Help my broker is trying to freak me out

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Almond
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Help my broker is trying to freak me out

Post by Almond » Sat May 11, 2019 9:22 am

[Thread updated, see this post on Page 2. --admin LadyGeek]

Hi,

Thanks to so many people here and the tons of information I finally decided I wanted to go the three fund portfolio route. My plan was to put US stocks in VTI. Well I called my broker and he started saying I was making a grave mistake that I would be getting in at the top of the market, that I wouldn’t be fully diversified, and many of the funds they have for me are doing well. My broker has a total of 8 funds covering US stocks. they include small cap and mid cap funds, large cap growth such as BRLIX (blue chip 35 fund index) POSKX (prime cap odyssey stock fund) and TORIX (blue chip growth) and some energy specific funds.

If I sell everything and move to VTI I will pay some CG, but okay with that. Also I am not sure why he says I am getting in at the top of the market because if I sell everything and buy back into VTI I am more or less getting in at the same level I just sold at. Is that correct? Is he right that if I move 100% in VTI, I will not be as fully diversified as I am now? I looked at his portfolio vs VTI over the past few years and I think his did better by a few thousand.

The rest of the portfolio he has in T Rowe price emerging market, dodge and cox international,Oppenheimer international growth and Lazard emerging markets FD instl. I was not going to hold international socks, but thinking maybe I should. What funds do you recommend?

For those of you with more experience is he right? Am I mad to rip the band aid off? will I be less diversified? I am making the decisions for me and my partner, who is not interested in learning about investment strategies. that said if I do this and the portfolio blows up they will probably think I am to blame.

EdLaFave
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Re: Help my broker is trying to freak me out

Post by EdLaFave » Sat May 11, 2019 9:42 am

You would be getting in at the top of the market. Since we’re betting on markets continually rising, this will often be true. Given that you have a broker, I assume you have investments, which means you’re already in at the top.

VTI is fully diversified in terms of US stocks. You may or may not want to further diversify with bonds or international stocks.

The funds you’re in now are more expensive than necessary. More funds don’t equal more diversity. Vanguard Total Stock Market owns just about every public US stock.

I didn’t look at every fund you own, but at least one had a fairly low expense ratio. I wouldn’t necessarily rush to pay capital gains in order to sell a reasonable fund with a reasonably low expense ratio. I certainly would redirect dividends to my fund of choice though. Who knows we may have a downturn that’ll allow you to exchange them without paying taxes. Either way you’ll be fine.

If you like ETFs I’d go with VXUS for international stocks.

It sounds like you’re going in the right direction. If you buy total market funds (as you plan to), you’ll have total diversification, which means your broker is being dishonest. I suspect your broker is charging you fees that you haven’t mentioned and you’ll definitely want to get away from that.

retiredjg
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Re: Help my broker is trying to freak me out

Post by retiredjg » Sat May 11, 2019 9:46 am

People define "diversified" in different ways. And some people think that actively managed funds are better than index funds. So it is possible your broker is telling you what he believes to be true and what he believes to be in your best interest. Or he could just be trying to keep you as a client.

Others would say that Vanguard Total Stock Index (VTI) is as diversified as it gets because it contains a representative amount of pretty much everything available in US stocks.

About "getting in at the same level", that is correct if you are talking about selling US stocks and buying US stocks - you are just making more or less an equal exchange. Or if you sell international and buy similar international. However, if you sell your international holdings and replace them with US holdings...you would be selling the international low and buying US high. See the difference?


You are not mad to rip off the bandaid and move to a simpler and lower cost portfolio. I think you are headed in the right direction, but I'm not sure you are actually ready to make the move yet. Have you already considered just how much capital gains will be triggered? How much is long term (lower tax rate) and how much is short term (higher tax rate)?

yohac
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Re: Help my broker is trying to freak me out

Post by yohac » Sat May 11, 2019 9:48 am

Almond wrote:
Sat May 11, 2019 9:22 am
I called my broker and he started saying I was making a grave mistake
Are you implying that you will cut your broker loose if you do this? Then of course he would say that. They learn that on the first day of broker school.

dbr
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Re: Help my broker is trying to freak me out

Post by dbr » Sat May 11, 2019 9:49 am

Why did you call "your" broker. Can't you execute trades on-line without talking to someone or at least without talking to anyone beyond an order taker?

It might be good to open an account with that company or a different company that does not have a personal advisor involved and transfer everything there. Then you would not be exposed to sales pitch investing which is designed to take money out of your pocket and put it in their pocket.

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Watty
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Re: Help my broker is trying to freak me out

Post by Watty » Sat May 11, 2019 9:56 am

Almond wrote:
Sat May 11, 2019 9:22 am
I looked at his portfolio vs VTI over the past few years and I think his did better by a few thousand.
That means very little since it could just be random difference or he might have put your into more aggressive investments. The more aggressive investments might do better when the market is up but worse when the market is down.

A broker needs to make things seem complex and scary to justify their costs. If you decide to invest in index funds you will not need your broker.

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dogagility
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Re: Help my broker is trying to freak me out

Post by dogagility » Sat May 11, 2019 10:07 am

Almond wrote:
Sat May 11, 2019 9:22 am
For those of you with more experience is he right? Am I mad to rip the band aid off?
No, he is not right, and no, you're not mad to rip the band aid off.

Many of the funds he has you in have a very high expense ratio (about 1%). No doubt, he is also charging you a 1% assets under management (AUM) fee. This doesn't sounds like much, but paying 1-2% more in fees can cost you hundreds of thousands of dollars over time.

