31 yr old w/ $500k @ EdwardJones

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carlweezer
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Joined: Thu Apr 03, 2014 3:50 pm

31 yr old w/ $500k @ EdwardJones

Post by carlweezer » Thu Apr 03, 2014 8:44 pm

Thanks in advance for any advice. I have concentrated on earning income and basically put my retirement accounts on cruise control with EdwardJones because I didn't want to take the time/risk of choosing funds on my own. After lunch with a friend who introduced me to your website I figured I would test the water and see what I could learn from seasoned DIYers. Please advise if further info is needed. I am not afraid to have some risk as I have 40 years before I will use the money.

Emergency funds: Six months (40,000)
Debt: 400k
Home: Worth 350k, Owe 152k, 2.875 15 yr, 1122/month
Farm: Worth 235k, Owe 115k, 3.9 15 yr, 1042/month
Office: Worth 125k, Owe 68k, 4.15 15 yr, 560/month
Duplex: Worth 135k, Owe 66k, 4.05 15 yr, 540/month

Tax Filing Status: Married Filing Jointly
Tax Rate: 33% Federal, 3.4% State
State of Residence: Indiana
Age: 31/29

Current retirement assets 459,128

His SEP at EJ
6.45% Amcap fund cl a, amcpx, 29,636
7.28% American balanced fund cl a, abalx, 33,432
4.86% American mutual fund cl a, amrmx, 22,292
2,99% Capitol world growth & income cl a, cwgix, 13,739
4.99% Europacific growth fund cl a, aepgx, 22,897
2.64% Franklin balance sheet investment fund cl a, frbsx, 12,129
2.45% Franklin high income fund cl a, fhaix, 11,248
2.38% Franklin microcap value fund cl a, frmcx, 10,909
4.99% Franklin mutual shares fund cl a, tesix, 22,924
2.54% Franklin rising dividends fund cl a, frdpx, 11,642
2.77% Franklin small cap value fund cl a, frvlx, 12,726
2.07% Franklin strategic income fund cl a, frstx, 9,504
0.85% Franklin total return fund cl a, fkbax, 3,891
8.56% Growth fund of America cl a, agthx, 39,288
6.82% Income fund of America fund cl a, amecx, 31,325
5.77% Investment company of America fund cl a, aivsx, 26,505
4.33% New world fund cl a, newfx, 19,899
3.71% Small cap world fund cl a, smcwx, 17,041
1.25% Templeton china world fund cl a, tcwax, 5,735
1.97% Templeton foreign fund cl a, temfx, 9,039
3.78% Washington mutual investor fund cl a, awshx, 17,349

His Roth IRA at EJ
1.76% New perspective fund cl a, anwpx, 8,093

Her Roth IRA at EJ
2.12% Franklin flex cap growth fund cl a, fkcgx, 9,746
1.02% Franklin growth fund cl a, fkgrx, 4,680
0.66% Franklin mutual beacon fund cl a, tebix, 3,039
3.39% Franklin rising dividends fund cl a, frdpx, 15,545
4.60% Mutual global discovery fund cl a, tedix, 21,142
1.00% Mutual quest fund cl a, teqix, 4,598
0.65% Templeton global bond fund cl a, tpinx, 2,974
0.68% Templeton global smaller companies fund cl a, temgx, 3,102
0.66% Templeton world fund cl a, temwx, 3,043

Contributions

New annual Contributions
$40-45,000 his SEP
$5,500 her Roth IRA
$5,000 kids 529

Kids 529 (ages 5,5,3) 36,444
67% Cc adv 2025 enroll fd, 24,266
14% Cc adv 529 amer fd europacific, 5,244
19% Cc adv 529 trp lg cap grw fd a, 6,934

Available funds

Franklin rising dividends funds cl a, frdpx, 2,462 at EJ
110,000 cash


Questions:
1. How much better can I do with vanguard vs Edward jones? I like the advisor I currently have but I like piling money better :happy

2. What would you do with the cash? My emergency fund is separate. My wife and I have decided to pay off debt before we buy anymore real estate. We are fine tuning a budget and cutting unnecessary expenses.

Thanks,
Carl

ASUGrad
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Re: 31 yr old w/ $500k @ EdwardJones

Post by ASUGrad » Thu Apr 03, 2014 9:50 pm

For starters I would read https://personal.vanguard.com/us/insigh ... principles .

I say that because I can't fathom a reason to have THAT many funds. Your advisor has basically built an index but is charging you many times what an index would cost. It looks like someone said, "this fund looks good, lets throw it in," instead of, "so here are our goals, here is our desired allocation, what funds can be used to build this portfolio?"

If you just want to own everything that is easy at Vanguard. Total market funds. Total stock, total bond, total international stock, total international bond. You can build just about any allocation you want with those and have plenty of diversification. And the expenses are low. Total stock market index admiral shares = 0.05% expense ratio. Just the 12b1 fees at Edward Jones(normally 0.25%) are 5 times that. You don't even have to look at management expenses, front end loads(as high as 5.75%), redemption fees, maintenance fees, etc.

With 500k at VG you would also qualify for a free financial plan created by a certified financial planner. So if you want professional advice you have that.

And you're EJ guy spends most of his time finding new clients and 'selling'. The VG CFP doesn't have sales goals(no one at VG does). He builds financial plans for a living. Lets consider who is likely better at building the best portfolio to meet your needs? Not to mention which one will charge you a LOT less along the way. A 1% difference in fees adds up to a lot of :moneybag when you figure in compounding over 40 years.

500k at 6% for 40 years: 5.478 million
500k at 7% for 40 years: 8.156 million

For the portfolio? If you have a 40 year time horizon and you are ok with risk. 56% total stock index, 24% total international stock index, 14% total bond, 6% total international bond. Thats just 80% stock, 20% bonds, 30% of which is international. Personally I would bump the stock into the 90-100% range, but I thought that would be a good starting point. It really comes down to your goals and your risk tolerance. If you can weather a 40-50% drop without selling and hang on for 40 years 90-100% stock should be fine.

