34yo, baby on way, leaving expensive financial advisor... Please Help!

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 11:37 am

Hi All and thanks in advance for any advice!

I have taken a hands off approach to investing for years, simply contributing to fidelity account run by family financial advisor. With a pregnant wife, a fatherly instinct has kicked in and I am determined to take control of financial situation. I discovered I was paying financial advisor 1.75%. After reading up on John Bogle and Three Fund Potfolio, I decided to leave financial advisor-- simplify portfolio and dig in for the next 35 years.

I told FA I was leaving and I was ready to liquidate the positions in my Fidelity account when he got in my ear about keeping the profitable positions (AAPL, QQQ, SPY, VIMSX) as to not suffer 9K in capitol gains. I really want to simply this portfolio into 3 (or maybe 4) fund portfolio but am now worried I bit off more than I can chew.

Here is current account and Total Gain/Loss:

TRADITIONAL IRA
BARAX (Baron Asset) +$1,882
NBGNX (Neuberger Berman Genesis Investors CL) -$147
PARMX (Parnassus Mid Cap) +$570
RYTRX (Royce Total Return FD Investment CL) -$862
TBGVX (Tweedy Browne Global Value Fund) +374

INDIVIDUAL
AAPL (Apple Com) +$10,864
BIG (Big Lots Inc) -$3,208
CNX (CNX Resources) -$852
FRD (Friedman Inds) -$1170
GLW (Corning) +$6,168
NBGNX (Neuberger Berman Genisis Investors CL) +$463
QQQ (Invesco QQQ Trust unit series 1) +$15,758
RYTRX (Royce Total Return FD Investment CL) -$2,039
SPY (SPDR S&P500 ETF Trust USD DIS) +$5,664
TPH (Tri Pointe Group Inc) +$263
VIMSX (Vanguard Mid Cap Index Investor CL) +$3,690

I suppose my questions are:
Is it worth taking the tax hit and liquidating all now to setting up simple to manage and balance 3 fund? Is FA right that I should hold the profitable positions for now?

Any advice is GREATLY appreciated. Thank you friends.

buhlaxtus
Posts: 122
Joined: Wed Apr 20, 2016 1:55 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by buhlaxtus » Tue Jul 09, 2019 12:20 pm

How big is your portfolio, and what is your tax bracket? You could try to micro-optimize this decision, but with only 9k of capital gains it's probably not worth the effort. Myself, I would just make the switch and pay the tax bill, have it over with. Your taxable investments have a lot of unnecessary single-stock or sector risk.

Frank Grimes
Posts: 176
Joined: Tue Mar 07, 2017 10:54 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Frank Grimes » Tue Jul 09, 2019 12:30 pm

If you're intending to set up a three fund portfolio (total stock, total international, total bond), SPY and VIMSX are not entirely incompatible with that so I maybe would not rush to dump them. That combination is not exactly the same as total stock market but it's close enough that I might keep it.

HomeStretch
Posts: 3499
Joined: Thu Dec 27, 2018 3:06 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by HomeStretch » Tue Jul 09, 2019 12:37 pm

Have you taken the first step of moving away from the advisor so you can end the 1.75% advisor fee?

You can decide after whether/when to change your current taxable holdings in your self-managed account at Fidelity.

ETA: the tax on $9k of capital gains seems small enough to make the change now in order to move to your desired portfolio.

User avatar
FelixTheCat
Posts: 1692
Joined: Sat Sep 24, 2011 12:39 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by FelixTheCat » Tue Jul 09, 2019 12:43 pm

Take a look at Tax Loss Harvesting https://www.bogleheads.org/wiki/Tax_loss_harvesting You have $7,269 in losses that can offset some capital gains for 2019.

Here's the three fund portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio

Make sure your portfolio is tax efficient https://www.bogleheads.org/wiki/Tax-eff ... _placement
Felix is a wonderful, wonderful cat.