That's a lot of money in your broker's pocket... no wonder he is "trying to freak you out". He stands to lose a lot of money if you leave. He isn't your friend... this is a business decision on your part.

I suggest you stick with your plan to invest in Vanguard Index funds. I also suggest you contact Vanguard's Personal Advisory Service (PAS). Speak with them about transferring your money to Vanguard. If you need an advisor, Vanguard's PAS is the most reasonable with a 0.3% fee. Once you are more comfortable investing on your own, you can drop the PAS.
Almond wrote:
Sat May 11, 2019 9:22 am
Well I called my broker and he started saying I was making a grave mistake that I would be getting in at the top of the market...
You're already invested at the top of the market... this is a scare tactic on his part that is without merit.
...that I wouldn’t be fully diversified,
[/quote]
VTI is a great fund and plenty diversified for your equity allocation. If you want to add some international, choose Vanguard's total international fund.
Almond wrote:
Sat May 11, 2019 9:22 am
...many of the funds they have for me are doing well.
Well compared to what? Every stock fund has been doing well for the past decade. This is a red herring that he is using to scare you. Don't fall for it.
Taking "risk" since 1995.

dbr
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Re: Help my broker is trying to freak me out

Post by dbr » Sat May 11, 2019 10:12 am

All of the above is excellent except that you don't have to sign up and pay for VPAS to get support from Vanguard to transfer your assets. They will do this as a matter of course if you open Vanguard accounts and tell them to fund the accounts by transferring assets from your current broker. The one thing to check with Vanguard is that all the funds you now own can in fact be held by Vanguard.

But it is also true that your current broker can certainly sell the funds you are in now and buy what you want there no matter what arguments that person makes. Note that there will presumably be commissions and commissions to buy Vanguard funds might be a little high. Generally one can buy and sell ETFs cheaper than actual mutual fund share classes. Also there can be issues getting Admiral classes of some funds not at Vanguard.

Is it or is it not the case that your current broker has discretion to buy and sell in your account? If he does, that is a really bad thing.
Last edited by dbr on Sat May 11, 2019 10:14 am, edited 1 time in total.

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Phineas J. Whoopee
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Re: Help my broker is trying to freak me out

Post by Phineas J. Whoopee » Sat May 11, 2019 10:13 am

Lose the broker salesperson. S/he probably doesn't know where next month's boat payment is coming from, therefore needs to get it from you.

Choose a low-cost index fund provider and initiate a transfer of all assets through them. You'll never need to interact with your broker salesperson again.

I wrote a post yesterday explaining one aspect of why -- it isn't your broker salesperson, they behave as if they own you -- should not be engaged with.

PJW

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goodenyou
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Re: Help my broker is trying to freak me out

Post by goodenyou » Sat May 11, 2019 10:20 am

Your intuition is correct. Break up with him. I will bet that your performance after ALL fees and taxes will be inferior to VTI. If you want international and even at the same asset allocation as your broker, buy an international index etf or fund.

My parents went through the same anxiety with their investments. They are older and very unsophisticated investors. That was 10 years ago. Now they strut around proudly that they are in control with their very simple portfolio getting FREE advice from Vanguard at times. They often say “what were we thinking giving all that money to the guy with a fancy office!?”
"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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Wiggums
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Re: Help my broker is trying to freak me out

Post by Wiggums » Sat May 11, 2019 10:24 am

The vanguard 3-4 fund portfolio is quite diversified. You can compare Your current funds versus the vanguard three or four fund portfolio using a tool such as morningstar’s x-ray. I’d also add that the AUM and the fees associated With the funds that you currently have do matter. There are also tools to compare fees to demonstrate what I am saying. The bottom line is that this is your money and you get to make the final decision. I’ve seen cases where a broker will reduce the AUM And then try to make it up by churning the funds in your account even more.

Good luck to you.

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Mullins
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Re: Help my broker is trying to freak me out

Post by Mullins » Sat May 11, 2019 10:52 am

If I'm thinking correctly, if your broker has you in U.S. stocks and claims you'd be getting in at the top of the market, then doesn't that mean he believes there's no where to go now but down, not up? And so, wouldn't he, as a good broker believing the markets are at their tops and won't be going higher, been calling you to advise you to move it all to cash?

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Kenkat
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Re: Help my broker is trying to freak me out

Post by Kenkat » Sat May 11, 2019 10:55 am

How much are you paying your broker? That’s a critical factor.

retiredjg
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Re: Help my broker is trying to freak me out

Post by retiredjg » Sat May 11, 2019 11:03 am

I'm wondering about this "broker" thing. Does one pay a broker an annual fee for AUM (assets under management)? Or just a transaction fee to make purchases that you direct? Or is this person acting like a financial advisor?

My understanding about the function of a "broker" would not include financial advice. So I'm guessing you are with some kind of "advisor".

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whodidntante
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Re: Help my broker is trying to freak me out

Post by whodidntante » Sat May 11, 2019 11:05 am

You seem to feel uncertain over the basics, so start with the basics. Click that button that says "Wiki" at the top and spend some time reading.

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Stinky
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Re: Help my broker is trying to freak me out

Post by Stinky » Sat May 11, 2019 1:13 pm

Phineas J. Whoopee wrote:
Sat May 11, 2019 10:13 am
Lose the broker salesperson. S/he probably doesn't know where next month's boat payment is coming from, therefore needs to get it from you.

Choose a low-cost index fund provider and initiate a transfer of all assets through them. You'll never need to interact with your broker salesperson again.