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BL
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Re: 31 yr old w/ $500k @ EdwardJones

Post by BL » Thu Apr 03, 2014 10:04 pm

How and how much is your broker being paid? (AUM, commissions, etc.) I see you have (a ton of) Class A funds. Did you pay the load on each? What are ERs?

Search the Wiki for Lazy Portfolios and/or three-fund portfolio (Total Stock fund, Total International funds, total bond funds. ) Read recommended book(s). Vanguard has low-cost funds and inexpensive advice if desired.

You are fortunate to have made this discovery before you accumulated many taxable funds which would generate taxes on capital gains if you sold them for better/cheaper funds.

Johm221122
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Re: 31 yr old w/ $500k @ EdwardJones

Post by Johm221122 » Thu Apr 03, 2014 10:17 pm

Welcome to forum

http://www.bogleheads.org/wiki/Boglehea ... philosophy

" The difference between an expense ratio of 0.15% and 1.5% might not seem like much, but the effect of the compounding over an investing lifetime is enormous. After 30 years, a fund with a 1.5% expense ratio will provide an investor with several hundred thousand dollars less for retirement than a 0.15% index fund with the same growth. And remember that most managed funds actually underperform index funds. Costs matter, and investors need returns compounding for their own benefit, not the benefit of fund companies who skim unnecessary fees off the top. Figure 2. "


" In summary, a Bogleheads investor tends to (1) save a lot, (2) select an asset allocation containing both stock and bond asset classes, (3) buy low cost, widely diversified funds, (4) allocate funds tax-efficiently, and (5) stay the course. One of the wonderful things about Boglehead investing is that it generally only requires a part of a day to set up, and then about an hour a year of effort to rebalance. Beyond that, there is no need to watch the markets or follow financial news. Even better, it works. "

John

DSInvestor
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Re: 31 yr old w/ $500k @ EdwardJones

Post by DSInvestor » Thu Apr 03, 2014 10:38 pm

I entered your tickers and balances in to Morningstar Instant X-Ray and found that your AA is:
Cash 8%
Bonds 9%
US Stocks 57%
International Stocks 24%
Other 3%

M* stock grid seems close to total market weight
22 26 29 <- large cap
05 05 05 <- mid cap
03 03 02 <- small cap

Expense ratio is 0.87% which on 459K in assets costs you $3993/yr. This may be on top of wrap fees or AUM fee.

If you went with a Vanguard portfolio of:
60% Total Stock Market Admiral
23% Total International Stock Market Admiral
17% Total Bond Market Admiral

Expense ratio is 0.08% which on 459K in assets costs you $367/yr.

Your morningstar grid would be as follows:
25 25 25 <- large cap
06 06 06 <- mid cap
02 02 02 <- small cap

The two portfolios have very similar asset allocations but this vanguard portfolio is much simpler, much easier to manage and has very low expense ratios. No sales loads for additional purchases. No assets under management fee. No IRA custodial fees.

It's almost like they intentially create a complicated portfolio to give you the impression that there's no way that regular folks can manage an investment portfolio so pay us to do it for you. If they created a portfolio like the one I proposed with just 3 funds, you may very well get the impression that you can do it yourself.

welcome to the forum.
Wiki

carlweezer
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Re: 31 yr old w/ $500k @ EdwardJones

Post by carlweezer » Thu Apr 03, 2014 10:45 pm

Thanks for all the replys. I have quite a bit of reading to do.
All the funds were front loaded. I'm pretty sure they were all in the 5.75% range and an expense ratio around .8%??? It's possible I could be mistaken. EJ is not completely transparent with the fees charged. I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges. I knew they were high but I liked the idea of letting a professional handle them while allowing me to concentrate on earning more. Fear of the unknown I guess.

carlweezer
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Joined: Thu Apr 03, 2014 3:50 pm

Re: 31 yr old w/ $500k @ EdwardJones

Post by carlweezer » Thu Apr 03, 2014 10:50 pm

DSInvestor wrote:I entered your tickers and balances in to Morningstar Instant X-Ray and found that your AA is:
Cash 8%
Bonds 9%
US Stocks 57%
International Stocks 24%
Other 3%

M* stock grid seems close to total market weight
22 26 29 <- large cap
05 05 05 <- mid cap
03 03 02 <- small cap

Expense ratio is 0.87% which on 459K in assets costs you $3993/yr. This may be on top of wrap fees or AUM fee.

If you went with a Vanguard portfolio of:
60% Total Stock Market Admiral
23% Total International Stock Market Admiral
17% Total Bond Market Admiral

Expense ratio is 0.08% which on 459K in assets costs you $367/yr.

Your morningstar grid would be as follows:
25 25 25 <- large cap
06 06 06 <- mid cap
02 02 02 <- small cap

The two portfolios have very similar asset allocations but this vanguard portfolio is much simpler, much easier to manage and has very low expense ratios. No sales loads for additional purchases. No assets under management fee. No IRA custodial fees.

It's almost like they intentially create a complicated portfolio to give you the impression that there's no way that regular folks can manage an investment portfolio so pay us to do it for you. If they created a portfolio like the one I proposed with just 3 funds, you may very well get the impression that you can do it yourself.

welcome to the forum.
Thank you for this!
Really puts it in black/white. I wish I had found this site years ago.

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Taylor Larimore
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Hodge-podge of expensive funds.

Post by Taylor Larimore » Thu Apr 03, 2014 11:04 pm

carlweezer:

Welcome to the Bogleheads Forum!