BarbBrooklyn
Posts: 593
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by BarbBrooklyn » Tue Jul 09, 2019 12:46 pm

Deleted.
Last edited by BarbBrooklyn on Tue Jul 09, 2019 3:01 pm, edited 1 time in total.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

CurlyDave
Posts: 1442
Joined: Thu Jul 28, 2016 11:37 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by CurlyDave » Tue Jul 09, 2019 12:53 pm

DearFam4Life wrote:
Tue Jul 09, 2019 11:37 am

...INDIVIDUAL
AAPL (Apple Com) +$10,864
BIG (Big Lots Inc) -$3,208
CNX (CNX Resources) -$852
FRD (Friedman Inds) -$1170
GLW (Corning) +$6,168
NBGNX (Neuberger Berman Genisis Investors CL) +$463
QQQ (Invesco QQQ Trust unit series 1) +$15,758
RYTRX (Royce Total Return FD Investment CL) -$2,039
SPY (SPDR S&P500 ETF Trust USD DIS) +$5,664
TPH (Tri Pointe Group Inc) +$263
VIMSX (Vanguard Mid Cap Index Investor CL) +$3,690

I suppose my questions are:
Is it worth taking the tax hit and liquidating all now to setting up simple to manage and balance 3 fund? Is FA right that I should hold the profitable positions for now?

Any advice is GREATLY appreciated. Thank you friends.
I see $42k of capital gain in this list, a lot more than the $9k stated.

I would transfer everything to another brokerage as shares, not by selling and transferring money. Then get back to us on what the gains and losses really are. Also, if these holdings are in taxable accounts, get the cost basis from the brokerage you are leaving BEFORE you make the transfer.

MarkVH0518
Posts: 73
Joined: Tue Dec 13, 2016 2:14 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by MarkVH0518 » Tue Jul 09, 2019 1:00 pm

Given that you have a beginner's understanding of the 3-Fund portfolio, here's how I suggest starting:

1) Drop the adviser and 1.75% fee.
Given that your investments are as Fidelity, there's no reason to find another brokerage.
Call Fidelity and remove the adviser as the account's authorized trader
(Fidelity may have other names for this function; I'm not sure. I've done this for a brother-in-law at another brokerage)

2) Concurrently with the next few steps determine your desired asset allocation.
I'll propose 2 as outer boundaries:
60% US stocks/40% bonds - probably too conservative for you.
60% US stocks/30% international stocks/10% bonds - many 35yo have portfolio; it's similar to most target retirement funds for your age
Or choose something in between.
I only checked a few of your funds; they seem to be stock funds.
If your current portfolio is 100% stocks then even the aggressive 60/30/10 portfolio is less risky than yours.

3) Order your funds in expense ratio order, from most expensive to least expensive.
3a) Sell the most expensive fund in the IRA first: no tax implications -> no brainer
For replacements, use the funds here:
https://www.bogleheads.org/wiki/Three-fund_portfolio
If you keep your account at Fidelity then either use the Fidelity mutual funds or the Blackrock iShares ETFs.
Both of these trade free at Fidelity
3b) Sell, in the taxable account, expensive funds with gains and sell individual stocks with offsetting losses.
And vice versa.
If you keep the losses and gains somewhat in sync, then the tax implications will offset.

4) Take a big breath you've accomplished a lot.

5) Due to potential tax implications, consider how and when to to the following;
5a) Sell any remaining expensive funds. Don't let the tax tail wag the expense ratio dog.
5b) Sell any remaining individual stocks. Don't let the tax tail wag the risk dog.

6) At your leisure sell a few leftovers (or maybe never):
QQQ, VIMSX
SPY qualifies as a 3-fund portfolio domestic stock. Total domestic markets funds are preferable, but this works.
I wouldn't buy more of it, but no need to sell it either.

You can get to step 5 without thinking too hard. Step 5 *may* require some thought,
but if you reach that point you've already made tremendous progress.

Good luck
Mark

Cody
Posts: 968
Joined: Sun Dec 02, 2007 9:19 am
Location: Stillwater, Mn

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Cody » Tue Jul 09, 2019 1:02 pm

Just out of curiousity how did you determine that your advisor was taking 1.75%?

