in.
Here is the % breakdown of my portfolio (rounded of course)

5.2% BARON SMALL CAP CL I BSFIX
9% CHAMPLAIN MID CAP CL I CIPIX
13.4 % COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX
10% EDGEWOOD GROWTH CL I EGFIX
11% FRANKLIN DYNATECH CL R6 FDTRX
5.4% HARTFORD STRATEGIC INCOME CL F HSNFX
16.1% JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX
5% JPMORGAN SMALL CAP GROWTH CL R6 JGSMX
5.4% PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX
16.2% T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX
1.5% T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sun Oct 21, 2018 11:13 am

Taylor Larimore wrote:
Sat Oct 20, 2018 9:40 pm
CashedOut:

Please add the (months) you have owned each of your funds. Use the "Edit" link (looks like a crayon) at the top/right of your post.

The reason I ask is that Edward Jones salespeople often exchange underperforming funds for overperforming funds. This has two purposes: 1) The Portfolio always looks great because it holds only winning funds. 2) The salesperson gets another commission.

I went to Morningstar to learn the 10-year cost of the first 5 funds you listed:

BSFIX---$1,283
CIPIX--- $1,143
CCWRX ---$846
EGFIX-- $1,299
FDTRX-----$652

(VTSAX-----$51 Vanguard Total Stock Market Index Fund Admiral)
"If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds." -- Morningstar
Thank you for the edits -- and best wishes.
Taylor
Wow, that is crazy! And those fees are top of the $1.35% EJ charges! Thank you so much for this info!

And I have owned the funds for about 1 yr 3 months

RickBoglehead
Posts: 1001
Joined: Wed Feb 14, 2018 9:10 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by RickBoglehead » Sun Oct 21, 2018 11:23 am

This can all be overwhelming to a person. Let me summarize what you likely have already figured out from the responses.

1) Your EJ advisor intentionally mislead you in his answer. I won't say he lied, I wasn't in the room. But as you can clearly see, the funds you are in don't have anywhere near the expense ratio he suggested, nor does a weighted average expense ratio of the funds you hold (multiply percent of total assets times expense ratio for each holding and add them up). He'll possibly claim he misunderstood your question, or was giving the 12b1 "marketing fee" number, not the expense ratio, or since the expense ratio is taken out of returns before you see them that it doesn't matter. He'd be wrong.

2) You can't compare apples and oranges. The Vanguard fund you list holds 54% of its assets in Vanguard Total Stock Market Index, 36% in Vanguard Total International Stock Market Index, 7% in Vanguard Total Bond Market Index, and 3% in Vanguard Total International Bond Market Index. That's a 61% US and 39% international split, and 90% stock, 10% bond split. Someone has explained in more detail how this doesn't compare at all to what you hold at EJ. Think of it this way - the stock market gives higher returns over a long period than does bond funds. The more stock you hold, the more RISK you have, because it's more volatile than the bond market.

3) Expense ratios matter. This reduces the return on your investments by paying the EJ rep for his nice office and nice car. And maybe the lunch he buys you. And his kids' college fund. You saw one example of how the math works.

The EJ rep will attempt to distract you from what matters. Don't let him. Keep pressing for factual, timely answers. When you are satisfied that you have your info, it should be plain that a comparable investment in Vanguard funds will beat the EJ portfolio you have OVER TIME.

CashedOut
Posts: 12
Joined: Sat Oct 20, 2018 1:05 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by CashedOut » Sun Oct 21, 2018 11:34 am

I will be discussing with my EJ advisor this week the ER fee discrepancy many of you have brought to my attention. Thank you for that! I will let you know what he says. This will dictate what I do with the EJ investments.

My next big question is what do I do with the Vanguard 401K I currently have in the 2045 target fund/portfolio? Is it a good fund that I should just keep? I'm 36 so have lots of time before retirement. I just checked the plan fees and it says a .05% ER currently and my prior employer pays all other fees.

Or are there better Vanguard options other than this fund?

Thank you for your help with this!