This is the Boglehead Philosophy based on the wisdom of our mentor, Jack Bogle, who founded the largest and lowest-cost mutual fund company in the world--Vanguard:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

I will be blunt. You listed one of the most ridiculous collection of expensive funds I have seen posted on this forum. To help you understand, listen to these investment authorities:
Scott Adams, author of Dilbert: "I once tried to write a book about personal investing. - After extensive research I realized I could describe everything that a young first-time investor needs to know on one page."

Christine Benz, Morningstar Director of Personal Finance: "Simplicity is one of the greatest--but in my view, woefully underrated--virtues when managing a portfolio."

Bill Bernstein, author of Four Pillars of Investing: "If, over the past 10 or 20 years, you had simply held a portfolio consisting of one quarter each of indexes of large U.S. stocks; small U.S. stocks; foreign stocks; and high quality U.S. bonds, you would have beaten over 90% of all professional money managers and with considerably less risk."

Richard Bernstein, Merrill Lynch strategist: "Investors find it hard to believe that ignoring the vast majority of investment noise might actually improve their performance."

Jack Bogle, Vanguard founder: ""In the stock market, the more elaborate and abstruse the mathematics, the more uncertain and speculative are the conclusions we draw therefrom.-- Simplicity is the master key to financial success."

Jack Brennan, Vanguard CEO and author of Straight Talk on Investing: "It's in the interest of many financial service companies to make you think that investing is difficult.--It's really quite simple."

Warren Buffet: "To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these."

Scott Burns, Columnist: "Concentrate on a simple portfolio with two basic assets--a stock index fund and a bond index fund. Do that and you'll enjoy superior performance with less risk."

Andrew Clarke, author of "Wealth of Experience": "In investing, simple is usually more productive than complex."

Jonathan Clements, author of "You've Lost It. Now What?": "Investing is simple. To be sure, you can make it ludicrously complicated."

Paul Crafter, author of "Investment Guide": "After doing it all, I now feel I've come around in a complete circle, ending up with this: The more I learn, the less I really need to know."

Michael Edesess, author of The Big Invesment Lie: "As a mathematician I know when mathematical-sounding analyses are little more than elaborate sales pitches, designed to thoroughly obscure the simple fact that smart investing is non-mathematical and accessible to everyone."

Albert Einstein: "The five ascending levels of intellect are: smart, intelligent, brilliant, genius, simple."

Charles Ellis, co-author of "The Elements of Investing": "KISS investing--Keep It Simple, Sweetheart--is the best and easiest and lowest cost and worry-free way to invest for retirement security."

Rick Ferri, CFA, author of "All About Index Funds": "It does not take much to outperform the average investor. All you have to do is put half your money in the Vanguard Total Stock Market and the other half in an intermediate-term bond index fund. Then rebalance your account once per year. By keeping it simple, you will achieve all the benefits the markets have to offer."

Future Metrics looked at the performance of 224 pension plans over about 14 years compared with the performance of 60% S&P 500 index and 40% aggregate bond index benchmark. Of those 224 plans, only 19 beat that simple benchmark.

Gensler & Baer, authors of "The Great Mutual Fund Trap": "If you simply buy and hold you don't need to read investing magazines, watch financial news networks, subscribe to newsletters, or pay a broker to execute new trades."

Benjamin Graham: "In the stock market, the more elaborate and abstruse the mathematics, the more uncertain and speculative are the conclusions we draw therefrom."

Alan Greenspan, former chairman of the Federal Reserve: "This decade is strewn with examples of bright people who thought they built a better mousetrap that could consistently extract abnormal returns from financial markets. Some succeed for a time. But while there may occasionally be misconfigurations among market prices that allow abnormal returns, they do not persist."

Daniel Kahneman, Nobel Laurete: "All of us would be better investors if we just made fewer decisions"

Edmund Kean: "Complexity is easy. Simplicity is hard."

Michael LeBoeuf, author of "The Millionaire in You": "The master key to wealth can be summed up in just one word: Simplicity."

Leonardo da Vinci: “Simplicity is the ultimate sophistication.”

Peter Lynch, "Magellan Fund" manager: "If you spend more than fifteen minutes a year worrying about the market, you've wasted twelve minutes."

MIT study: "The less well-informed group did far better than the group that was given all the financial news."

Joe Maglia, CEO TD Ameritrade: "Wall Street goes out of its way to make investing incredibly sophisticated and complex because they can make a tremendous amount of money by doing so."

Burton Malkiel, author of "Random Walk Down Wall Street": "The overarching rule for achieving financial security: Keep it simple."

John Markese, CEO of American Association of Individual Investors: "If you have more than eight funds you should slap yourself."

Wm McNabb, Vanguard CEO: "If you can't understand an investment product in five minutes, walk away."

James Montier, author: "Never underestimate the value of doing nothing."

Morningstar Guide to Mutual Funds: "Good investing doesn't have to be complicated. In fact, simplification may lead to better investment results."

Suze Orman: "We make investing so complicated and it really is not. -- A total market index fund is a great one-stop-shopping choice that provides you instant diversification among different types of stocks."

Mike Piper, financial author: "There's an entire industry built on convincing us that investing is complicated."

Jane Bryant Quinn, syndicated columnist and author of "Smart and Simple Financial Strategies": "You shouldn't buy anything too complex to explain to the average 12-year old."

John Rekenthaler, Morningstar Research Director: "How many funds should you have? Four to six should do."

Rodc on Boglehead Forum: "While doing this financial engineering my wife who does no math just shook her head at my optimization games and said, 'Rod, life is uncertain, get over it.' After a lot of work I discovered much to my surprise, she was right."

Paul Samuelson, Nobel Laurete: "Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."

Bills Schulthies, author of "The Coffeehouse Investor": "When you simplify your investment decisions, not only do you enrich your life by spending more time on families, friends and careers, but you enhance portfolio returns in the process."

Chandon Sengupta, author of "The Only Proven Road to Investment Success": "There is overwhelming evidence that the simplest possible investment method works much better than all the other more complex ones."

