New To This, Just Read Bogle's Little Book of Common Sense Investing!

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LowCostIndexFundsFTW
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New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by LowCostIndexFundsFTW » Tue Sep 10, 2019 3:02 pm

Hi all,

I'm brand new to this forum, it seems to be a very valuable resource, and its so cool to see a community of people who seem so friendly, smart/thoughtful, and eager to help each other! A friend recommended Bogle's Little Book of Common Sense Investing and I gotta say the book truly was an eye-opener for me. I had an understanding of the miracle of compounding interest, and was somewhat aware that costs were bad, but I had never really stopped to consider the devastating impact of compounding costs on a retirement portfolio over the course of a lifetime! Also learned a lot more from this simple little book, so grateful I gave it a shot, already passed it along to family and friends!

I am 36yo, and have had the good fortune of creating/owning a successful business that has done quite well for me over the last 10+ years. I do my personal and business banking with Chase and when I got more serious about investing 10 or so years ago I figured I'd use Chase for my investments as well. I currently have an investment portfolio in the $600-700K range with Chase. After reading the book, as you can imagine one of the first things I did was dive into my holdings to determine how much costs my funds had. Not surprisingly, there were a number of funds with rather high costs. I know now that strategically I want to switch my holdings from these higher-cost funds into low-cost index funds (looking at going 64% low cost equity fund, 36% low cost index bond fund). So I guess my question isn't necessarily so much strategic in terms of how my investment allocation should look (though of course, I'd be happy to listen if anyone has any advice on that front!)

My primary question is, what is the best way to get my money from these high-cost funds they are currently in, and into low cost index funds? What sort of tax implications will I be facing, and strategically what is the best way to reduce my tax burden?

In case specifics of my Chase holdings matter I have my funds split up pretty much evenly in half... half of my holdings are in a SEP IRA account I currently hold which consists of: 34% of my assets in JPMORGAN INVESTOR GROWTH FUND A (ONGAX), 18% in JPMORGAN US EQUITY FUND A (JUEAX), 18% in SPDR S&P 500 ETF SPY: NYSE Arca, 16% in JPMORGAN GROWTH ADVANTAGE A (VHIAX), and 13% in JPMORGAN VALUE ADVANTAGE FUND A (JVAAX).

The other half of my investments are just regular investments (weren't done as SEP IRA) and they consist of: 65% equity mutual funds (and of these, I was happy to see that at least half were low cost index funds, so at least all my mutual funds weren't high cost lol), 25% bond funds, and 10% individual stocks.

Proportionally I've put money into my investments about equally over the years between my SEP IRA funds and the Non-IRA funds. My investing began about 10-12 years ago, and grew more and more each year before leveling out over the last five years (around then I started buying some investment properties which I also still hold and receive monthly income on). Because of the time-frame of my investing, and the fact I was so heavy on the equities, my accounts have performed quite well over the last few years (though after costs and such, doubt I did as well as a low cost index equity fund would have done), so I imagine if I had to realize profits for tax purposes when moving into my new funds, there would be A LOT of profit to be taxed on.

Anyway, I'm just looking for help figuring out the best way to get my holdings into a traditional Bogle style investment strategy with 64% in a low cost equity fund, 36% in a low cost index bond fund? Any other advice, tips, thoughts, or ideas would be truly appreciated! I'd be happy to share other information if it would be relevant. I hope everyone is having a great day, and thanks in advance for any time or thought you put into this, it really means a lot to me :)

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Duckie
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by Duckie » Tue Sep 10, 2019 5:24 pm