Good luck

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 1:50 pm

MarkVH0518 wrote:
Tue Jul 09, 2019 1:00 pm
Given that you have a beginner's understanding of the 3-Fund portfolio, here's how I suggest starting:

1) Drop the adviser and 1.75% fee.
Given that your investments are as Fidelity, there's no reason to find another brokerage.
Call Fidelity and remove the adviser as the account's authorized trader
(Fidelity may have other names for this function; I'm not sure. I've done this for a brother-in-law at another brokerage)

2) Concurrently with the next few steps determine your desired asset allocation.
I'll propose 2 as outer boundaries:
60% US stocks/40% bonds - probably too conservative for you.
60% US stocks/30% international stocks/10% bonds - many 35yo have portfolio; it's similar to most target retirement funds for your age
Or choose something in between.
I only checked a few of your funds; they seem to be stock funds.
If your current portfolio is 100% stocks then even the aggressive 60/30/10 portfolio is less risky than yours.

3) Order your funds in expense ratio order, from most expensive to least expensive.
3a) Sell the most expensive fund in the IRA first: no tax implications -> no brainer
For replacements, use the funds here:
https://www.bogleheads.org/wiki/Three-fund_portfolio
If you keep your account at Fidelity then either use the Fidelity mutual funds or the Blackrock iShares ETFs.
Both of these trade free at Fidelity
3b) Sell, in the taxable account, expensive funds with gains and sell individual stocks with offsetting losses.
And vice versa.
If you keep the losses and gains somewhat in sync, then the tax implications will offset.

4) Take a big breath you've accomplished a lot.

5) Due to potential tax implications, consider how and when to to the following;
5a) Sell any remaining expensive funds. Don't let the tax tail wag the expense ratio dog.
5b) Sell any remaining individual stocks. Don't let the tax tail wag the risk dog.

6) At your leisure sell a few leftovers (or maybe never):
QQQ, VIMSX
SPY qualifies as a 3-fund portfolio domestic stock. Total domestic markets funds are preferable, but this works.
I wouldn't buy more of it, but no need to sell it either.

You can get to step 5 without thinking too hard. Step 5 *may* require some thought,
but if you reach that point you've already made tremendous progress.

Good luck
Mark
Mark,

I am tremendously thankful for this clear path forward and your words of encouragement!

All the best,
Mike

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 1:55 pm

Cody wrote:
Tue Jul 09, 2019 1:02 pm
Just out of curiousity how did you determine that your advisor was taking 1.75%?

Good luck
Cody,

Very simply-- I looked at the statements and did the math. It was easy for me to simply close my eyes for many year, hand him money, and "hope" everything was under control. I learned a good life lesson-- Do your homework and ask questions. No need to be afraid of the "experts"

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 1:59 pm

[/quote]

I see $42k of capital gain in this list, a lot more than the $9k stated.

I would transfer everything to another brokerage as shares, not by selling and transferring money. Then get back to us on what the gains and losses really are. Also, if these holdings are in taxable accounts, get the cost basis from the brokerage you are leaving BEFORE you make the transfer.
[/quote]

CurlyDave,
You are right. Sorry all for the lack of clarity. I was told that if they sell out the whole account at Fidelity I would see approximately a $9,000 Capital gain income tax. There is approximately $33,000 of unrealized capital gains in the account that would become taxable if sold.

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 2:07 pm

FelixTheCat wrote:
Tue Jul 09, 2019 12:43 pm
Take a look at Tax Loss Harvesting https://www.bogleheads.org/wiki/Tax_loss_harvesting You have $7,269 in losses that can offset some capital gains for 2019.

Here's the three fund portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio

Make sure your portfolio is tax efficient https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thanks for the Info Felix.


And to all who responded, thank you for your wisdom. I am blown away by the bogleheads community!

HomeStretch
Posts: 3499
Joined: Thu Dec 27, 2018 3:06 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by HomeStretch » Tue Jul 09, 2019 2:21 pm

DearFam4Life wrote:
Tue Jul 09, 2019 1:59 pm
I see $42k of capital gain in this list, a lot more than the $9k stated.

I would transfer everything to another brokerage as shares, not by selling and transferring money. Then get back to us on what the gains and losses really are. Also, if these holdings are in taxable accounts, get the cost basis from the brokerage you are leaving BEFORE you make the transfer.
[/quote]

CurlyDave,
You are right. Sorry all for the lack of clarity. I was told that if they sell out the whole account at Fidelity I would see approximately a $9,000 Capital gain income tax. There is approximately $33,000 of unrealized capital gains in the account that would become taxable if sold.
[/quote]

You have 11 holdings in the taxable account. You can immediately sell the 7 holdings with capital losses and the lowest capital gains as the gains and losses will almost completely offset each other so very little tax due. Reinvest the proceeds in the new funds you do want.