Larry Swedroe, author of "The Successful Investor Today": "The more complex the investment, the faster you should run away."

David Swensen, Yale Chief Investment Officer: "As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run."

Andrew Tobias, author: "I believe in selecting the most straighforward and easiest-to-implement strategy for achieving our goals."

Tweddell and Pierce, authors of "Winning with Index Mutual Funds": "Keep it simple. Investment success depends on asset allocation, diversification, and risk management, not on complexity."

Eric Tyson, author of "Mutual Funds for Dummies." "Planners may try to make it all so complicated that you believe you can't possibly manage your finances or make major financial decisions without them."

Walter Updegrave, editor of MONEY magazine: "Simpler is better. Ignore the siren song of sophisticated investments"

Richard Young, author of "The Intelligence Report": "If you can't run your portfolio taking 60 minutes a month, it's too complicated."

Jason Zweig, author of "The Intelligent Investor": "The less you fool with your portfolio, the less often you'll play the fool."

Warren Buffett: "There seems to be some perverse human characteristic that likes to make easy things difficult."

This is The Three Fund Portfolio mentioned earlier.

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

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StormShadow
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Re: 31 yr old w/ $500k @ EdwardJones

Post by StormShadow » Thu Apr 03, 2014 11:08 pm

carlweezer wrote:Thanks for all the replys. I have quite a bit of reading to do.
All the funds were front loaded. I'm pretty sure they were all in the 5.75% range and an expense ratio around .8%??? It's possible I could be mistaken. EJ is not completely transparent with the fees charged. I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges. I knew they were high but I liked the idea of letting a professional handle them while allowing me to concentrate on earning more. Fear of the unknown I guess.
Welcome to bogleheads. :beer

You're still young and have a lot of potential earning years ahead of you. Better to fix it now instead of 10-20 years down the line, right?

Like many others here, I discovered that the most important predictor of fund performance is the fees. And wouldn't you know it... PBS decided to come out with a nice documentary hammering in this point. http://www.pbs.org/wgbh/pages/frontline ... nt-gamble/

DSInvestor
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Re: 31 yr old w/ $500k @ EdwardJones

Post by DSInvestor » Thu Apr 03, 2014 11:55 pm

Carl, the morningstar x-ray shows you the composition of your current portfolio. You will need to spend some time to determine whether you're comfortable with 83% stock and 17% bonds. Did you spend time with your EJ financial advisor to discuss asset allocation and are you comfortable with 80+% stocks knowing that stocks can drop 50% in a market crash?

When you have finalized your asset allocation stock/bond mix, you will find that fund selection is really quite easy. The hard part is to figure out the asset allocation that you'd be comfortable holding through all market conditions. The three fund portfolio mentioned above is pretty easy to manage even when spread across many accounts but it will require manual rebalancing once in a while. Your nerves will be tested when your asset allocation tells you to buy stocks when stocks are down 50% and below target. If you'd prefer a more hands off approach, you can use Vanguard LifeStrategy (LS) or Target Retirement (TR) fund that are essentially three fund portfolios in one fund and the fund will maintain the asset allocation for you. Pick an LS or TR fund that most closely matches your desired asset allocation. LS and TR funds are not tax efficient funds so they're best held in tax advantaged accounts like IRA or 401k.
LifeStrategy Growth has 80/20 stock/bond AA
LifeStrategy Moderate Growth has 60/40 AA
LifeStrategy Conservative Growth has 40/60 AA
LifeStrategy Income has 20/80 AA
LifeStrategy maintain a fixed asset allocation. Target Retirement funds get more conservative (hold less stocks) as you get closer to target date.

The three fund portfolio mentioned above has approx 0.08% expense ratio but you'd have to rebalance yourself.
A lifestrategy or Target Retirement fund would have expense ratio of around 0.15%. More than the pure 3 fund porfolio of admiral shares but still significantly cheaper than EJ and if you've picked the fund that matches your desired asset allocation, you don't have to worry about rebalancing.
Wiki

Howard Donnelly
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Re: 31 yr old w/ $500k @ EdwardJones

Post by Howard Donnelly » Fri Apr 04, 2014 5:35 am

Taylor,

That is an incredible list of wise investing quotes. Thank you for posting it.

Best,
Howard

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William4u
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Re: 31 yr old w/ $500k @ EdwardJones

Post by William4u » Fri Apr 04, 2014 6:04 am

I agree with Taylor and the other posters. This is ridiculous. You are young, so fix this now before it takes a huge bite out of your retirement.

An extra 1% in fees, after 40 years, easily reduces your retirement by 1/3rd. Do you want to retire on 1/3rd less? For example, you would retire on $2 million instead of $3 million for no good reason.

And you might over the long run pay far more than an extra 1% fees over a Total Index Fund (and you portfolio is essentially identical to an Total Index Fund with much higher fees).

Read this blog about how fees affect your retirement...

http://vanguardblog.com/2011/10/28/stop ... f-returns/

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Taylor Larimore
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Impact of Fees.