LowCostIndexFundsFTW, welcome to the forum.
LowCostIndexFundsFTW wrote:My primary question is, what is the best way to get my money from these high-cost funds they are currently in, and into low cost index funds? What sort of tax implications will I be facing, and strategically what is the best way to reduce my tax burden?
You have:
  • ONGAX (Expense ratio -- 0.97%, Front load -- 4.50%)
  • JUEAX (ER -- 0.94%, FL -- 5.25%)
  • VHIAX (ER -- 1.14%, FL -- 5.25%)
  • JVAAX (ER -- 1.14%, FL -- 5.25%)
In your SEP IRA you can sell these without a tax-hit and should. You're paying a lot in loads and expense ratios. Do you have any say about where the SEP IRA is held or what it could contain? Do you have employees?
The other half of my investments are just regular investments (weren't done as SEP IRA) and they consist of: 65% equity mutual funds (and of these, I was happy to see that at least half were low cost index funds, so at least all my mutual funds weren't high cost lol), 25% bond funds, and 10% individual stocks.
Specifically, what do you hold in taxable and what is the unrealized gain/loss on each stock/fund in dollars? You will need that information to figure the tax-cost of selling. You should hold your bonds in your pre-tax SEP IRA, not in taxable.

Do you have any personal IRAs? Traditional IRA or Roth IRA?

MaryO
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by MaryO » Tue Sep 10, 2019 5:43 pm

I wish I could transport myself back 24 years to be in your shoes. Bravo for being ambitious and saving a nice chunk. Now the Boglehead experts will guide you on how to make the best decisions for your situation. Try to absorb as much as you can.

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Taylor Larimore
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by Taylor Larimore » Tue Sep 10, 2019 6:56 pm

LowCostIndexFundsFTW:

Welcome to the Bogleheads Forum!

Duckie wrote:
You have:
ONGAX (Expense ratio -- 0.97%, Front load -- 4.50%)
JUEAX (ER -- 0.94%, FL -- 5.25%)
VHIAX (ER -- 1.14%, FL -- 5.25%)
JVAAX (ER -- 1.14%, FL -- 5.25%)
Would you mind telling us how long you have held each of these high-expense funds?

Do you feel that Chase has been "churning" your account to get the front-end loads over and over again?

Thank you and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "You get to keep exactly what you don't pay for."
"Simplicity is the master key to financial success." -- Jack Bogle

Topic Author
LowCostIndexFundsFTW
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by LowCostIndexFundsFTW » Tue Sep 10, 2019 9:42 pm

Thanks everyone for your responses! This is all pretty new to me, and something I really have not put much thought into in recent years (really since I started investing a while back, I kinda just went with what my Chase Financial Manager recommended, and 'set-it-and-forget-it', not the smartest strategy lol.

Duckie wroe: In your SEP IRA you can sell these without a tax-hit and should. You're paying a lot in loads and expense ratios. Do you have any say about where the SEP IRA is held or what it could contain? Do you have employees?

You are absolutely right Duckie, the expense ratios are high, but what blows my mind is the loads... does that really mean I was paying roughly 5% just for the honor of putting my money in their funds?!? My Chase Rep never mentioned that when recommending funds, quite disappointing... I have complete control of where I put my SEP IRA funds and what they could contain. I have no employees on my payroll per se, all of my help is contract labor, so I have no other people to consider when making decisions on the SEP IRA.

That is great advice about holding my bonds in my IRA. I plan to transfer all funds from my Chase IRA account into Vanguard IRA accounts (with at least 36% in a low cost Index Bond Fund, the rest in a low cost index equity fund). I may elect to do an even higher portions of my IRA funds in bonds so my bond holdings all stay within my IRA, and then keep my non-IRA investments primarily in equities.

I don't know the answers to your last questions exactly. Tomorrow I am meeting with my Chase Financial Specialist. I will find the unrealized gain/loss on each stock/fund in dollars. I imagine there are some decent gains, but I'll find out for sure tomorrow. On an aside, I think my Chase Rep is going to be pretty blindsided by my new outlook on investing lol, truly so happy I read this book :)

To answer your question Taylor Larimore, I am not exactly sure on how long I've held each of these individual accounts. I will have more answers tomorrow. And to answer if I feel that Chase has been churning my accounts to collect loads on the same money multiple times, I don't think that's been happening... but I really need to pay better attention to this stuff. I honestly did not even know I was paying 5% loads on these funds up front, very frustrated to learn that.