User avatar
oldcomputerguy
Posts: 3459
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by oldcomputerguy » Sun Oct 21, 2018 12:17 pm

CashedOut wrote:
Sun Oct 21, 2018 11:06 am
Here is the % breakdown of my portfolio (rounded of course)

5.2% BARON SMALL CAP CL I BSFIX
9% CHAMPLAIN MID CAP CL I CIPIX
13.4 % COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX
10% EDGEWOOD GROWTH CL I EGFIX
11% FRANKLIN DYNATECH CL R6 FDTRX
5.4% HARTFORD STRATEGIC INCOME CL F HSNFX
16.1% JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX
5% JPMORGAN SMALL CAP GROWTH CL R6 JGSMX
5.4% PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX
16.2% T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX
1.5% T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX
Thank you. Here's what Morningstar gives for this portfolio (some rounding error is present):

US stocks: 68%
Foreign stocks: 18%
Bonds: 11%
Cash: 4%

The stock allocation is more heavily weighted to US and away from international than is the Vanguard target-date fund. It is also biased strongly to growth stocks (61% of the stock holding is large-cap growth, 16% is mid-cap growth), and growth has been outperforming for the past decade. You're a little heavy in healthcare compared to the S&P 500 index (18% vs 15%), and IMHO overly heavy in technology stocks (31% vs 23%) and consumer discretionary (18% vs 12%).

Of the bonds held in this portfolio, all are short-term, and 53% are "junk" bonds (which likely ran up the return a bit but are much more risky). The bonds in the Vanguard fund return less but are higher-quality, and are less correlated to the stock market. The bonds in the EJ portfolio likely will take a signficant dip next time the stock market has a downturn, which is not what you want in your bond holdings.

All of this adds up to what I suspected, namely that you're taking extra risk for your extra return. If you're comfortable with that, then fine. But you still should bird-dog the EJ guy over the expenses. Morningstar calculates average expense ratio of your portfolio at 0.72%, a far cry from the 0.20% your manager quoted.

Edited to add:

You might look at the results from your growth-heavy portfolio and conclude that growth is indeed where you want to be. But nobody, not you, not me, not your Edward Jones manager, knows which asset class will outperform going forward. For a great demonstration of this truth, take a look at the Callan Periodic Table of Investment Returns. Note that in 2017, S&P 500 Growth indeed was the top-performing domestic stock class, outperforming value and the blended index. And in 2014 and 2015, it outperformed everything. But now look at the other seventeen years shown on the chart. Out of those seventeen years, S&P 500 Growth performed above average only seven of those seventeen years. And between 2001 and 2006, it was the worst-performing stock class of all, with only slightly better performance in 2000, 2010, 2012, and 2016. So for ten of the twenty years shown, S&P 500 Growth gave horrible returns.

The point is that nobody can predict "the right stocks" or "the right mutual funds". Take a look at the randomness of the return rankings on the Callan chart, and it will be very obvious. That's why we recommend holding broad-market index funds; that way, no matter which asset class outperforms or for how long, you'll own some of it.
Last edited by oldcomputerguy on Sun Oct 21, 2018 12:31 pm, edited 1 time in total.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

Living Free
Posts: 120
Joined: Thu Jul 19, 2018 7:31 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Living Free » Sun Oct 21, 2018 12:22 pm

CashedOut wrote:
Sun Oct 21, 2018 11:34 am


My next big question is what do I do with the Vanguard 401K I currently have in the 2045 target fund/portfolio? Is it a good fund that I should just keep? I'm 36 so have lots of time before retirement. I just checked the plan fees and it says a .05% ER currently and my prior employer pays all other fees.

Or are there better Vanguard options other than this fund?

Thank you for your help with this!
I would keep the vanguard target date fund for now. Don't start chasing performance. Come up with a thoughtful investing plan after reading up a bunch, and compose an investment policy statement: https://www.bogleheads.org/wiki/Investm ... _statement. By then you should know what you want and be considering how to best implement it.

Lafder
Posts: 3833
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Lafder » Sun Oct 21, 2018 12:32 pm

Cashedout,

The Vanguard Target Date Retirement funds are decent low cost all on one mutual funds that rebalance for you and increase their % bonds over the years. They are a convenient invest and forget fund to hold. Especially if you do not want to do any rebalancing yourself.