For the remaining 4, turn off dividend reinvestment so you don’t buy more. Reinvest the dividends paid into your settlement account in the new funds you do want. Then you have time to figure out how best to divest of the remaining 4 funds.

jibantik
Posts: 225
Joined: Fri Nov 24, 2017 1:05 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by jibantik » Tue Jul 09, 2019 2:52 pm

Just want to say congratulations to OP. By dropping your advisor who charges insane fees, you will be saving around 50% of your total lifetime returns. Best decision you will ever make :sharebeer

Image

(taken from here)

MarkVH0518
Posts: 73
Joined: Tue Dec 13, 2016 2:14 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by MarkVH0518 » Tue Jul 09, 2019 3:04 pm

FelixTheCat wrote:
Tue Jul 09, 2019 12:43 pm
Take a look at Tax Loss Harvesting https://www.bogleheads.org/wiki/Tax_loss_harvesting You have $7,269 in losses that can offset some capital gains for 2019.

Here's the three fund portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio

Make sure your portfolio is tax efficient https://www.bogleheads.org/wiki/Tax-eff ... _placement
The tax efficiency advice in the wiki is so complicated, but it can be greatly simplified in the OP's case with
self-directed brokerage accounts invested in the 3-fund portfolio at Fidelity.
1) All bonds go into the IRA.
2) All international funds go into the taxable account

If your bond allocation exceeds the value of the IRA (unlikely, but possible), then naturally the rest of the bonds will be in taxable accounts.
If your international allocation exceed that value of the taxable account (again, unlikely in the OP's situation), then the
rest of the international allocation will be in IRA accounts.

Roth accounts, when you get them, will contain the assets with the most upside potential.
In the 3-fund portfolio case, that means domestic stocks and international stocks, in that order.

In my view, the only instance where this advice should not be applied is when the tax-deferred (usually bad 401k's) bond funds are expensive.
Expensive bond funds are to be avoided, but otherwise this is the tax efficient allocation.
Fidelity has very inexpensive bond funds, so this concern doesn't apply.

Mark

snailderby
Posts: 688
Joined: Thu Jul 26, 2018 11:30 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by snailderby » Tue Jul 09, 2019 3:12 pm

Welcome to the forum, Mike, and congratulations on the baby on the way!

Other posters have already contributed helpful advice. The only thing I would add is to read up on the difference between short-term capital gains and long-term capital gains, if you haven't already, assuming that you have significant gains that you can't offset with losses in the same year. See https://www.investopedia.com/articles/p ... -rates.asp.
Last edited by snailderby on Fri Jul 12, 2019 1:37 pm, edited 1 time in total.

User avatar
Duckie
Posts: 7001
Joined: Thu Mar 08, 2007 2:55 pm
Location: California Bay Area

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Duckie » Tue Jul 09, 2019 6:20 pm

DearFam4Life wrote:Here is current account and Total Gain/Loss:

TRADITIONAL IRA
Gains/losses don't matter in a tax-sheltered account. It all comes out as ordinary income.
Is it worth taking the tax hit and liquidating all now to setting up simple to manage and balance 3 fund?
No.
Is FA right that I should hold the profitable positions for now?
Yes. If you sell BIG, CNX, FRD, and RYTRX for a $7269 loss and then sell GLW, NBGNX, and TPH for a $6894 gain you'd have reduced the account by seven equities leaving only four to deal with later (AAPL, QQQ, SPY, and VIMSX).

I recommend that you:
  • Drop the advisor but stay at Fidelity.
  • Immediately sell the seven equities in taxable.
  • Turn off automatic dividend reinvestment for the equities you keep so you don't buy more.
  • Sell everything in your TIRA.
Do you have an employer plan like a 401k? If so, what are the options? We look at the entire portfolio when advising on assets.

togb
Posts: 212
Joined: Mon Oct 23, 2017 8:36 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by togb » Tue Jul 09, 2019 7:53 pm

you've gotten a lot of good advice already.