Thanks all for your time/help, truly appreciate it :)

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BolderBoy
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by BolderBoy » Tue Sep 10, 2019 9:57 pm

LowCostIndexFundsFTW wrote:
Tue Sep 10, 2019 9:42 pm
but what blows my mind is the loads... does that really mean I was paying roughly 5% just for the honor of putting my money in their funds?!? My Chase Rep never mentioned that when recommending funds, quite disappointing...
Yes, that is what it means. And your Chase Rep may be compensated by commissions in whole or in part.

When you get more comfy with doing this yourself, you'll want to move away from Chase to Vanguard or Fidelity or Schwab, perhaps.

And as you gain more sophistication you may want to consider a solo 401k instead of the SEP-IRA you use now. But ask us first about the strategies.

Welcome!
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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abuss368
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by abuss368 » Tue Sep 10, 2019 10:05 pm

Mr. Bogle’s “Little Book of Common Sense Investing” is one of my favorite books. I learned much.
John C. Bogle: "Simplicity is the master key to financial success."

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abuss368
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by abuss368 » Wed Sep 11, 2019 7:12 am

I think one of the best lines in this book (that I'll always remember) is: "don't search for the needle in the haystack, but the haystack".

Thank you so much Mr. Bogle.
John C. Bogle: "Simplicity is the master key to financial success."

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Brianmcg321
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by Brianmcg321 » Wed Sep 11, 2019 7:23 am

Read the thread in the theory section on the three fund portfolio. Great stuff.

Also check out this blog by JL Collins
viewtopic.php?f=10&t=88005

And the Bogleheads wiki has tons of great information.

The simple way to get everything into a Bogleheads portfolio:
1. Sell everything
2. Invest 64% in the Vanguard Total Stock Market Index
3. Invest 36% in the Vanguard Total Bond Market Index
4. Rebalance once a year.

It really is as simple as that.

My next question would be given your age and income level, why so much in bonds?
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

Ferdinand2014
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by Ferdinand2014 » Wed Sep 11, 2019 9:18 am

I have Fidelity. Vanguard users will also post I am sure. My advise is get out of Chase as quick as you can. Run don’t walk. I have my SEP, taxable accounts, 529, rollover IRA and my wife’s IRA at Fidelity and also am self employed. I would transfer to Fidelity. Call Fidelity. Don’t bother calling Chase. They will try and convince you it’s wrong. Then I would invest in FSKAX ER 0.015 (Total stock market index) and FXNAX 0.025 (total bond market index). They both have zero minimums, no loads, zero transaction fees and cost penny’s per 10,000.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Duckie
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Re: New To This, Just Read Bogle's Little Book of Common Sense Investing!

Post by Duckie » Wed Sep 11, 2019 6:14 pm

LowCostIndexFundsFTW wrote:I have complete control of where I put my SEP IRA funds and what they could contain. I have no employees on my payroll per se, all of my help is contract labor, so I have no other people to consider when making decisions on the SEP IRA.
Since you have no employees you could create a solo 401k at Fidelity (for example) and roll the SEP IRA into the solo 401k. You could also roll any unmentioned personal pre-tax IRAs into the solo 401k. That would allow you to not only contribute more to your employer plan ($19K as the employEE plus ~20% net profit as the employER) but also to use the Backdoor Roth.
That is great advice about holding my bonds in my IRA. I plan to transfer all funds from my Chase IRA account into Vanguard IRA accounts
Before you switch custodians decide if you want to change from a SEP IRA to a solo 401k. Since Vanguard's solo 401k does not allow incoming rollovers, if you want to switch you will need a different custodian. Fidelity and E*Trade allow incoming rollovers from IRAs. (See here.)
I may elect to do an even higher portions of my IRA funds in bonds so my bond holdings all stay within my IRA, and then keep my non-IRA investments primarily in equities.
That is the way to do it. You look at all accounts earmarked for retirement as one big portfolio and allocate accordingly.
I will find the unrealized gain/loss on each stock/fund in dollars.
This information should be available in your online account.

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