They are funds made up of 4 subfunds, that VG buys and sells to stay at their stated asset allocation for your target date fund, if there are large market shifts.

The 4 subfunds held in your target date fund are:

Total (US) Stock Market Index
Total International Stock Market Index
Total (US) Bond Index fund
Total International Bond index fund

On Bogleheads they talk about a 3 fund portfolio. That is the above 3 fund equivalents, minus the International bonds as that is more controversial to hold and some people say it is not necessary.

Some people prefer to hold the subfunds directly. Others prefer the simplicity of an all in one fund. They really can be equivalent, but you have to look at the specific holdings and consider if you want to be rebalancing yourself.

Note some Target Date retirement funds from other companies are much more complex in their holdings so always look up what an all in one fund contains.

I believe the boglehead way that costs matter, and index funds beat stock picking.

lafder

User avatar
oldcomputerguy
Posts: 3459
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by oldcomputerguy » Sun Oct 21, 2018 12:34 pm

CashedOut wrote:
Sun Oct 21, 2018 11:34 am
I will be discussing with my EJ advisor this week the ER fee discrepancy many of you have brought to my attention. Thank you for that! I will let you know what he says. This will dictate what I do with the EJ investments.

My next big question is what do I do with the Vanguard 401K I currently have in the 2045 target fund/portfolio? Is it a good fund that I should just keep? I'm 36 so have lots of time before retirement. I just checked the plan fees and it says a .05% ER currently and my prior employer pays all other fees.

Or are there better Vanguard options other than this fund?

Thank you for your help with this!
I don't think you're ever going to find a target-date fund with better than a 0.05% ER. Hang on to this. Keep pushing money into it no matter what the market is doing, and otherwise ignore it.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

User avatar
arcticpineapplecorp.
Posts: 3368
Joined: Tue Mar 06, 2012 9:22 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by arcticpineapplecorp. » Sun Oct 21, 2018 12:36 pm

CashedOut wrote:
Sun Oct 21, 2018 11:06 am
Here is the % breakdown of my portfolio (rounded of course)

5.2% BARON SMALL CAP CL I BSFIX
9% CHAMPLAIN MID CAP CL I CIPIX
13.4 % COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX
10% EDGEWOOD GROWTH CL I EGFIX
11% FRANKLIN DYNATECH CL R6 FDTRX
5.4% HARTFORD STRATEGIC INCOME CL F HSNFX
16.1% JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX
5% JPMORGAN SMALL CAP GROWTH CL R6 JGSMX
5.4% PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX
16.2% T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX
1.5% T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX
First off if you add your percentages I come up with 98.2% not 100% so something’s off there. Double check that.

Secondly, if we convert from percentage to decimal (and multiply by the expense ratios I found via internet (you claim no special pricing) we get:

.052 BARON SMALL CAP CL I BSFIX .0105 = .000546 (this is .052 X .0105 = .000546)
.09 CHAMPLAIN MID CAP CL I CIPIX .0093 = .000837 (this is .09 X .0093 = .000837) and so on..
.134 COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX .00071 = .0009514
.10 EDGEWOOD GROWTH CL I EGFIX .019 = .0019
.11 FRANKLIN DYNATECH CL R6 FDTRX 0.0051 = .000561
.054 HARTFORD STRATEGIC INCOME CL F HSNFX 0.0060 = .000324
.161 JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX 0.0089 = .0014329
.05 JPMORGAN SMALL CAP GROWTH CL R6 JGSMX 0.0081 = .000405
.054 PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX 0.0042 = .0002268
.162 T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX 0.0056 = .00090702
.015 T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX 0.0030 = .000045

Add them up (.000546 + .000837 + .0009514...) you get .00813612 which when you move the decimal two places, is an expense ratio of 0.81% or 8 tenths of 1 %, which is known as 81 bps (basis points). If you add that to your 1.35% annual advisor fee you’re paying total expenses of 2.16% per year! :shock:

That's definitely more than what you'd pay for VG's TD 2045 fund (0.16%) in an IRA and if you choose personal advisory (0.30%) which would total 0.46% or 46 basis points (between 4 and 5 tenths of 1 percent total). You're paying 4.69 times as much as you would with Vanguard. Will you get 4.69 times as much benefit? Doubtful.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

User avatar
oldcomputerguy
Posts: 3459
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by oldcomputerguy » Sun Oct 21, 2018 12:45 pm

Lafder wrote:
Sun Oct 21, 2018 12:32 pm
Note some Target Date retirement funds from other companies are much more complex in their holdings so always look up what an all in one fund contains.
This is a very good point. For example, Fidelity offers some target-date funds, in two versions, index and non-index. The index versions are pretty simple, but the non-index funds are incredibly complicated.

For example, Fidelity Freedom 2045 Fund (FFFGX), ER 0.75%, contains the following astounding list of holdings:
Fidelity Series Intrinsic Opportunities Fund 9.97%
Fidelity Series Large Cap Stock Fund 9.15%
Fidelity Series Growth Company Fund 8.72%
Fidelity Series Stock Selector Large Cap Value Fund 6.79%
Fidelity Series Value Discovery Fund 4.80%
Fidelity Series Opportunistic Insights Fund 4.65%
Fidelity Series Blue Chip Growth Fund 4.31%
Fidelity Series Small Cap Opportunities Fund 3.76%
Fidelity Series All-Sector Equity Fund 3.47%
Fidelity Series Large Cap Value Index Fund 2.51%
Fidelity Series Small Cap Discovery Fund 1.15%
Fidelity Series Commodity Strategy Fund 2.11%
Fidelity Series International Value Fund 9.10%
Fidelity Series International Growth Fund 8.91%
Fidelity Series International Small Cap Fund 2.15%
Fidelity Series Canada Fund 0.90%
Fidelity Series Emerging Markets Opportunities Fund 8.53%
Fidelity Series Emerging Markets Fund 0.51%
MSCI EMGMKT FUT DEC18 MESZ8 0.44%
Fidelity Series Investment Grade Bond Fund 0.44%
Long-Term U.S. Treasuries 3.46%
Fidelity Series Long-Term Treasury Bond Index Fund 3.46%
Fidelity Series Inflation-Protected Bond Index Fund 0.52%
Fidelity Series High Income Fund 1.30%
Fidelity Series Floating Rate High Income Fund 0.22%
Fidelity Series International Credit Fund 0.04%
Fidelity Series Emerging Markets Debt Fund 0.59%
Fidelity Series Real Estate Income Fund 0.43%
Fidelity Series Government Money Market Fund 1.03%
Fidelity Series Short-Term Credit Fund 0.29%
Fidelity Cash Central Fund 0.16%
UST BILLS 0% 11/29/18 0.04%
USTBILL 0% 12/06/18 0.03%
UST BILLS 0% 11/23/18 0.00%
while the index version, Fidelity Freedom Index 2045 Fund (FIOFX), ER 0.14%, contains just this:
Fidelity Total Market Index Fund - Class F 63.06%
Fidelity Series Global ex U.S. Index Fund 27.07%
Fidelity U.S. Bond Index Fund - Class F 6.96%
Fidelity Series Long-Term Treasury Bond Index Fund 2.90%
Fidelity Cash Central Fund -0.01%
I know which I'd rather invest in.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

Wakefield1
Posts: 857
Joined: Mon Nov 14, 2016 10:10 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Wakefield1 » Sun Oct 21, 2018 12:58 pm

Comparing the return over the last few months or so between various mutual funds is interesting but can be not only like comparing apples and oranges but comparing to watermelons!
Probably not of much use in comparing different fund houses unless you compare funds with similar missions and asset mixes.
How do 10 year records of the various funds and groups of funds compare?
How about comparing that complex portfolio with plain old Wellington and/or Wellesley Fund (Vanguard)
or even a straight dose of T.Rowe Price Capitol Appreciation Fund? (bought without an advisor charging a percentage per year) --still apples and--watermelons?
would comparing with VGHAX (Vanguard's managed healthcare fund) -be like throwing in a Lamborghini? (might be expensive if something goes wrong but what performance!)

