Not happy with one FA allocation: PBRIX

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RetiredMike1
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Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Wed Jul 10, 2019 7:27 pm

Can somebody tell me if this is a good idea or bad idea?

I just retired 2 weeks ago, age 61. My wife and I hired a financial advisor last month because we want someone to help guide us. We think he is a smart guy, and not trying to [cheat us - moderator oldcomputerguy]. My wife plans to continue working for 4 more years, to get a better pension, and pay for our health insurance.

FA took my 401K ($1.2M) and moved it into 10 funds, mostly muni bonds, because we want to keep our risk low, maintain assets.

15% LDLFX Lord Abbett Short Duration Income Fund Class F
15% PBRIX Federated Prudent Bear Fund Institutional Shares
10% DRRIX BNY Mellon Global Real Return Fund - Class I
10% SETMX Columbia Intermediate Muni. Bond Fund Instit. Class
10% LUBFX Lord Abbett Ultra Short Bond Fund Class F
10% MEDIX MFS Emerging Markets Debt I
10% PONPIX PIMCO Income Fund Class I-2
9% PDBZX PGIM Total Return Bond Fund -Class Z
5% PRGMX T. Rowe Price GNMA Fund
5% JHBIX John Hancock Bond Fund Class I
1% cash

I'm ok with the bonds, but one choice throws up a red flag in my mind. He put $180k into a fund called Federated Prudent Bear Institutional, (PBRIX).
Looking at the history of this fund, it looks like it is losing money consistently every day, and has a crazy high ER, 3.27%. I asked FA about this fund, and he said that it's going to do well when the market goes badly. Its strategy is: Seeks capital appreciation primarily through short positions in domestically traded equity securities and indices.

Of course I realize that it is called a bear fund, but can anyone lay out a scenerio saying what might happen?

I'm guessing: the stock market crashes, and I will regain whatever money I have lost? That would be fine if the stock market crashes next week, but if the crash comes next year, will I regain what I have lost?
It looks like it is going to suck money out of my portfolio while all my other allocations are trying to build my assets.

Or do you think my FA is going to allow the bear fund to skyrocket after the crash, then try to move my money out of it? This sounds like his is trying to time the market?

Is there a possibility that this fund will ever do good for me? Does anybody have any success stories about this kind of fund?

Is there some kind of tax advantage to lose money/value? Between 6/24/19 and 7/10/19, I have lost $2648 on this fund.

HEDGEFUNDIE
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Re: Not happy with one FA allocation: PBRIX

Post by HEDGEFUNDIE » Wed Jul 10, 2019 7:40 pm

You have a bigger problem. The FA should not have put you into any muni funds at all.

The whole point of a muni fund is to avoid taxes in a taxable account; the tradeoff is the muni fund earns less return than a normal bond fund.

A 401k is already tax-shielded, which means you are unnecessarily sacrificing return by holding muni funds there.
Last edited by HEDGEFUNDIE on Wed Jul 10, 2019 8:04 pm, edited 1 time in total.

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RetiredMike1
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Re: Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Wed Jul 10, 2019 7:46 pm

Yikes! I am a total newbie with this. Furthermore, I just read the bumped up post from earlier today, about the LPL Financial, and now I'm getting scared. My FA is with LPL. I will look closer at the other funds now too.

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RetiredMike1
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Re: Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Wed Jul 10, 2019 7:51 pm

I may be wrong about that when I wrote "mostly muni's".

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vineviz
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Re: Not happy with one FA allocation: PBRIX

Post by vineviz » Wed Jul 10, 2019 7:59 pm

RetiredMike1 wrote:
Wed Jul 10, 2019 7:27 pm
We think he is a smart guy, and not trying to [cheat us - moderator oldcomputerguy].
At the risk of sounding flippant, you better think again. This is an insanely terrible portfolio. I'm not sure I've ever seen a worse one.

For one thing, he's got 10 funds doing the same job that four funds could do. That's not smart.

For a second thing, every single one of those 10 funds could be replaced by a better fund at 1/3 of the cost. That's not smart.

For a third thing, he apparently let you buy a muni bond fund in a tax-advantaged IRA. That's not smart.

For a fourth thing, he apparently thinks the Federated Prudent Bear Fund is a good idea. That's not smart.