I wrote a post yesterday explaining one aspect of why -- it isn't your broker salesperson, they behave as if they own you -- should not be engaged with.

PJW
+1

Take charge of your own investments. Move away from this salesperson who is probably sucking you dry.

Read to Wiki to educate yourself. Ask questions on this Board - lots of folks are more than willing to offer their opinions.

If I wasn't clear - move away from this salesperson!!!
It's a GREAT day to be alive - Travis Tritt

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TomatoTomahto
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Re: Help my broker is trying to freak me out

Post by TomatoTomahto » Sat May 11, 2019 1:20 pm

We need a term for what brokers and advisors are doing when they prattle nonsense like this. Death rattle?

OP, you’re fine. You can’t blame a broker for wanting to keep a paying customer, but you don’t have to pay.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Watty
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Re: Help my broker is trying to freak me out

Post by Watty » Sat May 11, 2019 1:30 pm

TomatoTomahto wrote:
Sat May 11, 2019 1:20 pm
We need a term for what brokers and advisors are doing when they prattle nonsense like this. Death rattle?
There is FUD, Fear, uncertainty, and doubt.

https://en.wikipedia.org/wiki/Fear,_unc ... _and_doubt

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ruralavalon
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Re: Help my broker is trying to freak me out

Post by ruralavalon » Sat May 11, 2019 1:53 pm

What fees are you charged by this broker?
Almond wrote:
Sat May 11, 2019 9:22 am
Hi,

Thanks to so many people here and the tons of information I finally decided I wanted to go the three fund portfolio route. My plan was to put US stocks in VTI. Well I called my broker and he started saying I was making a grave mistake that I would be getting in at the top of the market, that I wouldn’t be fully diversified, and many of the funds they have for me are doing well. [emphasis added] My broker has a total of 8 funds covering US stocks. they include small cap and mid cap funds, large cap growth such as BRLIX (blue chip 35 fund index) POSKX (prime cap odyssey stock fund) and TORIX (blue chip growth) and some energy specific funds.
You would not be "getting in at the top of the market", you are already in the market. You will just be shifting to a different investment.


Almond wrote:
Sat May 11, 2019 9:22 am
If I sell everything and move to VTI I will pay some CG, but okay with that.
What sort of account is this? An IRA, 401k, 403b, 457, TSP, taxable brokerage account, several different accounts?

If this is a tax-advantaged account there is no need to worry about capital gains taxes.

Almond wrote:
Sat May 11, 2019 9:22 am
Also I am not sure why he says I am getting in at the top of the market because if I sell everything and buy back into VTI I am more or less getting in at the same level I just sold at. Is that correct? Is he right that if I move 100% in VTI, I will not be as fully diversified as I am now? I looked at his portfolio vs VTI over the past few years and I think his did better by a few thousand.
He is not correct.

Vanguard Total Stock Market ETF (VTI) is very diversified.

That fund invests in stocks of 3,615 companies, of all sizes large-cap, mid-cap and small-cap, both value and growth types.


Almond wrote:
Sat May 11, 2019 9:22 am
The rest of the portfolio he has in T Rowe price emerging market, dodge and cox international,Oppenheimer international growth and Lazard emerging markets FD instl. I was not going to hold international socks, but thinking maybe I should. What funds do you recommend?
What type of account is this?

I usually suggest Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) or the ETF version (VXUS) if available in the type of account you are using.

That covers both developed and emerging markets, investing in stocks of large-cap, mid-cap and small-cap companies of all types.


Almond wrote:
Sat May 11, 2019 9:22 am
For those of you with more experience is he right? Am I mad to rip the band aid off? will I be less diversified? I am making the decisions for me and my partner, who is not interested in learning about investment strategies. that said if I do this and the portfolio blows up they will probably think I am to blame.
First make a solid diversified plan that you can stick with, covering the entire portfolio including all retirement/investing accounts.

Then if this is a tax-advantaged account and no need to worry about capital gains taxes, the switch over all at once and move on to something else.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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TomatoTomahto
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Re: Help my broker is trying to freak me out

Post by TomatoTomahto » Sat May 11, 2019 2:02 pm

Watty wrote:
Sat May 11, 2019 1:30 pm
TomatoTomahto wrote:
Sat May 11, 2019 1:20 pm
We need a term for what brokers and advisors are doing when they prattle nonsense like this. Death rattle?
There is FUD, Fear, uncertainty, and doubt.
https://en.wikipedia.org/wiki/Fear,_unc ... _and_doubt
FUD works to describe what they’re trying to disseminate; I was hoping to capture the desperation of a salesperson knowing that the market for overpriced funds is drying up and thus, ultimately, his/her livelihood.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Wiggums
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Re: Help my broker is trying to freak me out

Post by Wiggums » Sat May 11, 2019 2:23 pm

TomatoTomahto wrote:
Sat May 11, 2019 2:02 pm
Watty wrote:
Sat May 11, 2019 1:30 pm
TomatoTomahto wrote:
Sat May 11, 2019 1:20 pm
We need a term for what brokers and advisors are doing when they prattle nonsense like this. Death rattle?
There is FUD, Fear, uncertainty, and doubt.
https://en.wikipedia.org/wiki/Fear,_unc ... _and_doubt
FUD works to describe what they’re trying to disseminate; I was hoping to capture the desperation of a salesperson knowing that the market for overpriced funds is drying up and thus, ultimately, his/her livelihood.
So true.