moehoward
Posts: 209
Joined: Mon Mar 05, 2018 10:16 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by moehoward » Sun Oct 21, 2018 3:16 pm

CashedOut wrote:
Sun Oct 21, 2018 10:46 am
arcticpineapplecorp. wrote:
Sat Oct 20, 2018 10:16 pm
CashedOut wrote:
Sat Oct 20, 2018 9:06 pm
Dottie57 wrote:
Sat Oct 20, 2018 2:28 pm
What funds are you invested in?
Here are the funds:

BARON SMALL CAP CL I BSFIX 1.05%
CHAMPLAIN MID CAP CL I CIPIX 0.93%
COLUMBIA SELECT LARGE CAP GROWTH CL I3 CCWRX 0.71%
EDGEWOOD GROWTH CL I EGFIX 1.9%
FRANKLIN DYNATECH CL R6 FDTRX 0.51%
HARTFORD STRATEGIC INCOME CL F HSNFX 0.60%
JOHN HANCOCK INTERNATIONAL GROWTH CL R6 JIGTX 0.89%
JPMORGAN SMALL CAP GROWTH CL R6 JGSMX 0.81%
PGIM SHORT TERM CORPORATE BOND CL R6 PSTQX 0.42%
T ROWE PRICE LARGE-CAP GROWTH CL INSTL TRLGX 0.56%
T ROWE PRICE U.S. TREASURY MONEY CL I TRGXX 0.30%
we don't know the overall expenses because we don't know the percentages you have in each of the funds above. However, I did a quick search of all the tickers above and put the net expense ratios in red. Are you getting some kind of special pricing? Because I don't see a single fund you listed that is 0.20% or less. You said the average expense ratio is 0.20%. The cheapest fund is the last one (treausry, t.rowe price) and it's more than 0.20% (at .30%). So how are your total expenses 0.20% when there's not a single fund above that is that cheap?

I would like to hear your (or your advisor's) explanation of that one.
WOW :shock:

I'm not getting any special pricing that I'm aware of. I will definitely be discussing this with my EJ advisor! Thank you so much for the info!
Discussing with your advisor? He is ready for you and has all the answers. You should be doing your own homework and then talking to your EJ advisor. You only need two words. I'm leaving or I'm staying.

suemarkp
Posts: 57
Joined: Sun Nov 12, 2017 8:18 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by suemarkp » Sun Oct 21, 2018 4:11 pm

And don't think your Vanguard lifecycle funds sucks. My very large company 401K uses some custom funds or funds managed by others. Its 2045 Target Date fund is down 1.39% this year (its worse than yours). It is managed by Blackrock with an ER of .39% (so my fee is higher than Vanguard's too).

The company lifecycle retired fund is down 1.13%, the general balanced fund is down 2.24%, and the bond fund down 2.4%. But the S&P 500 fund is up 5.08%, Russell 2000 up 1.38%, and the stable value fund is up 2.16%. All of the above funds, except for the bond fund, have a higher return if you look back 12 months (the 2045 fund is positive at 1.86%).

So short windows can mean a loss when looking at returns. Edward Jones moves things around to try and time the market. Maybe it works, maybe it doesn't. I have some money there since my wife put her IRA there a long time ago. I want to see what happens during a larger downturn to see if they can market time around it, or if they lose worse than the low cost Vanguard 3-fund choices. I didn't start looking into her EJ funds into 2012, so I don't know what happened during 2008/2009 and she didn't save statements. I think it is easier to see the upward trends, its the down turn that happens so fast you usually can't get out without a big haircut (at least in stock funds). Most see those as more of a buying opportunity in many funds when it happens.