For a fifth thing, he apparently didn't convince you that having zero (well, actually negative give the fourth thing) equity exposure at age 61 is a terrible idea. That's not smart.

My advice? Call Vanguard first thing tomorrow and initiate a transfer of this account away from Terrible FA and into the hands of someone with a clue and some integrity.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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vineviz
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Re: Not happy with one FA allocation: PBRIX

Post by vineviz » Wed Jul 10, 2019 8:01 pm

Oh, and welcome to the forum!

Get comfortable, because I suspect you're about to experience a lifetime's allotment of tough love.

Wow!
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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RetiredMike1
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Re: Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Wed Jul 10, 2019 8:14 pm

Oh, thanks for the kind welcome! LOL

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vineviz
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Re: Not happy with one FA allocation: PBRIX

Post by vineviz » Wed Jul 10, 2019 8:28 pm

vineviz wrote:
Wed Jul 10, 2019 7:59 pm
For a fifth thing, he apparently didn't convince you that having zero (well, actually negative give the fourth thing) equity exposure at age 61 is a terrible idea. That's not smart.
Just to put a face on this point . . . .

I calculated what your portfolio would have done from 2010 through 2019 (had to substitute for one fund that you own which doesn't go back that far). The graph below shows the return of your portfolio (blue line) and Vanguard's most conservative LifeStrategy fund (red line) in inflation-adjusted dollars.

Your portfolio would have actually lost purchasing power during this period: it would be worth less now in 2010 dollars than when you started, and that doesn't even count any fees you'd have paid the advisor.

Not only that, in addition to having a lower return than the Vanguard fund your portfolio was actually riskier by some measures. It would have LOST 4% in 2013 whereas the Vanguard fund has never had a drawdown in excess of 3% over the same time period.

Image

If you are truly off-the-charts risk averse, and find the 20% equity allocation of Vanguard LifeStrategy Income Fund (VASIX) distasteful you could always dilute it 50/50 with Vanguard Short-Term Inflation-Protected Securities Index Fund Admiral Shares (VTAPX). You'd have a less risky portfolio than you have now, with higher expected returns, and at less than 1/10th of the cost.

If you needed professional guidance, Vanguard can do that for another 0.30% and you'd STILL be at less than half the cost of your current portfolio not even accounting for your advisor's fees.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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RetiredMike1
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Re: Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Wed Jul 10, 2019 8:45 pm

When I looked over the graphs of the funds in my portfolio for the previous 10 years, it looked like they all tended to go upward, except the PBRIX, which went steadily downward. The 10 year chart of PBRIX went straight down from the hypothetical $10K to ~$2K. That is why I was asking if I should tell my FA to get out of it, unless there is some reason that it will skyrocket.

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vineviz
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Re: Not happy with one FA allocation: PBRIX

Post by vineviz » Wed Jul 10, 2019 9:00 pm

RetiredMike1 wrote:
Wed Jul 10, 2019 8:45 pm
When I looked over the graphs of the funds in my portfolio for the previous 10 years, it looked like they all tended to go upward, except the PBRIX, which went steadily downward. The 10 year chart of PBRIX went straight down from the hypothetical $10K to ~$2K. That is why I was asking if I should tell my FA to get out of it, unless there is some reason that it will skyrocket.
Without PBRIX, your portfolio is definitely less terrible. If you're going to stick with this advisor, then DEFINITELY get rid of this fund. My advice would be to insist on replacing it with some sort of stock fund. I suggest Vanguard Total World Stock ETF (VT) or iShares Core S&P Total U.S. Stock Market ETF (ITOT)

I will say, even without PBRIX, your existing portfolio still had a 25% lower return than the Vanguard fund I mentioned earlier. The vast majority of that difference is the insanely high expenses of your funds: your fund expenses are consuming somewhere between 20% and 40% of your return every year. I'm not suggesting you chase higher returns, just encouraging you to be aware that with low-return funds like you have that costs matter a lot.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

nix4me
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Re: Not happy with one FA allocation: PBRIX

Post by nix4me » Wed Jul 10, 2019 9:06 pm

Fire the advisor. Use a Lifestrategy fund or balanced fund and be done with it.

