Morgan 85 page analysis needs analysis

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josephny
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Morgan 85 page analysis needs analysis

Post by josephny »

In my ongoing frustration to understand my portfolio, Morgan Stanley ran an analysis and report on one of my accounts.

The report is 85 pages -- I understand about 1% of it.

This non-retirement account has 14 preferred stock positions (ALL.H; AEL.A; AHL.C; T.C; ATH.A; ATH.C; CFG.D; FITBI; KEY.L; MS.I; MS.E; RF.B; RF.C; VOYA.B) and 31 corporate fixed income positions (such as ALLY 4.7%; AMERICAN INTL 5.75%; BOFA 6.25%; BOFA 6.5%; CAP ONE 3.95%; SCHWAB 5.375%; CITI 5.95%; CITI 6.25%; DISCOVER 5.5%; etc.

Fixed income characteristics (excluding funds):

2.05: Current duration (yrs)
5.73: Weighted Ave Bond Coupon (%)
3.05: Spread duration
8.76: Yield to maturity
6.75: Yield to worst
187.08: option-adjusted spread (bps)
0.03: option-adjusted convexity

Do I understand correctly that if the weighted average coupon for this account is 5.73% then I'm not doing poorly? I understand there would have been better places for the money, but I've also learned here that looking back with an eye towards regret isn't particularly helpful. That is, is it reasonable to conclude that with 5.73% ave coupon I should not be in a rush to liquidate and redeploy?

Interestingly, the report includes all sorts of hypothetical analysis for the portfolio value. Most of the scenarios do not bode well for the value. Some that do result in an increase of net return is the US dollar dropping or the Pound/Euro/Mexican-Bolda/Peso/gold/oil/commodities gaining, as well as "easing inflation spurs dovish fed" and European/emerging stocks gaining. Also forecasting good results would be Russel 2k and DJIA up.

I think (from what I have gleaned here) that I should not focus on the current value of these bonds (that is, how that value is substantially below their original cost). I wonder if the value returns to par (for example), I should reconsider liquidating?

Thank you.
Parkinglotracer
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Re: Morgan 85 page analysis needs analysis

Post by Parkinglotracer »

You go the route with a large advisor they will make it so complicated and confusing you may never leave. And with their expenses the odds of it out performing the market are very very small in my opinion.

I buy three things

1 Vanguard total market index fund / etf 50%
2 Vanguard total international fund / etf 15%
3 five year ladder of treasury securities 35%

And vanguards mm fund included in 35%

Of course your yield on your fixed income is a function of the risk of the bonds they buy. I can buy titanic bonds and give a yield much higher so just pulling a yield comparison does not tell you much. Comparing the yield of corporate bonds compared to the same length gov bonds tells you what extra yield you are getting for the extra corporate risk. I think keeping corporate risk in your stock portfolio is best. Overall the fees I pay on the portfolio are less than .04%

Gov two and ten year are almost 5% so you are getting a little extra yield in the hope the bond holders won’t default. Not worth it to me.

https://www.bloomberg.com/markets/rates ... t-bonds/us

Most here don’t recommend trying time bond purchases based upon interest rates. Trying to predict world events and stock market responses are really tough. If you think they have insight then you are at right place with them.

Lots of info here in BH land on simple three fund portfolio if it is of interest. It’s easy to understand too. Vanguard has a service to do it for you for .3% if you need help. Do you know what morgan is charging you?
    Last edited by Parkinglotracer on Sun May 12, 2024 6:54 am, edited 1 time in total.
    HomeStretch
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    Re: Morgan 85 page analysis needs analysis

    Post by HomeStretch »

    This looks like a continuation of your post last month about incomprehensible info from your MS advisor.

    Have you considered simplifying your portfolio/DIY at another brokerage?

    Honestly I can’t imagine parsing an 85-page report on my investments. If your advisor can’t give you a concise explanation or provide a clear 1-page summary, the 85 pages likely contain a lot of boilerplate language and obfuscation.
    z3r0c00l
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    Re: Morgan 85 page analysis needs analysis

    Post by z3r0c00l »

    Good thing you have two share classes of Athene Holding Ltd, I was worried for a moment!

    No, seriously, this complexity is totally unwarranted. The report is impenetrable because the portfolio is very complex, and it seems this is just one of your several accounts?

    You could get away with just one fund, certainly no more than three, and probably outperform active management after fees. How to get there now without onerous taxes might be your next question. Then dump the advisor and cover your own investments for like 30 minutes a year effort and save thousands.

    And not for nothing, but financial analysis rarely seems to accomplish anything. All the experts out there act as if all these numbers and metrics and charts will tell them about what to do next. It is a fun curiosity, nothing more. The real information you need is so simple, no one can get away with selling it for long. That's why they don't share that information with you.
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    Stinky
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    Re: Morgan 85 page analysis needs analysis

    Post by Stinky »

    josephny wrote: Sun May 12, 2024 5:38 am In my ongoing frustration to understand my portfolio, Morgan Stanley ran an analysis and report on one of my accounts.

    The report is 85 pages -- I understand about 1% of it.

    This non-retirement account has 14 preferred stock positions....and 31 corporate fixed income positions .....
    Wow! Just wow!