Even though market timing is taboo around here, I think you can see momentum and trends. Personally, I would be reducing exposure to international stocks right now, and that's a problem with many target date funds as they keep more in international than I like (at least with recent international performance). I'd also be wary of long term bond funds right now. But who knows, maybe international and bonds will rally in a few years, so buying it now is buying low.
Mark | Kent, WA

User avatar
arcticpineapplecorp.
Posts: 3368
Joined: Tue Mar 06, 2012 9:22 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by arcticpineapplecorp. » Sun Oct 21, 2018 5:38 pm

suemarkp wrote:
Sun Oct 21, 2018 4:11 pm
Even though market timing is taboo around here, I think you can see momentum and trends.
Sure and Yale Economist Irving Fisher said nine days before the crash on Wall Street (starting 10/24/1929):

“Stock prices have reached what looks like a permanently high plateau,”

source: https://www.google.com/search?client=fi ... N62MvZav8Q
The stock market crash of 1929 and the subsequent Great Depression cost Fisher much of his personal wealth and academic reputation. He famously predicted, nine days before the crash, that stock prices had "reached what looks like a permanently high plateau."[24] Irving Fisher stated on October 21 that the market was "only shaking out of the lunatic fringe" and went on to explain why he felt the prices still had not caught up with their real value and should go much higher. On Wednesday, October 23, he announced in a banker's meeting "security values in most instances were not inflated." For months after the Crash, he continued to assure investors that a recovery was just around the corner. Once the Great Depression was in full force, he did warn that the ongoing drastic deflation was the cause of the disastrous cascading insolvencies then plaguing the American economy because deflation increased the real value of debts fixed in dollar terms. Fisher was so discredited by his 1929 pronouncements and by the failure of a firm he had started that few people took notice of his "debt-deflation" analysis of the Depression
source: https://en.wikipedia.org/wiki/Irving_Fisher
And "economists have predicted 9 of the last 5 recessions" -- Paul Samuelson
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

User avatar
StormShadow
Posts: 599
Joined: Thu Feb 09, 2012 6:20 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by StormShadow » Sun Oct 21, 2018 5:58 pm

CashedOut wrote:
Sun Oct 21, 2018 11:34 am
I will be discussing with my EJ advisor this week the ER fee discrepancy many of you have brought to my attention. Thank you for that! I will let you know what he says. This will dictate what I do with the EJ investments.
Oh, please let us know what sweet nothings he whispers into your ear about Edward Jones. I would really like to hear what they have to say about us.

You should know that the only legitimate training EJ advisors have is in marketing. Basically, how to convince you to stay with them.

inbox788
Posts: 5668
Joined: Thu Mar 15, 2012 5:24 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by inbox788 » Sun Oct 21, 2018 8:14 pm

Do you have longer time performance, say 5 years?

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

I suspect and expect that if you look back 5 years or keep this and go forward 5 years, you won't do so well. Also, there seems to be more small cap/mid cap, growth and tech stocks in the mix and fewer international stocks. You might want to compare to these benchmarks. And it's quite possible if not likely that in the next downturn, many of these will fall more than the market as they have done in the past.

As far as the fees, do you have it backwards? The fund fees are continuously taken out of the investments, so you won't see it on your statement. Is there a separate 0.20 management fee on top of the fund fees?

User avatar
Taylor Larimore
Advisory Board
Posts: 27529
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Taylor Larimore » Sun Oct 21, 2018 8:44 pm

Cashed Out:

As I wrote earlier, I would like to know approximately how long you have held each of your listed funds? There is evidence of "churning" (selling low and buying high to increase compensation) .

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

pkcrafter
Posts: 13107
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by pkcrafter » Sun Oct 21, 2018 9:06 pm

Hate to say it, but the reality is EJ advisors are trained far more in schmoozing then looking out for customer's welfare. Talking to this guy is a complete waste of 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.

User avatar
whodidntante
Posts: 4202
Joined: Thu Jan 21, 2016 11:11 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by whodidntante » Sun Oct 21, 2018 9:13 pm

At a glance, it appears the funds have a growth tilt and tech tilt, and your fixed income is tilted to low duration. That has been a pretty good setup for YTD performance. The question is whether this happened via luck or skill, and if it's skill, will it be persistent and reliable and meaningful enough to overcome the scandalous fees you are paying. I'm guessing not. But you can drive down to the strip mall and ask your adviser to convince you.