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RetiredMike1
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Re: Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Wed Jul 10, 2019 9:10 pm

Yeah, I remember reading about how the ER eats your returns, in one of the Boglehead books. I'm researching the funds and finding ERs of .49, .56. .84, .90 %, etc.

heyyou
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Re: Not happy with one FA allocation: PBRIX

Post by heyyou » Thu Jul 11, 2019 2:43 am

When you open the account at Vanguard (VG), they will request what you tell them to, from your new advisor. When he gets that request, he will call you, hoping that you will rescind it, but he has to comply with it and send the money to VG, unless you change your request. You get to make your decision before the advisor's smooth sales tactics occur, so just stick to your decision to move some or all, of the money. Note how much was charged for you to buy or to sell those shares too, that shows some of the greed.

Yes, someday the stock market will fall, and that one fund will go up, but maybe not enough to compensate for its losses for all of the previous years, especially for those who have owned it longer than your recent purchase. It is an expensive bauble to distract you when the whole stock market drops some, and your extra risky funds drop even more. Take the long view, knowing that long term stock investing, with its ups and downs, is better than trying to guess what will happen next.

The sad, standard joke is "My advisor helped me to put two kids through college, but it was his kids, not mine."

My previous advisor had my money in Fidelity advisor shares that cost .25% more than similar shares at Fidelity, because Fidelity paid the seller .25% of my money every year, not just the first year, including that fee on any annual growth that did occur. I suspect that is why some of your funds have such high expense ratios. Your advisor's customers paid for everything he has, that he uses to show how successful he appears.

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LiveSimple
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Re: Not happy with one FA allocation: PBRIX

Post by LiveSimple » Thu Jul 11, 2019 2:57 am

Mike, interested to see if you see the value of the suggestions here and move away from the FA and simplify your portfolio.

This will be my text book reference on how a FA may not be that helpful in designing a portfolio. 😳

cacophony
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Re: Not happy with one FA allocation: PBRIX

Post by cacophony » Thu Jul 11, 2019 3:06 am

RetiredMike1 wrote:
Wed Jul 10, 2019 9:10 pm
Yeah, I remember reading about how the ER eats your returns, in one of the Boglehead books. I'm researching the funds and finding ERs of .49, .56. .84, .90 %, etc.
Even those expense ratios are excessive. On your $1.2M 401k an average expense ratio of .6% means you're paying $7200 in expenses, every single year, regardless of how the funds do. Many Vanguard funds have expense ratios around .08% which at $960/year is a savings of $6240/year !

Regarding PBRIX, the FA is betting your money that the market will go down, and the expense ratio on just that one fund is charging you $490/month to maintain that bet.

I'd strongly suggest firing the FA, moving the money to Vanguard, and letting this forum help you.

mmcmonster
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Re: Not happy with one FA allocation: PBRIX

Post by mmcmonster » Thu Jul 11, 2019 5:19 am

RetiredMike1 wrote:
Wed Jul 10, 2019 9:10 pm
Yeah, I remember reading about how the ER eats your returns, in one of the Boglehead books. I'm researching the funds and finding ERs of .49, .56. .84, .90 %, etc.
In case you're feeling dismayed by everything you're hearing here, just realize that almost all of us went through exactly what you're going through now.

I fired my FA almost five years ago and took full control of my investments. I sold everything that he had he had me invested in and bought a stable of low expense ratio index funds (a total of five different funds). I don't trade funds regularly, I bought once and hold long term. My weighted expense ratio is now 0.06 and I just watch the growth. :D

3-20Characters
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Re: Not happy with one FA allocation: PBRIX

Post by 3-20Characters » Thu Jul 11, 2019 6:01 am

When you contract with a FA, you are making a bet that he/she will beat the market. Additionally, the FA has to beat the market while recouping his/her fees. Additionally, FAs will put you in funds with higher fees (often with front and/or back loads), so they have to beat the market while recouping those fees as well. If any FA could do this consistently over a period of time, they’d be writing books and appearing on cable tv instead of handling individual accounts of limited dollars/fees.

As if things aren’t bad enough above, most FAs place you in a long list of funds which can create complexities when you want to untangle from the FA (such as capital gains when in taxable). Is this intentional or a byproduct of their choices? I have my opinions which I will keep to myself.