Post by Taylor Larimore » Fri Apr 04, 2014 7:41 am

William:

I copied this from your link.
CUMULATIVE IMPACT OF FEES:

.................................Annual Fee
.............0.10%.......0.25%.....0.50%.....1.00%.....2.00%.....3.00%

3 years.....–0.3%......–0.7%......–1.5%.....–2.9%......–5.8%.....–8.5%
5 years.....–0.5%......–1.2%......–2.5%.....–4.9%......–9.4%....–13.7%
10 years...–1.0%.......–2.5%.....–4.9%.....–9.5%.....–18.0%....–25.6%
20 years...–2.0%.......–4.9%.....–9.5%....–18.0%.....–32.7%....–44.6%
30 years...–3.0%.......–7.2%....–13.9%....–25.8%.....–44.8%....–58.8%
40 years...–3.9%.......–9.5%....–18.1%....–32.8%.....–54.7%....–69.3%
Here's more:
"If there is 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." -- Russell Kinnell, Morningstar's director of mutual fund research.
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

supernova
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Re: 31 yr old w/ $500k @ EdwardJones

Post by supernova » Fri Apr 04, 2014 8:01 am

carlweezer wrote:EJ is not completely transparent with the fees charged. I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges. I knew they were high but I liked the idea of letting a professional handle them while allowing me to concentrate on earning more. Fear of the unknown I guess.
There are a lot of former EJers on this forum. Myself included. I am 30, and recently switched from Edward Jones to Vanguard. I had $80k in assets at EJ, but when I found out about the 5.75% load fee, that alone made me decide to switch to Vanguard (Not cool knowing you lost almost 6% just in initial fees). It is a sunk cost, but just the idea of it. Especially, looking back, my advisor had me in just really awful funds (i.e. high yield bond and balanced fund in taxable account).

placeholder
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Re: 31 yr old w/ $500k @ EdwardJones

Post by placeholder » Fri Apr 04, 2014 1:00 pm

If it were me I would pick a discount brokerage with a good bonus program going and move everything there to use the bonus money to sell most of that stuff and implement a good index portfolio (my preference is with ETFs).

carlweezer
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Re: 31 yr old w/ $500k @ EdwardJones

Post by carlweezer » Fri Apr 04, 2014 1:53 pm

I have been with the same guy for about 8 years. He came highly recommended from a "wealthy" person I knew at the time. After opening up this can of worms yesterday it rekindled the memory of sitting in his office the first time. I remember him showing me the different fund classes and the front load fees and ER's for them. I remember thinking "they all suck... but this one sucks less". I just thought that was what I had to choose from and I became complacent and just let it ride for far too long.
I called Vanguard today and am in the process of transferring the funds to them. I will sell them and buy vanguard funds with lower ER's once the funds are available. That will give me time to do some research and speak with a CFP from Vanguard. I appreciate all the advice and time you guys have given me here. I already feel more "in control" and I haven't even made a decision what to invest in.

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Re: Hodge-podge of expensive funds.

Post by Professor Emeritus » Fri Apr 04, 2014 3:38 pm

Taylor Larimore wrote:carlweezer:


I will be blunt. You listed one of the most ridiculous collection of expensive funds I have seen posted on this forum.


Best wishes.
Taylor

Blunt is fine, but let's be nice. OP was suckered by a pro and admits it.

Perhaps "you have been misled into one of the most ridiculous collection of expensive funds I have seen posted on this forum".

swaption
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Re: 31 yr old w/ $500k @ EdwardJones

Post by swaption » Fri Apr 04, 2014 3:58 pm

carlweezer wrote:I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges.
Most of us have had this sickness. Perhaps the only way to build up immunity. Kind of like chicken pox, much better if you get it when you are young.

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William4u
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Re: 31 yr old w/ $500k @ EdwardJones

Post by William4u » Fri Apr 04, 2014 4:09 pm

swaption wrote:
carlweezer wrote:I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges.
Most of us have had this sickness. Perhaps the only way to build up immunity. Kind of like chicken pox, much better if you get it when you are young.
+1

My wife and I were in bad funds for years. We learned our (expensive) lesson as we read up on boglehead research. Now we are on track and doing fine at Vanguard and Fidelity (Spartan Funds only). We learned that investing primarily in inexpensive index funds is the only (decision theoretically rational) way to invest for retirement.

I recommend the three fund portfolio others have mentioned.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by ps56k » Fri Apr 04, 2014 4:13 pm

I can never keep these two firms apart - too similar names to mentally tag them.
- Edward/Jones
- Raymond/James

My wife's sisters use one of these,
and yeah - their holdings look the same as the laundry list from above.
I've wanted to share the Kool-Aid - but wanted to keep the family peace.

Some folks just need the hand holding, as they are totally lost,
and therefore are willing to pay the cost of "management",
even if they don't really know they are paying....

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Re: Hodge-podge of expensive funds.

Post by Taylor Larimore » Fri Apr 04, 2014 4:33 pm

Professor Emeritus wrote:
Taylor Larimore wrote:carlweezer:


I will be blunt. You listed one of the most ridiculous collection of expensive funds I have seen posted on this forum.


Best wishes.
Taylor

Blunt is fine, but let's be nice. OP was suckered by a pro and admits it.

Perhaps "you have been misled into one of the most ridiculous collection of expensive funds I have seen posted on this forum".
Professor Emeritus:

I like your phrasing much better than mine. It is what I meant. I hope Carl understands.

Thank you and best wishes.
Taylor
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Re: Hodge-podge of expensive funds.

Post by carlweezer » Fri Apr 04, 2014 6:08 pm

Taylor Larimore wrote:
Professor Emeritus wrote:
Taylor Larimore wrote:carlweezer:


I will be blunt. You listed one of the most ridiculous collection of expensive funds I have seen posted on this forum.


Best wishes.
Taylor[/quote


Blunt is fine, but let's be nice. OP was suckered by a pro and admits it.

Perhaps "you have been misled into one of the most ridiculous collection of expensive funds I have seen posted on this forum".
Professor Emeritus:

I like your phrasing much better than mine. It is what I meant. I hope Carl understands.

Thank you and best wishes.
Taylor
I never thought anything of it. I actually appreciated the bluntness. :happy

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Re: 31 yr old w/ $500k @ EdwardJones

Post by hoppy08520 » Fri Apr 04, 2014 6:16 pm

Carl, don't feel bad. This forum sometimes feels like an AA meeting -- probably at least half of us have been lying drunk in a gutter somewhere before we discovered passive investing. You should find some of the "your worst investing mistake" threads here -- there are plenty and they're interesting to read. So welcome to the club. My mother was at Edward Jones too, for 10+ years. She's at Vanguard now. Better late than never.