Topic Author
Almond
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Re: Help my broker is trying to freak me out

Post by Almond » Sat May 11, 2019 4:04 pm

Thank you everyone for the great advice. I felt I had read and learned a lot about the three fund portfolio but once I was talking with broker I got nervous and him saying such things as — obviously you can do as you want but not the first time I have see clients dump their well managed portfolio only for their new approach to tank etc etc. Yeah, he was freaking me out and It is a joint portfolio so made me even more concerned.

It is a taxable account so will have to pay CG, but agree with the strategy to hold onto any funds with a low fee for now so as to minimize CG. Alternatively I could wait for a market down turn, but that might be a while and in the meantime I am paying fund fees and management fees.

appreciate all the advice and confirmation that I am on the right path.

lkar
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Re: Help my broker is trying to freak me out

Post by lkar » Sat May 11, 2019 4:19 pm

Mullins wrote:
Sat May 11, 2019 10:52 am
If I'm thinking correctly, if your broker has you in U.S. stocks and claims you'd be getting in at the top of the market, then doesn't that mean he believes there's no where to go now but down, not up? And so, wouldn't he, as a good broker believing the markets are at their tops and won't be going higher, been calling you to advise you to move it all to cash?
Right. Holding a stock is a decision not to sell. It is the equivalent of deciding to buy it.

If you have a position worth $10,000, a decision to hold it is the same as a decision to buy it, in that the decision not to sell means that you are deciding you would rather have the security than $10,000.

A broker advising you not to move a security that he believes is topped out should be recommending you decide to no longer hold it at all.

Katietsu
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Re: Help my broker is trying to freak me out

Post by Katietsu » Sat May 11, 2019 4:33 pm

Please pay attention to the post that pointed out that if you sell non-US stocks and invest the proceeds in VTI, you may be selling low and buying high. At minimum, you will be making a significant change to your asset allocation and should be doing so consciously.

You do not need to continue paying management fees even if you decide not to sell everything right away. You are invested in what appear to be pretty main stream funds. It is quite possible that you can transfer them to a discount brokerage without selling first. You would need to check on each fund.

And I would continue to do more reading and learning.
I think you are going in the right direction. But I think you need a bit more knowledge to take this to the next step.

retire2022
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Re: Help my broker is trying to freak me out

Post by retire2022 » Sat May 11, 2019 7:57 pm

op read this thread :

viewtopic.php?f=1&t=280863&newpost=4539 ... ead#unread

just put in transfer forms to Vanguard, or any other custodian Charles Schwab or Fidelity.

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Almond
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Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 11:15 am

Katietsu wrote:
Sat May 11, 2019 4:33 pm
Please pay attention to the post that pointed out that if you sell non-US stocks and invest the proceeds in VTI, you may be selling low and buying high. At minimum, you will be making a significant change to your asset allocation and should be doing so consciously.

You do not need to continue paying management fees even if you decide not to sell everything right away. You are invested in what appear to be pretty main stream funds. It is quite possible that you can transfer them to a discount brokerage without selling first. You would need to check on each fund.

And I would continue to do more reading and learning.
I think you are going in the right direction. But I think you need a bit more knowledge to take this to the next step.

Thank you for this. I plan to sell international funds, did not list them here, into international such as VUSTX, and us funds into voo or similar. I agree about not selling all at once but some funds have fees close to or at 1% which will hurt over time.

My other concern is % in fixed income. It is almost 50% and I want 70/30. If I sell those at a loss it does offset some gains but will be getting into something like VOO at higher level. So not sure what to do.

EdLaFave
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Re: Help my broker is trying to freak me out

Post by EdLaFave » Wed May 15, 2019 11:27 am

Abandon the notion that this asset is “high” and this one is “low”. Embrace the reality that you can’t predict the future, except that a diversified portfolio will grow your wealth over decades, and then dump every spare penny into a reasonable allocation that doesn’t change with the seasons.

Done.

GLState
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Re: Help my broker is trying to freak me out

Post by GLState » Wed May 15, 2019 11:28 am

[/quote]


Thank you for this. I plan to sell international funds, did not list them here, into international such as VUSTX, and us funds into voo or similar. I agree about not selling all at once but some funds have fees close to or at 1% which will hurt over time.

[/quote]

VUSTX is Vanguard Long-Term Treasury Fund Investor Shares, not International.

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ruralavalon
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Re: Help my broker is trying to freak me out

Post by ruralavalon » Wed May 15, 2019 11:34 am

Almond wrote:
Wed May 15, 2019 11:15 am
Katietsu wrote:
Sat May 11, 2019 4:33 pm
Please pay attention to the post that pointed out that if you sell non-US stocks and invest the proceeds in VTI, you may be selling low and buying high. At minimum, you will be making a significant change to your asset allocation and should be doing so consciously.

You do not need to continue paying management fees even if you decide not to sell everything right away. You are invested in what appear to be pretty main stream funds. It is quite possible that you can transfer them to a discount brokerage without selling first. You would need to check on each fund.

And I would continue to do more reading and learning.
I think you are going in the right direction. But I think you need a bit more knowledge to take this to the next step.

Thank you for this. I plan to sell international funds, did not list them here, into international such as VUSTX, and us funds into voo or similar. I agree about not selling all at once but some funds have fees close to or at 1% which will hurt over time.

My other concern is % in fixed income. It is almost 50% and I want 70/30. If I sell those at a loss it does offset some gains but will be getting into something like VOO at higher level. So not sure what to do.
I suggest making an overall plan for all accounts first, before buying or selling anything in the taxable account.