Once you understand the odds, the decision is elementary: target date fund, lifestyle fund, or simple portfolio (such a 3-fund) will beat your FA. If you feel that you’d still like an FA, Vanguard has that service for a reasonable fee and they’ll put you in low fee vanguard funds.

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Re: Not happy with one FA allocation: PBRIX

Post by JediMisty » Thu Jul 11, 2019 6:17 am

3-20Characters wrote:
Thu Jul 11, 2019 6:01 am
When you contract with a FA, you are making a bet that he/she will beat the market. Additionally, the FA has to beat the market while recouping his/her fees. Additionally, FAs will put you in funds with higher fees (often with front and/or back loads), so they have to beat the market while recouping those fees as well. If any FA could do this consistently over a period of time, they’d be writing books and appearing on cable tv instead of handling individual accounts of limited dollars/fees.

As if things aren’t bad enough above, most FAs place you in a long list of funds which can create complexities when you want to untangle from the FA (such as capital gains when in taxable). Is this intentional or a byproduct of their choices? I have my opinions which I will keep to myself.

Once you understand the odds, the decision is elementary: target date fund, lifestyle fund, or simple portfolio (such a 3-fund) will beat your FA. If you feel that you’d still like an FA, Vanguard has that service for a reasonable fee and they’ll put you in low fee vanguard funds.
+1. When my BF moved here, I got a look at his Wells Fargo accounts. They were doing all the above plus buying and selling the same high commission load funds and rebuying them. His annual fees were eating up his portfolio. Although, his AA was appropriate, his performance was dismal due to the fees. I've moved him to Vanguard and am teaching him to monitor his dividends and reinvest them himself. The Vanguard advisor is a good solution unless/until you learn to DIY.

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Re: Not happy with one FA allocation: PBRIX

Post by 3-20Characters » Thu Jul 11, 2019 6:26 am

JediMisty wrote:
Thu Jul 11, 2019 6:17 am
3-20Characters wrote:
Thu Jul 11, 2019 6:01 am
When you contract with a FA, you are making a bet that he/she will beat the market. Additionally, the FA has to beat the market while recouping his/her fees. Additionally, FAs will put you in funds with higher fees (often with front and/or back loads), so they have to beat the market while recouping those fees as well. If any FA could do this consistently over a period of time, they’d be writing books and appearing on cable tv instead of handling individual accounts of limited dollars/fees.

As if things aren’t bad enough above, most FAs place you in a long list of funds which can create complexities when you want to untangle from the FA (such as capital gains when in taxable). Is this intentional or a byproduct of their choices? I have my opinions which I will keep to myself.

Once you understand the odds, the decision is elementary: target date fund, lifestyle fund, or simple portfolio (such a 3-fund) will beat your FA. If you feel that you’d still like an FA, Vanguard has that service for a reasonable fee and they’ll put you in low fee vanguard funds.
+1. When my BF moved here, I got a look at his Wells Fargo accounts. They were doing all the above plus buying and selling the same high commission load funds and rebuying them. His annual fees were eating up his portfolio. Although, his AA was appropriate, his performance was dismal due to the fees. I've moved him to Vanguard and am teaching him to monitor his dividends and reinvest them himself. The Vanguard advisor is a good solution unless/until you learn to DIY.
Ah! Thanks! I forgot to mention all the buying and selling to churn fees. Funds have “matured” or some such excuse.

Example ...
viewtopic.php?t=284960

Jack FFR1846
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Re: Not happy with one FA allocation: PBRIX

Post by Jack FFR1846 » Thu Jul 11, 2019 6:32 am

10 bond funds instead of low cost single Total Bond? We all know why. Because mere mortals can't possibly understand investing.
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bikesandbeers
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Re: Not happy with one FA allocation: PBRIX

Post by bikesandbeers » Thu Jul 11, 2019 7:14 am

Wow, this kind of the thread makes me very glad I was set up with Vanguard early in my career. This does not seem like a good portfolio overall, and
PBRIX looks like a terrible solution to risk aversion. I wonder how your FA went through your risk tolerance to come up with these recommendations. Especially if your wife is getting a decent pension, you don't need to worry quite as much about a market drop, which is the only time PBRIX

There are folks on this forum that are worried the stock market wont do as well over the next decade as it has in the last decade, but no one would recommend you allocate your funds like this.