For your tIRA, you can sell there without triggering taxes on gains-- but honestly you are not doing very well with those investments. I'd dump them all, and get 2-3 better funds. You are young enough to be aggressive, but get low cost index funds.

In your taxable, you have some big winners, and some losers that will offset part of those gains. The only one I'd keep in that bunch is SPY, but that's just me. Sell your losers, and then sell some of the winners to a point you're willing to pay the LTCG. Consider donating enough shares with the biggest gain to a DAF, to avoid taxes and get a huge deduction that will cover the rest of your LTCGs.

If you want the 3 fund method, then get to it sooner than later. You'll fret til you do.

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 8:05 pm

Duckie wrote:
Tue Jul 09, 2019 6:20 pm
DearFam4Life wrote:Here is current account and Total Gain/Loss:

TRADITIONAL IRA
Gains/losses don't matter in a tax-sheltered account. It all comes out as ordinary income.
Is it worth taking the tax hit and liquidating all now to setting up simple to manage and balance 3 fund?
No.
Is FA right that I should hold the profitable positions for now?
Yes. If you sell BIG, CNX, FRD, and RYTRX for a $7269 loss and then sell GLW, NBGNX, and TPH for a $6894 gain you'd have reduced the account by seven equities leaving only four to deal with later (AAPL, QQQ, SPY, and VIMSX).

I recommend that you:
  • Drop the advisor but stay at Fidelity.
  • Immediately sell the seven equities in taxable.
  • Turn off automatic dividend reinvestment for the equities you keep so you don't buy more.
  • Sell everything in your TIRA.
Do you have an employer plan like a 401k? If so, what are the options? We look at the entire portfolio when advising on assets.
Thanks Duckie!

Only other investments we have is a very small joint account in Fidelity and my wife's 403(b) with TIAA.

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Tue Jul 09, 2019 8:10 pm

togb wrote:
Tue Jul 09, 2019 7:53 pm
you've gotten a lot of good advice already.

For your tIRA, you can sell there without triggering taxes on gains-- but honestly you are not doing very well with those investments. I'd dump them all, and get 2-3 better funds. You are young enough to be aggressive, but get low cost index funds.

In your taxable, you have some big winners, and some losers that will offset part of those gains. The only one I'd keep in that bunch is SPY, but that's just me. Sell your losers, and then sell some of the winners to a point you're willing to pay the LTCG. Consider donating enough shares with the biggest gain to a DAF, to avoid taxes and get a huge deduction that will cover the rest of your LTCGs.

If you want the 3 fund method, then get to it sooner than later. You'll fret til you do.
Will definitely look into that donation option-- Seems like a win/win. Thanks!

Strayshot
Posts: 607
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Strayshot » Tue Jul 09, 2019 8:52 pm

What kind of family would point someone to a criminal robbing them of 1.75% AUM? Wow. Or did you mean family in the mafia sense of the word?

Congrats on fatherhood kicking you in the pants and taking control of your finances. I can’t add much other than to remember to look at your asset allocation and investments holistically including the TIAA 403b. You will want to pay attention to where equities vs bonds are held in taxable vs tax-advantaged space.

User avatar
Watty
Posts: 18103
Joined: Wed Oct 10, 2007 3:55 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Watty » Tue Jul 09, 2019 9:19 pm

Just for clarification when you figure out the long term capital gains taxes be sure to do a dummy tax return to figure out what you actually will owe. There is a chance that you could be in some income range where the additional income will cause some sort of tax credit phase out and by doing a dummy tax return you can find that.

A few things;

The federal long term capital gains rate is 0% until a couple gets up to around $100K in taxable income.

You may also have state taxes that you will need to pay.

When the baby is born if you are planning on going down to one income for a year or two you may be able in a lower tax bracket so take that into account.