Vanguard 500 ETF (VOO) is a reasonable choice for Investing in U.S. stocks. But I suggest instead Vanguard Total Stock Market ETF (VTI) because a little more diversified with the same very low expense ratio.

Turn off any automatic reinvestment of dividends or gains that may have been set up in the taxable account. There is no sense in buying more of anything you might sell soon.

Then you can sell any fund with an unrealized capital loss, and that will offset some of the unrealized capital gains if you sell a funds with gains.

It might help if you simply listed each fund currently in the taxable account (giving fund name, ticker symbol, and expense ratio), along with the amount invested, and the unrealized capital gain/loss status and amount for each investment.

In selling concentrate on high expense and less diversified funds.

There may be some funds in the taxable account worth keeping, such as PrimeCap Odyssey Stock Fund (POSKX) or Dodge & Cox International Stock Fund (DODFX).
Last edited by ruralavalon on Wed May 15, 2019 11:41 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

elainet7
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Re: Help my broker is trying to freak me out

Post by elainet7 » Wed May 15, 2019 11:39 am

Act as if every broker, advisor, and insurance salesman is a hardened criminal-William Bernstein

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BL
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Re: Help my broker is trying to freak me out

Post by BL » Wed May 15, 2019 12:33 pm

It sounds like you need to look at your latest statement for a list of funds. You should find out ERs (expense ratios), ticker symbols, and unrealized gains/losses (or cost basis) so you can figure out Capital gains/losses on each fund. Then you would know the total Capital gains (CG) and can decide whether to keep the better ones or not. Also you need them when you call Vanguard to see if they can be transferred in-kind (as is) or need to be sold and turned into cash before transferring your account. Also you could post them here to get more specific advice on a portfolio, by folks who have nothing to gain. ERs could be looked up on Yahoo, Google, or at Morningstar, which has a lot of info on each fund.

You haven't said what the costs are of having your advisor. There could be management fees (assets under management, AUM), front or deferred loads, 12b-1 kickbacks to broker out of the high ERs, etc. If you dig into your statements you just might find out some of them. If you ask him, you might find out some of them. Since they have various names for fees, they may avoid mentioning all if they can get by with it, since they are not all called fees, for example.

Once you realize the total cost, and look up a chart showing how that cost counts up over time, you will want to get away from this model. In 20 years, you would have handed over about 20% of your portfolio to an advisor who gets 1% AUM! There could be an intermediate choice using Vanguard PAS, at 0.3% AUM with funds averaging <0.1%, for a total of 0.4% annually. Compare to what you have now: funds >1.0% ERs, probably 1.0% or more AUM, or whatever. Consider PAS as training wheels that you can remove if you choose after a year or so when you are more confident. Even keeping a PAS advisor would be a fairly low cost. Most of us here are DIY investors so can't imagine adding to a very low cost, but it can be useful if the person is trustworthy and works as your fiduciary, with no incentive to sell you expense funds or products.

User avatar
Toons
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Location: Hills of Tennessee

Re: Help my broker is trying to freak me out

Post by Toons » Wed May 15, 2019 2:13 pm

Ignore the Broker's advice.
Nonsensical
3 fund
All you need.
Keep It Simple
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Cody6136
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Re: Help my broker is trying to freak me out

Post by Cody6136 » Wed May 15, 2019 3:14 pm

Almond wrote:
Sat May 11, 2019 9:22 am
Hi,

Thanks to so many people here and the tons of information I finally decided I wanted to go the three fund portfolio route. My plan was to put US stocks in VTI. Well I called my broker and he started saying I was making a grave mistake that I would be getting in at the top of the market, that I wouldn’t be fully diversified, and many of the funds they have for me are doing well. My broker has a total of 8 funds covering US stocks. they include small cap and mid cap funds, large cap growth such as BRLIX (blue chip 35 fund index) POSKX (prime cap odyssey stock fund) and TORIX (blue chip growth) and some energy specific funds.

If I sell everything and move to VTI I will pay some CG, but okay with that. Also I am not sure why he says I am getting in at the top of the market because if I sell everything and buy back into VTI I am more or less getting in at the same level I just sold at. Is that correct? Is he right that if I move 100% in VTI, I will not be as fully diversified as I am now? I looked at his portfolio vs VTI over the past few years and I think his did better by a few thousand.

The rest of the portfolio he has in T Rowe price emerging market, dodge and cox international,Oppenheimer international growth and Lazard emerging markets FD instl. I was not going to hold international socks, but thinking maybe I should. What funds do you recommend?

For those of you with more experience is he right? Am I mad to rip the band aid off? will I be less diversified? I am making the decisions for me and my partner, who is not interested in learning about investment strategies. that said if I do this and the portfolio blows up they will probably think I am to blame.
No, you are not mad. But you're just getting the first intimations about how you have been living your financial life, and some of what you are going to see isn't going to be pretty.

You are asking a good set of knowledgeable people...the people on this board...about another vision of investing. Think of it as a trip to another country. This is exactly what I have done when I discovered some unsavory facts about my own finances and managed to wriggle free of a financial advisor (whom I met with only a single time, whew!).

What has been an even BETTER idea is to make sure that I gain the basic understanding that underpins the responses from this forum. I've also benefited from SLOWING DOWN.

In my view as a relative neewbie....this particular broker has the power to freak you out because he has helped you believe that he is privy to a set of secrets that will be forever unknown to you. The BH approach comes down on the side of YOU...your knowledge, planning and allocation of risk, reduction of fees and staying the course while LBYM. Those things put you in the driver's seat. Once you have a deeper understanding of the theory of the BH approach, the broker -- whose role it is to make you 'broker' --won't be able to freak you out. He will seem comical or even kind of sad. Mostly irrelevant.