AlphaLess
Posts: 878
Joined: Fri Sep 29, 2017 11:38 pm
Location: Kentucky
Contact:

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by AlphaLess » Sun Oct 21, 2018 9:43 pm

Rwsawbones wrote:
Sat Oct 20, 2018 10:06 pm
I have no experience with firm in this posting but i am a geriatrician which means I have a lot of widows as patients. People often ask doctors about legal and financial matters. I warn them that doctors don’t know much about such matters and even worse we sound like we do. I have noticed that they often pay 50 to 200 bps (typically 100 bps) just for the advice. Some of these widows have significant assets but need to live on them for some time. They do not consider that with one million which should net them about 40k per year after fees net them less than 30k The advisor and firm net 1/3 or more the funds per year. $10,000 per year per million for only a few hours work per year is my idea of elder abuse. Young Women (and girls) May suffer physical abuse. In middle and old age they may suffer elder financial abuse. I do not know which is worse, often the same person suffers both. They suffer the financial abuse because often very intelligent well educated women (sometimes also men) feel that simple finance is beyond their capabilities. None of this is news to Bogleheads. Physical abuse raises our indignation. We need a #metoo movement for our elders usually women. As individuals we need to involve our significant others in finance before it is too late. My wife does not like dealing with investment but does find the 10k plus cost per million motivating. Many of her widowed friends do suffer this abuse.
Excellent post. Thank you for bringing up this important problem.
"You can get more with a kind word and a gun than with just a kind word." George Washington

sco
Posts: 810
Joined: Thu Sep 24, 2015 2:28 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by sco » Sun Oct 21, 2018 10:26 pm

What is the purpose of discussing anything with the EJ rep?

Do you expect to get a clear/concise answer? you won't, if you eventually get to the truth it will be after countless hours and you won't want to stay with EJ.

Do you expect him to put you in something that is in your best interest? Even if he could do this by picking funds in your best interests, in a simple portfolio (he can't), then there is that 1.35% fee he has to charge. That eats into your portfolio every year, whether you have gains or not.

The final outcome is either you stay and are OK with the high fees, or you leave. Neither is going to be made more clear by any discussion with him. They have these discussions all the time and it is a fair amount of their training.

shess
Posts: 46
Joined: Wed May 17, 2017 12:02 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by shess » Mon Oct 22, 2018 1:44 am

Chris001122 wrote:
Sun Oct 21, 2018 8:07 am
So, with my dad at age 65, this Edward Jones advisor was suggesting my dad go into 80% stocks and 20% bonds. I successfully convinced my dad to avoid this situation and he didn't give his entire nest egg to this man and his company. A few years later, my dad did put some money with this guy, wisely not asking me, and now my dad gets his little monthly stipend that he feels okay to spend 100% of.

Does it make sense to me? No. But he's my dad, I love him, I think he is making a mistake. But it's his money and I wish him well. It's not my money until he decides to will it to me.
My grandmother, who was opinionated, was courted by the local EJ guy for years. Eventually she capitulated and shifted some funds to him - literally because he just kept working on selling to her (and I'm sure he was super solicitous the entire time). That's what the enhanced ER pays for...

shess
Posts: 46
Joined: Wed May 17, 2017 12:02 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by shess » Mon Oct 22, 2018 2:06 am

CashedOut wrote:
Sat Oct 20, 2018 1:37 pm
Are there Vanguard funds that are easy to select that would have yielded me returns similar to my EJ account for the year so far? I have no problem paying more in fees if I'm getting a substantially better returns.
"I'd be happy to pay more for better returns" is an insidious investing issue. It makes so much sense! But that's not really how it works. The easiest way to make money in the stock market is to take a cut of managing other people's money. I'm not even being facetious. If I could generate a reliable 2% incremental return over the market, I could easily turn that into millions of dollars in a decade or so, and I can guarantee you that I would not be sharing my insights with you. The only reason I would share those insights is if I thought I could make more money charging you access to those insights than I could by using them directly. This is the basic genesis of the saying "Where are the customer's yachts?"