In addition to the Apple stock you directly own some of the mutual funds you own like QQQ also owns significant amounts of Apple stock so you have even more exposure to Apple. Just for diversification I would sell the Apple stock ASAP regardless of the capital gains taxes.
QQQ (Invesco QQQ Trust unit series 1) +$15,758
SPY (SPDR S&P500 ETF Trust USD DIS) +$5,664
VIMSX (Vanguard Mid Cap Index Investor CL) +$3,690
These might not be what you would buy today but they are OK and you can keep them and work your portfolio around them. Instead of a three fund portfolio you might end up with an equivalent 7 or 8 fund portfolio which is not much different and not that much harder to manage.
DearFam4Life wrote:
Tue Jul 09, 2019 11:37 am
Is it worth taking the tax hit and liquidating all now to setting up simple to manage and balance 3 fund?


When looking at the possible tax hit one thing to consider is that unless you can figure out a way to eventually sell them and not pay the taxes then you may only be delaying the taxes and not avoiding them.

There is also a risk that future tax rates will be higher and if that happens then you could eventually pay higher taxes if you delay selling them for a few years.

User avatar
BL
Posts: 9235
Joined: Sun Mar 01, 2009 2:28 pm

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by BL » Tue Jul 09, 2019 9:38 pm

I may have missed it but I didn't see anyone specifically mention that low-cost means low-ER (Expense Ratio). Anything below 0.20% might be considered low-ER. I think the Vanguard 3-funds are between 0.04 and 0.11% ERs.

Here is a Wiki page with suggestions for the low-ER 3 funds in Vanguard, Fidelity, and other brokerages:
https://www.bogleheads.org/wiki/Three-fund_portfolio

User avatar
Stinky
Posts: 2849
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Stinky » Wed Jul 10, 2019 8:45 am

togb wrote:
Tue Jul 09, 2019 7:53 pm

Consider donating enough shares with the biggest gain to a DAF, to avoid taxes and get a huge deduction that will cover the rest of your LTCGs.
Absolutely consider donating some of the appreciated shares in the taxable account to a Donor Advised Fund. I use Fidelity Charitable for that purpose, and am very happy with their services. No capital gains tax, income tax deduction - win/win.

And congratulations for moving away from the rip-off 1.75% financial advisor. That's one of the best decisions that you will ever make in your financial life.
It's a GREAT day to be alive - Travis Tritt

CurlyDave
Posts: 1442
Joined: Thu Jul 28, 2016 11:37 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by CurlyDave » Wed Jul 10, 2019 9:03 am

Duckie wrote:
Tue Jul 09, 2019 6:20 pm
DearFam4Life wrote:Here is current account and Total Gain/Loss:

TRADITIONAL IRA
Gains/losses don't matter in a tax-sheltered account. It all comes out as ordinary income.
Is it worth taking the tax hit and liquidating all now to setting up simple to manage and balance 3 fund?
No.
Is FA right that I should hold the profitable positions for now?
Yes. If you sell BIG, CNX, FRD, and RYTRX for a $7269 loss and then sell GLW, NBGNX, and TPH for a $6894 gain you'd have reduced the account by seven equities leaving only four to deal with later (AAPL, QQQ, SPY, and VIMSX).

I recommend that you:
  • Drop the advisor but stay at Fidelity.
  • Immediately sell the seven equities in taxable.
  • Turn off automatic dividend reinvestment for the equities you keep so you don't buy more.
  • Sell everything in your TIRA.
Do you have an employer plan like a 401k? If so, what are the options? We look at the entire portfolio when advising on assets.
+1

The performance of SPY is so close to Total Stock Market that I would not worry about any slight differences. So just consider that one a long-term holding.

Personally, I hold a lot of QQQ and over the past decade this has done significantly better than SPY. While it isn't exactly a real Boglehead holding, it isn't something I would be in a screaming hurry to sell. Keep it while you learn. VIMSX is similar.

AAPL is sort of an outlier. A fair number of people on this board hold AAPL, and I am one of them. Depending on your risk tolerance, it might not be an automatic sell. Others think that is like poison and should be avoided. Just hold it for now until you know more.

Topic Author
DearFam4Life
Posts: 8
Joined: Tue Jul 09, 2019 11:00 am

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by DearFam4Life » Fri Jul 12, 2019 9:36 am

UPDATE:

Following the much appreciated advice I have received so far, I have taken the following actions:
1) Removed FA from accounts
2) Sold all but QQQ, SPY, APPL and VMISX
3) Turned off reinvestment

Account stands as follows:

Traditional IRA- (14% of total)
Money Market $25,086.00

Individual- (86% of total)
Money Market/pending cash $84,415.00
AAPL $20,244.00
QQQ $19,223.00
SPY $8,961.00
VIMSX $16,353.00

TOTAL $174,282.00


In proceeding forward, do the following steps make sense for tax efficiency and AA for a 60/30/10?