"Wisdom is the principal thing, therefore get wisdom and with all your getting, get understanding."
--Proverbs 4:7

ohai
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Re: Help my broker is trying to freak me out

Post by ohai » Wed May 15, 2019 3:27 pm

OP, even if you are not comfortable moving all your investments out of this brokerage, there's a good chance you can get them to cut fees. What are you currently paying them? If it's anything more than 0.75%, you will most likely be able to get them to cut the rates. Also, it's pretty typical for these brokers to charge you $100 or so for every trade execution. This should be free to $7 if you handle the account yourself.

If you want to try your hand before going full on yourself, you can transfer a portion of your assets out to a self managed account and make sure you are comfortable.

In many cases, other companies will offer you a sign up bonus for moving your assets to them, including to self directed accounts. My in laws were offered something like $3k to $5k for moving a bit less than $1 million. Not sure if that matters, but can't hurt.

Topic Author
Almond
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Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 3:38 pm

ruralavalon wrote:
Wed May 15, 2019 11:34 am
Almond wrote:
Wed May 15, 2019 11:15 am
Katietsu wrote:
Sat May 11, 2019 4:33 pm
Please pay attention to the post that pointed out that if you sell non-US stocks and invest the proceeds in VTI, you may be selling low and buying high. At minimum, you will be making a significant change to your asset allocation and should be doing so consciously.

You do not need to continue paying management fees even if you decide not to sell everything right away. You are invested in what appear to be pretty main stream funds. It is quite possible that you can transfer them to a discount brokerage without selling first. You would need to check on each fund.

And I would continue to do more reading and learning.
I think you are going in the right direction. But I think you need a bit more knowledge to take this to the next step.

Thank you for this. I plan to sell international funds, did not list them here, into international such as VUSTX, and us funds into voo or similar. I agree about not selling all at once but some funds have fees close to or at 1% which will hurt over time.

My other concern is % in fixed income. It is almost 50% and I want 70/30. If I sell those at a loss it does offset some gains but will be getting into something like VOO at higher level. So not sure what to do.
I suggest making an overall plan for all accounts first, before buying or selling anything in the taxable account.

Vanguard 500 ETF (VOO) is a reasonable choice for Investing in U.S. stocks. But I suggest instead Vanguard Total Stock Market ETF (VTI) because a little more diversified with the same very low expense ratio.

Turn off any automatic reinvestment of dividends or gains that may have been set up in the taxable account. There is no sense in buying more of anything you might sell soon.

Then you can sell any fund with an unrealized capital loss, and that will offset some of the unrealized capital gains if you sell a funds with gains.

It might help if you simply listed each fund currently in the taxable account (giving fund name, ticker symbol, and expense ratio), along with the amount invested, and the unrealized capital gain/loss status and amount for each investment.

In selling concentrate on high expense and less diversified funds.

There may be some funds in the taxable account worth keeping, such as PrimeCap Odyssey Stock Fund (POSKX) or Dodge & Cox International Stock Fund (DODFX).
I have about $14, 000 in unrealized gains if I sold everything. I think most of that is long term but hard to get a straight answer.

For US stocks I have unrealized gains as follows

TBCIX $3,300 the fee is .57
POSKX $5,214. Fee is .66
CIPX $1,600. Fee is .90
BRLIX $2,440 fee is .15
DODGX $260 fee .52
The rest are at a loss

REIPX -$328 fee .54.
APMRX -$1,205 fee1.05. This is not a US stock fund but I am not sure why I even have it?
APDQX - $582. Fee 1.05
NOSGX -$18 fee 1.00
TORIX -$72 loss fee .96

I just realized they sold some fund s this year for a total loss of $1,800 in addition to loss listed so I have about $4000. What would you suggest.

In international my biggest gain is
PRIZX $1,500 fee 1.07
OIGIX $800 fee 1.11

I have about $700 in losses in other international funds to offset this.

dspencer
Posts: 172
Joined: Wed Jul 06, 2016 11:29 am

Re: Help my broker is trying to freak me out

Post by dspencer » Wed May 15, 2019 3:41 pm

Almond wrote:
Sat May 11, 2019 4:04 pm
Thank you everyone for the great advice. I felt I had read and learned a lot about the three fund portfolio but once I was talking with broker I got nervous and him saying such things as — obviously you can do as you want but not the first time I have see clients dump their well managed portfolio only for their new approach to tank etc etc. Yeah, he was freaking me out and It is a joint portfolio so made me even more concerned.

It is a taxable account so will have to pay CG, but agree with the strategy to hold onto any funds with a low fee for now so as to minimize CG. Alternatively I could wait for a market down turn, but that might be a while and in the meantime I am paying fund fees and management fees.

appreciate all the advice and confirmation that I am on the right path.
I am so resentful of your broker just reading this. He's using fear and social pressure to keep you from doing what is in your best interest because it's not in his best interest. I think the most important thing is you get away from him.

If possible, you should lean on the services of the receiving institution to handle the transfer. I think it's possible you could do everything without ever talking directly to your broker again and you are totally justified in making that decision. It is so liberating to reach the point where you never have to worry about interacting with a broker again.

There are details for you to figure out but I'm sure you can get them figured out with help from this community just by asking and providing the proper background info.