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RetiredMike1
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Re: Not happy with one FA allocation: PBRIX

Post by RetiredMike1 » Thu Jul 11, 2019 7:55 am

Thank you all for your replies. I am going to print out the whole column and show it to my wife tonight to convince her that this is not a good path to take.

HomeStretch
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Re: Not happy with one FA allocation: PBRIX

Post by HomeStretch » Thu Jul 11, 2019 9:42 am

Welcome!

Agree with comments about moving away from FA due to poor complex portfolio construction and high fees.

It’s easy to not “see” the high fees in one’s accumulating years as the ERs are deducted from returns. But you will really feel the effects of the fees now that you are retired. Ignoring portfolio growth and assuming your average ERs are 0.6% and advisor fees are 1.5%:

- you will pay $25,200 per year in ERs and advisor fees (versus paying < $1k per year in a DIY Vanguard 3-fund portfolio).

- by age 70, over 9 years you will have paid fees totaling $226,800 (versus < $9,000 at Vanguard)

- your first RMD at age 70-1/2 will be $43,795 (= $1.2 million / 27.4). Your advisor will get $25,200 in fees/ERs and you will get $18,595 of the RMD minus fees. You are only getting 42%!

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Re: Not happy with one FA allocation: PBRIX

Post by lakpr » Thu Jul 11, 2019 9:49 am

Everyone in this thread focused only on Prudent Bear fund, there is also the Lord Abbett Ultra Short find that is also trying to short the market. Long term, this is not going to end well.

Fire the advisor, put everything in a Vanguard target date fund. Simple, easy to understand. Zero commissions.

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Re: Not happy with one FA allocation: PBRIX

Post by David Jay » Thu Jul 11, 2019 9:51 am

RetiredMike1 wrote:
Wed Jul 10, 2019 7:27 pm
FA took my 401K ($1.2M) and moved it...
Mike:

Can you confirm that the advisor took the 401K assets and did a “roll-over” to a traditional IRA? This seems like the most likely course and would have preserved the tax-deferred nature of the assets.

If not, you have a huge tax bill coming this year...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Not happy with one FA allocation: PBRIX

Post by mhalley » Thu Jul 11, 2019 10:51 am

Just to pile on with what a terrible portfolio this is, and you should RUN AWAY from this salesman.

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vineviz
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Re: Not happy with one FA allocation: PBRIX

Post by vineviz » Thu Jul 11, 2019 10:59 am

lakpr wrote:
Thu Jul 11, 2019 9:49 am
Everyone in this thread focused only on Prudent Bear fund, there is also the Lord Abbett Ultra Short find that is also trying to short the market. Long term, this is not going to end well.
Thats a fund which holds short term bonds, not one that “shorts” the market.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Not happy with one FA allocation: PBRIX

Post by HEDGEFUNDIE » Thu Jul 11, 2019 10:59 am

David Jay wrote:
Thu Jul 11, 2019 9:51 am
RetiredMike1 wrote:
Wed Jul 10, 2019 7:27 pm
FA took my 401K ($1.2M) and moved it...
Mike:

Can you confirm that the advisor took the 401K assets and did a “roll-over” to a traditional IRA? This seems like the most likely course and would have preserved the tax-deferred nature of the assets.

If not, you have a huge tax bill coming this year...
I suppose there is a possibility the 401k was after-tax (not Roth) money. In which case perhaps the muni bond makes sense.

Unlikely though.

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Re: Not happy with one FA allocation: PBRIX

Post by goodenyou » Thu Jul 11, 2019 11:11 am

Welcome to the forum. What you will realize by empowering yourself with knowledge is that you are one of the many investors being ripped-off by an unscrupulous financial system. It will cost you a bit in the short term to disentangle, but you will save yourself a fortune by listening to the wise advice above. And it is free advice!

Educate and empower yourself! That is what this place is all about.
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Re: Not happy with one FA allocation: PBRIX

Post by ruralavalon » Thu Jul 11, 2019 11:14 am

Welcome to the forum :) .

Congratulations on your retirement.

RetiredMike1 wrote:
Wed Jul 10, 2019 7:27 pm
Can somebody tell me if this is a good idea or bad idea?