Look at the bright side. You're 31 years old and you have $500K. You're doing better than probably 98% of your peers. Again, better late than never.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by ogd » Fri Apr 04, 2014 6:25 pm

William4u wrote:
swaption wrote:
carlweezer wrote:I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges.
Most of us have had this sickness. Perhaps the only way to build up immunity. Kind of like chicken pox, much better if you get it when you are young.
+1

My wife and I were in bad funds for years. We learned our (expensive) lesson as we read up on boglehead research. Now we are on track and doing fine at Vanguard and Fidelity (Spartan Funds only). We learned that investing primarily in inexpensive index funds is the only (decision theoretically rational) way to invest for retirement.

I recommend the three fund portfolio others have mentioned.
Another +1. Happened to a lot of us before we wisened up. Mine wasn't EJ, but EJ does have one of the worst reputations for fleecing their customers. Every time one of the commercials is on, my TV feels physically threatened, or it should.

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Re: Hodge-podge of expensive funds.

Post by Professor Emeritus » Fri Apr 04, 2014 7:04 pm

carlweezer wrote:
Taylor Larimore wrote:
Professor Emeritus wrote:
Taylor Larimore wrote:carlweezer:


I will be blunt. You listed one of the most ridiculous collection of expensive funds I have seen posted on this forum.


Best wishes.
Taylor[/quote


Blunt is fine, but let's be nice. OP was suckered by a pro and admits it.

Perhaps "you have been misled into one of the most ridiculous collection of expensive funds I have seen posted on this forum".
Professor Emeritus:

I like your phrasing much better than mine. It is what I meant. I hope Carl understands.

Thank you and best wishes.
Taylor
I never thought anything of it. I actually appreciated the bluntness. :happy
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Re: 31 yr old w/ $500k @ EdwardJones

Post by kerplunk » Fri Apr 04, 2014 7:21 pm

I am bookmarking this thread so that every once in a while I can look at the list of funds mentioned in the first post and be very thankful that I found the Bogleheads forum before finding an advisor who would recommend a portfolio like that.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by SGM » Sat Apr 05, 2014 3:14 pm

Take Taylor's advice. He is a great advocate for the low cost investor. Furthermore, Taylor is one of the kindest, most centered persons I have ever meet. I had the pleasure of meeting him at last year's BH conference in Phillie for the first time. I read his books several years ago.

Don't fret about the front load any longer. That is a sunk cost and has no effect on investing going forward. Cut loose your advisor and get into low cost broad index funds. We all make mistakes, fortunately you have realized your mistake at an early age and will now get to keep more of your hard earned money. :sharebeer

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Re: 31 yr old w/ $500k @ EdwardJones

Post by carmenj54 » Sun May 18, 2014 10:01 am

I would like to say to the 31 yr old -- up until 3 weeks ago I was in your shoes -- with more than $500k in Edward Jones. I felt something was wrong...my money was not compounding like it should (I had inherited much of this EJ account). I took a free finance class by Jeff Kemp from Oshkosh, WI (and you can see online). He showed exactly how much Edward Jones takes on a yearly basis and how much is left for you -- Invest $250K with Edward Jones and after 30 years -- Edward Jones has $2.5 Million and You have $1.5 Million. There you have it...The truth. He shared with me the easiest way to get out of this mess was this: Sell all my American Funds, transfer everything to Vanguard -- keep out about $5K needed for the extra taxes at the end of the year. That being the quickest and most painless way of getting out of managed funds. Vanguard charges 1/10 of what EJ Jones charges per year per mutual fund and returns are much higher and the beauty -- no hidden fees!! He highly recommends books by John Bogle, such as The Little Book of Common Sense Investing and Common Sense On Mutual funds, updated edition by John Bogle. I was well aware of the $95 per account termination fee I was going to have to pay, but I was unaware of the "transfer to Vanguard Market" fees that they charge (on just one of my accounts it was $85.60), but in the long run, the money I am going to be making in index funds at Vanguard...they can have it. If you go to Vanguard, you will have a very happy retirement. Good luck, from a very happy Vanguard investor.

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A very valuable first post.

Post by Taylor Larimore » Sun May 18, 2014 11:38 am

Carmen:

Welcome to the Bogleheads Forum!

Your first contribution is a gem:
"Invest $250K with Edward Jones and after 30 years -- Edward Jones has $2.5 Million and You have $1.5 Million. There you have it."
Best wishes.
Taylor
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Re: 31 yr old w/ $500k @ EdwardJones

Post by Zabar » Sun May 18, 2014 1:42 pm

Welcome to the forum, Carlweezer. You've come to the right place.
DSInvestor wrote:It's almost like they intentially create a complicated portfolio to give you the impression that there's no way that regular folks can manage an investment portfolio so pay us to do it for you. If they created a portfolio like the one I proposed with just 3 funds, you may very well get the impression that you can do it yourself.
DSInvestor's comments are spot-on! Actually, I'd delete the words "It's almost like." This is exactly what your "advisor" did.

You clearly have the right attitude, judging by your other assets and your age. Now let's make sure that your hard work is rewarded and not siphoned off by financial leeches.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by Jazztonight » Sun May 18, 2014 4:58 pm

Carlweezer, let me add my support and welcome to you!

My Dad, now 93, always kept his investment cards hidden from the family. When I became Trustee of his portfolio a couple of years ago, I found almost 20 mutual funds in his Citibank brokerage account, all with high fees and loads.

Virtually everything is at Vanguard now, but sadly I cannot sell these funds without incurring a crazy tax event.

Take a relatively small hit now, and rest easy for the rest of your investing life while you add to your portfolio at Vanguard.

Once again, welcome to the Forum, and let's continue to hear from you!
"What does not destroy me, makes me stronger." Nietzsche

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Re: 31 yr old w/ $500k @ EdwardJones

Post by bottlecap » Sun May 18, 2014 7:28 pm

The difference?