Topic Author
Almond
Posts: 38
Joined: Wed May 01, 2019 3:11 pm

Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 3:43 pm

Also I just did a calculation using nerd wallet if I leave $600k at 1% AUM fee, not including fund fees, over 15 years the total cost is $208k. WOW is that correct. If so why do most people not mange their own funds. Which is the question my partner keeps asking and I don’t know how to answer

retiredjg
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Re: Help my broker is trying to freak me out

Post by retiredjg » Wed May 15, 2019 3:48 pm

$600k at 1% is $6,000 a year. And yes, that is $6k a year that is not earning money for you every year after you lose it.

Don't know if that gets you all the way to $208k though. What did you do to get there?

Grt2bOutdoors
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Re: Help my broker is trying to freak me out

Post by Grt2bOutdoors » Wed May 15, 2019 3:49 pm

Almond wrote:
Wed May 15, 2019 3:43 pm
Also I just did a calculation using nerd wallet if I leave $600k at 1% AUM fee, not including fund fees, over 15 years the total cost is $208k. WOW is that correct. If so why do most people not mange their own funds. Which is the question my partner keeps asking and I don’t know how to answer
Inertia! Because people are afraid of math and prefer someone else who describes themselves as an "adviser". An adviser - someone who is an expert in some field. Who or what qualifies this assignment of the word "expert"? Why the adviser of course. If you told someone the fee is 1%, the average person would say okay, that means I keep 99% and there's a cost, no one works for free, since 1% is the charge, I'm willing to pay it since I keep 99%. :oops: Now, tell the average person that in exactly 5 years time, they have given their adviser 5% of their assets, how do they feel? How about 10% of assets after 10 years? What about 20% or 30%? Then the lightbulb clicks on....the AHA moment!!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

retiredjg
Posts: 36346
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Re: Help my broker is trying to freak me out

Post by retiredjg » Wed May 15, 2019 3:50 pm

Almond wrote:
Wed May 15, 2019 3:38 pm
I just realized they sold some fund s this year for a total loss of $1,800 in addition to loss listed so I have about $4000. What would you suggest.
YOu probably should sell it all, but if you don't sell at least $4k worth, you are missing an opportunity to get out of stuff you don't want with no tax cost.

dspencer
Posts: 172
Joined: Wed Jul 06, 2016 11:29 am

Re: Help my broker is trying to freak me out

Post by dspencer » Wed May 15, 2019 3:58 pm

Almond wrote:
Wed May 15, 2019 3:38 pm
I have about $14, 000 in unrealized gains if I sold everything. I think most of that is long term but hard to get a straight answer.

For US stocks I have unrealized gains as follows

TBCIX $3,300 the fee is .57
POSKX $5,214. Fee is .66
CIPX $1,600. Fee is .90
BRLIX $2,440 fee is .15
DODGX $260 fee .52
The rest are at a loss

REIPX -$328 fee .54.
APMRX -$1,205 fee1.05. This is not a US stock fund but I am not sure why I even have it?
APDQX - $582. Fee 1.05
NOSGX -$18 fee 1.00
TORIX -$72 loss fee .96

I just realized they sold some fund s this year for a total loss of $1,800 in addition to loss listed so I have about $4000. What would you suggest.

In international my biggest gain is
PRIZX $1,500 fee 1.07
OIGIX $800 fee 1.11

I have about $700 in losses in other international funds to offset this.
Do you know what your new institution will be? If so, do you know what assets they will take as in-kind transfers? If you can simply transfer everything in-kind then you can decide later what to sell and what to keep. I went through a similar process switching from Betterment to Vanguard and still have many of the holdings but put new money into a simplified portfolio of mutual funds. However, they were mostly low cost index funds anyway so I didn't hate the funds themselves in most cases.

Personally, I have a single small holding with a .30 expense ratio (fee). Everything else is below .14 and my portfolio as a whole is at .08. So it would be hard for me to keep almost any of those funds long term. That being said, if you need to spread out the gains then you could do that slowly over time if you want.

Also, once you are in control of your investments it should be easier to see what you have. Vanguard has a tool that shows you the breakdowns in terms of stocks/bonds, domestic/international. I'm sure Fidelity and others have similar tools. That might make it easier to maintain a similar portfolio if that is your desire. The logic for that is debatable.

Topic Author
Almond
Posts: 38
Joined: Wed May 01, 2019 3:11 pm

Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 4:16 pm

retiredjg wrote:
Wed May 15, 2019 3:48 pm
$600k at 1% is $6,000 a year. And yes, that is $6k a year that is not earning money for you every year after you lose it.

Don't know if that gets you all the way to $208k though. What did you do to get there?
here is the link I did it again with annual return of 6% and it came to $160k. It was based against having etc with rough cost of .15. Still seems like a lot.

https://www.nerdwallet.com/blog/investi ... se-ratios/

Topic Author
Almond
Posts: 38
Joined: Wed May 01, 2019 3:11 pm

Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 4:18 pm

Grt2bOutdoors wrote:
Wed May 15, 2019 3:49 pm
Almond wrote:
Wed May 15, 2019 3:43 pm
Also I just did a calculation using nerd wallet if I leave $600k at 1% AUM fee, not including fund fees, over 15 years the total cost is $208k. WOW is that correct. If so why do most people not mange their own funds. Which is the question my partner keeps asking and I don’t know how to answer
Inertia! Because people are afraid of math and prefer someone else who describes themselves as an "adviser". An adviser - someone who is an expert in some field. Who or what qualifies this assignment of the word "expert"? Why the adviser of course. If you told someone the fee is 1%, the average person would say okay, that means I keep 99% and there's a cost, no one works for free, since 1% is the charge, I'm willing to pay it since I keep 99%. :oops: Now, tell the average person that in exactly 5 years time, they have given their adviser 5% of their assets, how do they feel? How about 10% of assets after 10 years? What about 20% or 30%? Then the lightbulb clicks on....the AHA moment!!
Wow that is a great way to look at it and it doesn’t account for miss opportunity cost as the money is taken every year an not invested.