Unfortunately, it's often really hard to argue the passive case, because "just chill out" simply doesn't feel right, while doing things _does_ feel right. I spent 15 years doing pretty intensive research about investing and being a pretty active investor before I converted to a thoroughly passive system. I knew the theory of passive indexing long before I committed to it, I just wasn't willing to grant that my effort (and obviously superior intelligence!) wouldn't lead to clear gains. It's been ~13 years since I converted, and I honestly can't say that I can point to any downside to it. AFAICT, my returns over time have stayed pretty stable, it's just that I spend less time screwing around with my portfolio, so everything is less stressful. I still have to routinely talk myself down from applying heroic strategies, I suspect I'll probably always have to keep a brake on my active-investor tendencies.

IMHO, you really have to go with what you're comfortable with. I'd say do some reading (for instance, Bernstein's "Four Pillars" and "Intelligent Asset Allocator" worked really well for me), and invest some portion of your portfolio (such as your 401k) in passive/lazy Vanguard investments. Learn to calculate your own returns, and compare how your sub-portfolios do. If you're getting different numbers than someone else reports to you, figure out why, either you made a mistake you can learn from, or they're biasing things and you can learn from that. Even if a part of your portfolio has slightly better returns, make sure that those returns are justified - if it requires consistent perpetual twiddling, that is strictly more risky than set-and-forget. Is the twiddling worthwhile after you back out the risk and the time spent? Try to learn to see through to why things are the way they are. There are 9500 mutual funds in America, how could that possibly make sense? If one (or twenty) of them really knew what they were doing, why the heck are the other 9480 still around?

lostdog
Posts: 1251
Joined: Thu Feb 04, 2016 2:15 pm

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by lostdog » Mon Oct 22, 2018 8:26 am

You're dealing with a salesman. When you bring this up to him and his lips start moving, get ready for the biggest BS answer ever.

Make the move without his assistance. He will most likely stall the process as long as possible so he can collect more fees. Have Vanguard call EJ to get the process rolling.

Cody
Posts: 888
Joined: Sun Dec 02, 2007 9:19 am
Location: Stillwater, Mn

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by Cody » Mon Oct 22, 2018 9:30 am

If total transparency is what you want EJ simply can not deliver.

Think of it this way - not what can he say to you but what can he actually do for you.

It will be difficult for him to reduce these fees. And hours to explain them.

Before you go in (which I'm not sure you should based on the above but....) have a very clear path set out on what you need from him that will satisfy you (set a standard). If he does not meet that standard call Vanguard as suggested and they will hold your hand to move all the funds out of EJ.

Cody

shess
Posts: 46
Joined: Wed May 17, 2017 12:02 am

Re: My Edward Jones IRA is out performing my Vanguard 401K

Post by shess » Mon Oct 22, 2018 10:00 am

Cody wrote:
Mon Oct 22, 2018 9:30 am
If total transparency is what you want EJ simply can not deliver.

Think of it this way - not what can he say to you but what can he actually do for you.

It will be difficult for him to reduce these fees. And hours to explain them.

Before you go in (which I'm not sure you should based on the above but....) have a very clear path set out on what you need from him that will satisfy you (set a standard). If he does not meet that standard call Vanguard as suggested and they will hold your hand to move all the funds out of EJ.
Something I think is important to keep in mind is that these brokers are often like real-estate agents - often, it's not so much that they're legit con-men, it's just that they have no idea what they are doing wrong. They've taken many hours of training, and it is intentionally setup to be hard enough to weed people out because the industry doesn't need an excess of brokers. So often the brokers believe they have spent a lot of time and effort learning to help you, and their brokerage spends a lot of time and effort convincing them of this, so they are legitimately unclear on why you'd not want to use these services. Even in some of the more cynical areas of the industry, there are a lot of people who look down on the customers but still don't really understand the problems they are causing.

That doesn't mean they are doing a good job managing your money, mind you. It just means that it can be a very challenging situation socially. In fact, they've probably had specific training courses on how to handle people who heard about passive indexing and want to switch out.

Post Reply