Yearly fees w EJ:

$500,000 at .8% = $4,000 in fees per year (keep in mind you're likely paying more than this, perhaps even twice this)

Yearly fees at Vanguard:

$500,000 at .0005% = $250 per year

I did the calculations on a rollover I'm going to do when my wife quits her job (401(k) is with JH), and I'm just floored by the difference. Thank God for Vanguard!

JT

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Fiction or Fact?

Post by Taylor Larimore » Sun May 18, 2014 7:31 pm

Mike wrote:Vanguard doesn't even rank in top 10 in Barron's list of best fund companies.
Mike:

Over the past 10 years, 92% of Vanguard funds outperformed their peer's.

Performance report: Vanguard funds excel versus peers

Barron's list speaks more about Barron's than about Vanguard.

Best wishes.
Taylor
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Re: 31 yr old w/ $500k @ EdwardJones

Post by sans souliers » Sun May 18, 2014 10:45 pm

Congratulations to you both for the many accomplishments you've made at this early stage in your lives. You have many, many years of time to make up for the short time your eyes were covered. Now that you've found this community, the things you learn will let you look away from where you are. We all have eye-opening stories to recall, and remember yours. You'll help yourselves and those around you with their recollections in years to come. Learn from the mistakes you make, and then move on.
Again -- congratulations - you've found it!
Sometimes pessimism leaves me pretty well prepared for when things don't go my way, and pleasantly surprised when they do.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by bloom2708 » Mon May 19, 2014 8:55 am

carlweezer wrote:Thanks for all the replys. I have quite a bit of reading to do.
All the funds were front loaded. I'm pretty sure they were all in the 5.75% range and an expense ratio around .8%??? It's possible I could be mistaken. EJ is not completely transparent with the fees charged. I feel sick that I neglected taking responsibility for making these decisions and not keeping a better eye on the excess charges. I knew they were high but I liked the idea of letting a professional handle them while allowing me to concentrate on earning more. Fear of the unknown I guess.
I was/am in the exact same boat. However I am 42. Great job catching this at 31.

I am mid-way through "breaking up" with my EJ advisor. It has not been easy. It is a slow process to move and they will come up with every excuse in the book to slow/delay transfers.

My taxable looks like this: VTSAX 50%, VTIAX 15%, VWITX 35% (65/35 Allocation) - (Intermediate tax exempt in Taxable account)

My tax sheltered looks like this: VTSAX 50% VITAX 15%, VBTLX (65/35)

80/20, 75/25 or 70/30 would all "Fit" based on your age. Just research your risk tolerance and set accordingly.

The best way to finish is to start. If you don't have any "EJ specific funds like Advisory funds", you could "In-Kind" transfer everything to Vanguard and sell on that side.

That would make things much easier. I had 3 Advisory accounts which needed to be liquidated before moving.

Good luck!
Last edited by bloom2708 on Tue May 20, 2014 10:31 am, edited 1 time in total.
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Re: 31 yr old w/ $500k @ EdwardJones

Post by Mel Lindauer » Mon May 19, 2014 10:02 am

This thread has been taken off topic. It's run its course and is locked.

[Thread reopened, see below. --admin LadyGeek]
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Re: 31 yr old w/ $500k @ EdwardJones

Post by LadyGeek » Mon May 19, 2014 9:12 pm

I removed a number of comments and replies from a member who expressed an opposing point of view. While we welcome differences of opinion, the manner in which the topic was presented derailed the thread. As a reminder, see: Forum Policy
This is a moderated forum. We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.

Respect your debating opponents. Debates are about issues, not people. If you disagree with an idea, go ahead and marshal all your forces against it. But do not confuse ideas with the person posting them; at all times we must conduct ourselves in a respectful manner to other posters.

Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
Let's restart the discussion and continue helping carlweezer. This thread is unlocked.
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Re: 31 yr old w/ $500k @ EdwardJones

Post by niceguy7376 » Tue May 20, 2014 8:41 am

Giving this a bump and letting the OP know that this is unlocked so that the OP can provide input as to where they stand and what more information is needed. More like a reset button.

Hopefully, we can discuss only the OP matters.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by bloom2708 » Tue May 20, 2014 9:56 am

This chart helped me understand the impact of fees over the course of time. An eye opener.

CUMULATIVE IMPACT OF FEES:

.................................Annual Fee
.............0.10%.......0.25%.....0.50%.....1.00%.....2.00%.....3.00%

3 years.....–0.3%......–0.7%......–1.5%.....–2.9%......–5.8%.....–8.5%
5 years.....–0.5%......–1.2%......–2.5%.....–4.9%......–9.4%....–13.7%
10 years...–1.0%.......–2.5%.....–4.9%.....–9.5%.....–18.0%....–25.6%
20 years...–2.0%.......–4.9%.....–9.5%....–18.0%.....–32.7%....–44.6%
30 years...–3.0%.......–7.2%....–13.9%....–25.8%.....–44.8%....–58.8%
40 years...–3.9%.......–9.5%....–18.1%....–32.8%.....–54.7%....–69.3%
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

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Re: 31 yr old w/ $500k @ EdwardJones

Post by simpleton » Tue May 20, 2014 2:42 pm

bloom2708 wrote:This chart helped me understand the impact of fees over the course of time. An eye opener.

CUMULATIVE IMPACT OF FEES:

.................................Annual Fee
.............0.10%.......0.25%.....0.50%.....1.00%.....2.00%.....3.00%

3 years.....–0.3%......–0.7%......–1.5%.....–2.9%......–5.8%.....–8.5%
5 years.....–0.5%......–1.2%......–2.5%.....–4.9%......–9.4%....–13.7%
10 years...–1.0%.......–2.5%.....–4.9%.....–9.5%.....–18.0%....–25.6%
20 years...–2.0%.......–4.9%.....–9.5%....–18.0%.....–32.7%....–44.6%
30 years...–3.0%.......–7.2%....–13.9%....–25.8%.....–44.8%....–58.8%
40 years...–3.9%.......–9.5%....–18.1%....–32.8%.....–54.7%....–69.3%
I like that chart too, but I find it more insightful to tweak it a bit. Instead of investing one lump sum at the beginning, assume the more typical retirement savings pattern of adding new savings every year.