I just retired 2 weeks ago, age 61. My wife and I hired a financial advisor last month because we want someone to help guide us. We think he is a smart guy, and not trying to [cheat us - moderator oldcomputerguy]. My wife plans to continue working for 4 more years, to get a better pension, and pay for our health insurance.

FA took my 401K ($1.2M) and moved it into 10 funds, mostly muni bonds, because we want to keep our risk low, maintain assets.

15% LDLFX Lord Abbett Short Duration Income Fund Class F
15% PBRIX Federated Prudent Bear Fund Institutional Shares
10% DRRIX BNY Mellon Global Real Return Fund - Class I
10% SETMX Columbia Intermediate Muni. Bond Fund Instit. Class
10% LUBFX Lord Abbett Ultra Short Bond Fund Class F
10% MEDIX MFS Emerging Markets Debt I
10% PONPIX PIMCO Income Fund Class I-2
9% PDBZX PGIM Total Return Bond Fund -Class Z
5% PRGMX T. Rowe Price GNMA Fund
5% JHBIX John Hancock Bond Fund Class I
1% cash

I'm ok with the bonds, but one choice throws up a red flag in my mind. He put $180k into a fund called Federated Prudent Bear Institutional, (PBRIX).
Looking at the history of this fund, it looks like it is losing money consistently every day, and has a crazy high ER, 3.27%. I asked FA about this fund, and he said that it's going to do well when the market goes badly. Its strategy is: Seeks capital appreciation primarily through short positions in domestically traded equity securities and indices.

Of course I realize that it is called a bear fund, but can anyone lay out a scenerio saying what might happen?

I'm guessing: the stock market crashes, and I will regain whatever money I have lost? That would be fine if the stock market crashes next week, but if the crash comes next year, will I regain what I have lost?
It looks like it is going to suck money out of my portfolio while all my other allocations are trying to build my assets.

Or do you think my FA is going to allow the bear fund to skyrocket after the crash, then try to move my money out of it? This sounds like his is trying to time the market?

Is there a possibility that this fund will ever do good for me? Does anybody have any success stories about this kind of fund?

Is there some kind of tax advantage to lose money/value? Between 6/24/19 and 7/10/19, I have lost $2648 on this fund.
HEDGEFUNDIE wrote:
Wed Jul 10, 2019 7:40 pm
You have a bigger problem. The FA should not have put you into any muni funds at all.

The whole point of a muni fund is to avoid taxes in a taxable account; the tradeoff is the muni fund earns less return than a normal bond fund.

A 401k is already tax-shielded, which means you are unnecessarily sacrificing return by holding muni funds there.
HEDGEFUNDIE is right.

This is like wearing a raincoat or using an umbrella, while indoors.

Also a 100% bond portfolio is not the safest way to proceed, it's actually safer for a 61 year old retiree with an investing horizon of perhaps 20-30 years to hold some equities as well as bonds. Trinity study, Table 3.

Do you have other accounts invested in stock funds?

What are the expense ratios on each of those bond funds, as charged in your 401k? Are there any other "real return" funds offered besides the BNY Mellon Global fund? You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is In one place.

An expense ratio of 3.27% is outrageous in my opinion.

it's probably a good idea to reduce the number of bond funds, using only the more diversified bond funds with lower expense ratios.
Last edited by ruralavalon on Thu Jul 11, 2019 11:48 am, edited 5 times in total.
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bei22000
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Re: Not happy with one FA allocation: PBRIX

Post by bei22000 » Thu Jul 11, 2019 11:25 am

One reminder is that some funds have early redemption fees if you withdraw them within 60 days after purchase. Need to find out.

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Re: Not happy with one FA allocation: PBRIX

Post by diy60 » Thu Jul 11, 2019 11:45 am

RetiredMike1 wrote:
Thu Jul 11, 2019 7:55 am
Thank you all for your replies. I am going to print out the whole column and show it to my wife tonight to convince her that this is not a good path to take.
Welcome to the forum. The above is a possible hurdle, don't expect to get on the same page in one night. After decades of managing our household investments and prior to retirement spouse and I made the same mistake. Took back control after about 12 months of the FA nonsense and another 3 years to unwind the mess in the taxable account.

You've received amazing comments, best of luck. Please report back and let us know final resolution.