1) Purchase $17,428.20 of iShares Core Total U.S. Bond Market ETF (AGG) in Traditional IRA.
2) Purchase $7,657.80 of iShares Core MSCI Total International Stock ETF (IXUS) in Traditional IRA.
3) Purchase $44,626.80 of iShares Core MSCI Total International Stock ETF (IXUS) in Individual (taxable).
4) Purchase $39,788.20 of iShares Core S&P Total Market ETF (ITOT) in Individual (taxable).
5) Keep $64,781.00 in (QQQ, SPY, VIMSX, AAPL) in Individual (taxable).

As I see it this would represent:

10% Bonds in tIRA
30% International (4.39% in tIRA and 25.61% in Individual)
60% Domestic in Individual (22.83% in new iShares and 37.17% kept with QQQ, SPY, VIMSX and AAPL)

Am I seeing this correctly?

The 2 pending questions (and 1 side question) I am not clear on are:
1) Since IRA holds 14% of total, does it make sense to fill with International? What would other option be?
2) Some have suggested selling APPL, other say keep. If I keep does it represent the domestic stock allocation as I have represented above? Is keeping it to much of a risk for domestic fluctuation in keeping with boglehead theory?
3) Side Note (and less pressing issue): I had not mentioned that I opened a Vanguard Roth IRA account a few months back, before I had found out about the Bogleheads, and invested $2200 in VFIF Vanguard Target Retirement 2050 Fund Investor Shares. Since I have everything over at Fidelity and would like to keep this as simple as possible, is it worth transferring the account to Fidelity? Is there another fund I should switch to in Vanguard to better balance the AA?


Again, thank you all in advance for you thoughts! I literally can't stop talking about the bogleheads to friends and family! :sharebeer

User avatar
Duckie
Posts: 7001
Joined: Thu Mar 08, 2007 2:55 pm
Location: California Bay Area

Re: 34yo, baby on way, leaving expensive financial advisor... Please Help!

Post by Duckie » Fri Jul 12, 2019 4:26 pm

DearFam4Life wrote:Following the much appreciated advice I have received so far, I have taken the following actions:
1) Removed FA from accounts
2) Sold all but QQQ, SPY, APPL and VMISX
3) Turned off reinvestment
Excellent.
In proceeding forward, do the following steps make sense for tax efficiency and AA for a 60/30/10?
<snip>
Am I seeing this correctly?
Mostly. You need to look at all your accounts when figuring out what to put where. You need to add in your wife's 403b with TIAA, your small joint account at Fidelity (if earmarked for retirement), and your Roth IRA.
Since IRA holds 14% of total, does it make sense to fill with International? What would other option be?
You want to put bonds in tax-sheltered accounts, preferably pre-tax. The TIRA is perfect for bonds. Her 403b may be good also.
Some have suggested selling APPL, other say keep. If I keep does it represent the domestic stock allocation as I have represented above?
It is a US stock so it does fit in that category.
Is keeping it to much of a risk for domestic fluctuation in keeping with boglehead theory?
It is risky. You need to decide how much you're willing to pay in taxes to reduce that risk. If you decide to sell, you don't need to sell it all at once.
I had not mentioned that I opened a Vanguard Roth IRA account a few months back, before I had found out about the Bogleheads, and invested $2200 in VFIF Vanguard Target Retirement 2050 Fund Investor Shares. Since I have everything over at Fidelity and would like to keep this as simple as possible, is it worth transferring the account to Fidelity?
Moving to Fidelity would make things easier.
Is there another fund I should switch to in Vanguard to better balance the AA?
Whether you stay at Vanguard or move to Fidelity you should put only stock index funds in a Roth IRA. At Vanguard that means VTSAX / VTI or VTIAX / VXUS. At Fidelity that means FSKAX / ITOT or FTIHX / IXUS.

Post Reply