For the average person, their goal is to "hit their number" so they can retire. The consequence of higher fees for them isn't less money, it's having to spend more time working and saving before they hit their number.

I also like to directly translate the AUM fee into the equivalent flat annual fee. Seemingly low AUM percentages translate into monstrously large annual flat dollar amounts.

Image
Last edited by simpleton on Tue May 20, 2014 2:53 pm, edited 1 time in total.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by bloom2708 » Tue May 20, 2014 2:45 pm

That is a good chart. Thanks for the addition.
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Re: 31 yr old w/ $500k @ EdwardJones

Post by LadyGeek » Tue May 20, 2014 3:16 pm

For those wanting to DIY (Do It Yourself), we have a spreadsheet in the wiki: Effect of expenses on a portfolio
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Re: 31 yr old w/ $500k @ EdwardJones

Post by TRC » Tue May 20, 2014 8:32 pm

carlweezer wrote:I have been with the same guy for about 8 years. He came highly recommended from a "wealthy" person I knew at the time. After opening up this can of worms yesterday it rekindled the memory of sitting in his office the first time. I remember him showing me the different fund classes and the front load fees and ER's for them. I remember thinking "they all suck... but this one sucks less". I just thought that was what I had to choose from and I became complacent and just let it ride for far too long.
I called Vanguard today and am in the process of transferring the funds to them. I will sell them and buy vanguard funds with lower ER's once the funds are available. That will give me time to do some research and speak with a CFP from Vanguard. I appreciate all the advice and time you guys have given me here. I already feel more "in control" and I haven't even made a decision what to invest in.
Don't feel bad. I was in the same boat working with an advisor from smith Barney. Became a boglehead back in 2008 (age 30) and haven't looked back. This forum rocks and people are extremely wiling to help for free.

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Re: 31 yr old w/ $500k @ EdwardJones

Post by LadyGeek » Tue May 20, 2014 8:52 pm

Beating a dead horse, I'd like to throw in a graph to drive the point home. Instead of thinking in terms of percentages, think in terms of what that money really means - how long your retirement will be funded. From the wiki: Expense ratios

Reducing your expenses by 1% (and doing it early) will give you an extra 10 years of retirement.

Image

(The numbers will be different for every scenario, but this is the general idea.)
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Re: 31 yr old w/ $500k @ EdwardJones

Post by Bacchus01 » Wed May 21, 2014 7:12 am

Wow.

Best thing I did was take a day during Christmas holiday in 2012. I read every single Wiki article. The next day I wrote a plan and reviewed with my wife. On the third day I out the plan in motion. It probably took me most if 2013 to execute the plan, but we are now there and I not only learned a lot in the process, I have a better sense that we are better prepared for the future. Ironically, we've started to splurge a little more.

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Wiki reader.

Post by Taylor Larimore » Wed May 21, 2014 7:47 am

Bacchus01 wrote:Best thing I did was take a day during Christmas holiday in 2012. I read every single Wiki article.
Bacchus:

You must be a speed reader and one of the best informed investors on the planet!

Bogleheads wiki

Congratulations and best wishes.
Taylor
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Re: 31 yr old w/ $500k @ EdwardJones

Post by simpleton » Wed May 21, 2014 7:51 am

LadyGeek wrote:Beating a dead horse, I'd like to throw in a graph to drive the point home.
That's a great graphic, and it tells an important story. But that graphic introduces another horse worth beating. That graphic has a story to it that the OP might find illuminating:

That graphic was produced by the fund company AllianceBernstein in 2005 as part of a report they submitted to a federal government hearing on Target Date Funds. Specifically, the graphic was designed to highlight the importance having your Target Date Fund utilize skilled active management to generate an extra 1% return. That you would be silly to accept the lower passive returns of the blue shaded area.

Image


AllianceBernstein was very confident that even with the drag of 1% fees that they could "readily deliver" 1% net market outperformance to investors because:

"The combination of multiple sources of excess return from style-pure actively managed portfolios can result in highly consistent outperformance versus a passive index approach."

How did that work out for them?

Image


Their actively managed 2045 target date fund has lagged the equivalent Vanguard target indexed fund by 1.75% annually over the past 9 years.

The comparison with Edward Jones is clear: It's really easy to put together a fancy, glossy presentation full of bluster. And it's easy for skilled salesmen to make clients feel stupid for not grabbing the easy money.

Actually beating Mr. Market is a whole nother ball game.

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The self-serving investment industry at its best.

Post by Taylor Larimore » Wed May 21, 2014 8:13 am

Simpleton:

You gave us a very well prepared behind-the-scene story which I had not heard before: The investment industry at its self-serving best in the halls of congress. Your post is a good illustration of why our retirement plans are a byzantine hodge-podge that no one understands.

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

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Re: 31 yr old w/ $500k @ EdwardJones

Post by 6miths » Wed May 21, 2014 8:21 am

Howard Donnelly wrote:Taylor,

That is an incredible list of wise investing quotes. Thank you for posting it.

Best,
Howard

Yes. Thank you very much for the quotes and your dedication.
'It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so!' Mark Twain

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Re: 31 yr old w/ $500k @ EdwardJones

Post by Professor Emeritus » Wed May 21, 2014 8:33 am

LadyGeek wrote:Beating a dead horse,
:happy No You are making "Wiener Schnitzel von Pferd" :happy

My High school job in the German restaurant was pounding the Schnitzel

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