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FelixTheCat
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Re: Not happy with one FA allocation: PBRIX

Post by FelixTheCat » Thu Jul 11, 2019 12:08 pm

RetiredMike1 wrote:
Wed Jul 10, 2019 7:27 pm
Federated Prudent Bear Institutional, (PBRIX) has a crazy high ER, 3.27%.
I had to look it up. This is the highest expense ratio I have seen to date.

Welcome to the Bogleheads. Let's start your financial education with https://www.bogleheads.org/wiki/Getting_started
Felix is a wonderful, wonderful cat.

Katietsu
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Re: Not happy with one FA allocation: PBRIX

Post by Katietsu » Thu Jul 11, 2019 12:09 pm

I do not dispute that you should look to change the situation as everyone has already outlined. But I do not know that you are ready today to go on your own to full DIY. What brought you hear is the concern that one of your funds had done badly over the last decade. This could lead to selling low and buying high behavior or performance chasing. These could be worse for you than paying an advisory fee. And not being aware of the tax considerations of munis in an IRA might mean that there are other tax considerations that you unaware at this time in your financial education.

I would take a bit of time to educate yourself. You can then decide the course best for you. It might be making your new retirement job be to learn enough about this to take it over. And taking it over might mean just putting everything into a single Life Strategy fund as suggested by another post. It might mean hiring an hourly advisor to look over all your finances, and giving you a plan that you then manage. It could mean a low priced option like VPAS. Or it might even mean a financial advisor for a reasonable price with good advice. Coming here was an excellent first step. The comments here are very negative towards your current advisor and portfolio. Use that as an incentive to take action. Now, find the next step that works best for you.

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goodenyou
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Re: Not happy with one FA allocation: PBRIX

Post by goodenyou » Thu Jul 11, 2019 1:56 pm

What you will realize is that the delay that it takes to convince yourself to extract yourself from your FA will cost you. The best option you have is to consult a fee-only advisor and tax planner to extricate yourself from your situation in the most tax-efficient way. While the most valuable component, education will only solidify your resolve in not paying someone to rip you off. When you get to that point, you will wish you had done it sooner.

My parents went through this many years ago. Now they strut around proudly they are no longer shark bait. They were convinced, at first, that they lacked the ability to do it. What it turned out to be was a minimal education and to simplify. They just needed to be enlightened.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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Tamarind
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Re: Not happy with one FA allocation: PBRIX

Post by Tamarind » Thu Jul 11, 2019 2:11 pm

cacophony wrote:
Thu Jul 11, 2019 3:06 am
RetiredMike1 wrote:
Wed Jul 10, 2019 9:10 pm
Yeah, I remember reading about how the ER eats your returns, in one of the Boglehead books. I'm researching the funds and finding ERs of .49, .56. .84, .90 %, etc.
Even those expense ratios are excessive. On your $1.2M 401k an average expense ratio of .6% means you're paying $7200 in expenses, every single year, regardless of how the funds do. Many Vanguard funds have expense ratios around .08% which at $960/year is a savings of $6240/year !

Regarding PBRIX, the FA is betting your money that the market will go down, and the expense ratio on just that one fund is charging you $490/month to maintain that bet.

I'd strongly suggest firing the FA, moving the money to Vanguard, and letting this forum help you.
This needs to be repeated, because it emphasizes just how much money your "advisor" is siphoning from your accounts.

Broken Man 1999
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Re: Not happy with one FA allocation: PBRIX

Post by Broken Man 1999 » Thu Jul 11, 2019 2:38 pm

My BIL actually made less money on his portfolio than his distant relative received managing his portfolio.

And this was during this bull market.

Too many funds with high ERs.

Sad, but that is the modus operandi of the advisors far too often.

He now marvels at his returns/growth in his portfolio safely resident at Vanguard.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Lalamimi
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Re: Not happy with one FA allocation: PBRIX

Post by Lalamimi » Thu Jul 11, 2019 3:21 pm

Mike We are trying to avoid your situation, have met with 4 FA, including Fidelity, and my BIL talked me out of it -, market is doing too well to Sell all our Mutual funds for Fidelity ones, And they still charge .79% to manage. Money is still with Edward Jones, and we are still wondering what to do. Found this site a few weeks ago, and am reading all the posts. Good luck!

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