IHateCasinos
Posts: 40
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Location: Portland, OR

Re: Help my broker is trying to freak me out

Post by IHateCasinos » Wed May 15, 2019 4:25 pm

Phineas J. Whoopee wrote:
Sat May 11, 2019 10:13 am
Lose the broker salesperson. S/he probably doesn't know where next month's boat payment is coming from, therefore needs to get it from you.

Choose a low-cost index fund provider and initiate a transfer of all assets through them. You'll never need to interact with your broker salesperson again.

I wrote a post yesterday explaining one aspect of why -- it isn't your broker salesperson, they behave as if they own you -- should not be engaged with.

PJW
+1
and that line "S/he probably doesn't know where next month's boat payment is coming from, therefore needs to get it from you." should get comment of the month/year!

M

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dogagility
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Re: Help my broker is trying to freak me out

Post by dogagility » Wed May 15, 2019 4:51 pm

Almond wrote:
Wed May 15, 2019 3:43 pm
Also I just did a calculation using nerd wallet if I leave $600k at 1% AUM fee, not including fund fees, over 15 years the total cost is $208k. WOW is that correct. If so why do most people not mange their own funds. Which is the question my partner keeps asking and I don’t know how to answer
Absolutely right. Now you're seeing the light. :beer
https://investor.vanguard.com/investing ... t-of-costs

Why do most people not manage their own funds? It takes a bit of time at first to learn an appropriate way to invest. People think it's difficult. People don't like math. People think investing is complicated... and "advisors" keep feeding them this story.

Investing the BH way is not complicated. The BH method takes more psychological than intellectual toughness.
Taking "risk" since 1995.

Luckywon
Posts: 447
Joined: Tue Mar 28, 2017 10:33 am

Re: Help my broker is trying to freak me out

Post by Luckywon » Wed May 15, 2019 5:01 pm

Almond wrote:
Sat May 11, 2019 4:04 pm
... once I was talking with broker I got nervous ...
Looks like you are moving in a very good direction, with advice from this forum. I strongly suggest you never speak to your broker again. IMO, nothing he says will be of added value and he will be on a mission to retain you as a client using tactics that will cause you stress and possibly make costly errors.

Topic Author
Almond
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Joined: Wed May 01, 2019 3:11 pm

Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 5:51 pm

thank you everyone this has been really helpful. Thinking of moving to Merrill Edge. Need to check what I can move in kind. It is hard to believe paying 1% fee on $600k cost about $150k it seems so high and the fact it might be true is so shocking to me I can’t believe anyone would use a broker.

jibantik
Posts: 142
Joined: Fri Nov 24, 2017 1:05 pm

Re: Help my broker is trying to freak me out

Post by jibantik » Wed May 15, 2019 6:45 pm

Almond wrote:
Wed May 15, 2019 5:51 pm
thank you everyone this has been really helpful. Thinking of moving to Merrill Edge. Need to check what I can move in kind. It is hard to believe paying 1% fee on $600k cost about $150k it seems so high and the fact it might be true is so shocking to me I can’t believe anyone would use a broker.
Almond, you may find this chart interesting (or shocking :D). You are taking 100% of the risk, putting up 100% of the capital, and your advisor wants to take 1/3rd of your retirement?? :annoyed

Image

(taken from here)

jibantik
Posts: 142
Joined: Fri Nov 24, 2017 1:05 pm

Re: Help my broker is trying to freak me out

Post by jibantik » Wed May 15, 2019 6:51 pm

jibantik wrote:
Wed May 15, 2019 6:45 pm
Almond wrote:
Wed May 15, 2019 5:51 pm
thank you everyone this has been really helpful. Thinking of moving to Merrill Edge. Need to check what I can move in kind. It is hard to believe paying 1% fee on $600k cost about $150k it seems so high and the fact it might be true is so shocking to me I can’t believe anyone would use a broker.
Almond, you may find this chart interesting (or shocking :D). You are taking 100% of the risk, putting up 100% of the capital, and your advisor wants to take 1/3rd of your retirement?? :annoyed

Image

(taken from here)
From the mouth of the wise-one himself: https://www.youtube.com/watch?v=K4lwJ5aQGlI

Topic Author
Almond
Posts: 38
Joined: Wed May 01, 2019 3:11 pm

Re: Help my broker is trying to freak me out

Post by Almond » Wed May 15, 2019 7:20 pm

jibantik wrote:
Wed May 15, 2019 6:45 pm
Almond wrote:
Wed May 15, 2019 5:51 pm
thank you everyone this has been really helpful. Thinking of moving to Merrill Edge. Need to check what I can move in kind. It is hard to believe paying 1% fee on $600k cost about $150k it seems so high and the fact it might be true is so shocking to me I can’t believe anyone would use a broker.
Almond, you may find this chart interesting (or shocking :D). You are taking 100% of the risk, putting up 100% of the capital, and your advisor wants to take 1/3rd of your retirement?? :annoyed

Image

(taken from here)

Wow seeing it like that is just shocking. Do most people just have no idea how much the pair broker is costing them? My partner wants to know when I got my series seven license, and is still skeptical about doing it ourselves. I don’t think managed funds have outdone the three portfolio mix.

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