    How much is Morgan Stanley charging you to run this needlessly complex portfolio? I expect that you're not only being confused, but also being taken advantage of on fees.

    If I were advising you, I'd suggest charting a course toward taking over your fixed income portfolio over time. I'd definitely stop Morgan Stanley from investing any new positions, and I would reinvest coupons and maturing positions into something like the Total Bond Market Index fund. You could also consider tax loss harvesting on positions that have losses, while selling securities that may have small gains, in order to simplify your portfolio more quickly.

    Morgan Stanley seems to be trying to dazzle you with so much detail and analysis that you feel totally inadequate to manage your portfolio. And I expect that they're charging you a pretty penny for doing just that.
    Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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    josephny
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    I hear (and greatly appreciate) the message from all of you very clearly: My portfolio is not where and how it should be. I'm slowly understanding why.

    What I don't understand is what I should do about it now.

    MS is charging me 90 bps on $1.5MM of my portfolio (which happens to not include the fixed income account that the 85 page report was run on). The rest of the account does not have any fees.

    So my question is (as, yes, it has been for several posts): What do I do with this account? It costs me no fees to keep as it is. The holdings are no where near as risk-free as treasuries. The return is okay, but not great (5.73% current weighted ave yield; 6.75% worst yield). The value is about 20% less than my cost (reasonable to hope for bond price increase, resulting in a much higher total return?).

    I don't need the cash. I simply want it to work for me as best as possible.

    Thank you!
    livesoft
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    Re: Morgan 85 page analysis needs analysis

    Post by livesoft »

    If this is a taxaable account is now valued at 20% less than what you paid for it, then I think the best way to make it work for you is to sell the whole thing in a tax-loss harvesting move and sever any relationship with Morgan Stanley. Seriiously.
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    nedsaid
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    Re: Morgan 85 page analysis needs analysis

    Post by nedsaid »

    Having done taxes part-time and full-time over the years, I have seen a lot of year end statements from various firms: Vanguard, Fidelity, Edward Jones, Ameriprise, Schwab, American Funds, Morgan Stanley, and so forth. Morgan Stanley was the worst in terms of complexity, continuous trading, and statements that ran pages and pages (and pages).

    When I see something like this I think of this quotation from Shakespeare:
    Life's but a walking shadow, a poor player,
    That struts and frets his hour upon the stage,
    And then is heard no more. It is a tale
    Told by an idiot, full of sound and fury,
    Signifying nothing.
    In fairness to Morgan Stanley, the complexity of your portfolio is a lot like what your portfolio would look like if you got a list of all the securities held in a portfolio consisting of a few mutual funds. It is sort of like going to a factory and seeing how sausages are made. Yuk! The thing is, as a shareholder in a mutual fund, you really don't need to see all of this.

    Looks to me that you hold a lot of Corporate Bonds, the names are familiar and the credit quality is probably okay. If the duration of this portfolio is 2.05 years, I would be awfully tempted to tell the advisor to just let these bonds mature and not buy any more, probably the bulk of them would do so within about three years. What you are finding is that a lot of Corporate Bonds are thinly traded and you might not get a good price when you sell.

    What is the credit rating for these bonds as a group?
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    GuyInFL
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    Re: Morgan 85 page analysis needs analysis

    Post by GuyInFL »

    Interesting that they charge no fees on the fixed income portion of your portfolio. I’d try and compare the portfolio value for the last quarter or last year and see how that compares to the 5.73%
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    Re: Morgan 85 page analysis needs analysis

    Post by nedsaid »

    Here's the deal, the managers at Morgan Stanley might be doing a competent job but the 85 pages of analysis they provide makes it hard to tell. They should be able to give you a one or two page analysis that tells you what you need to know but they didn't. These firms make it hard to do comparisons and that is sad. Your Advisor sounds like a nice person, part of the job is explaining what they are doing and why. Somewhere in the paperwork should be an Investment Policy Statement which would explain the rationale behind the portfolio. So either this wasn't explained to you or perhaps you weren't paying attention. The communication here wasn't great.
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    josephny
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    I thought about tax loss harvesting. I am not educated on the nuances of such. My basic understanding is that I take losses against gains. But, I don't have any gains in 2024 as of yet. I could sell some appreciate stock and create those gains. Might be a good way to liquidate the individual stock positions anyway.

    Thinking about my portfolio as holding what a mutual fund might hold (but see the sausage making process) is a good way to look at this. Problem is, no one is held accountable for my specific collection of holdings.

    I absolutely cannot understand how the summary says a duration of 2.05 years when the vast majorirty of each individual holding has maturation decades into the future -- year 2079.

    So, even with everyone's great help here and the 85 page report and multiple telephone calls and emails with MS, I still do not understand the holdings in even this one account.

    I wish I could paste snippets here.

    The reason they are not charging is because I keep telling them I am leaving them. They finally said this is the best they can do -- keeping charing 90 bps on 3 of my retirement accounts totalling $1.5M AUM.
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    retired@50
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    Re: Morgan 85 page analysis needs analysis

    Post by retired@50 »

    josephny wrote: Sun May 12, 2024 9:11 am I thought about tax loss harvesting. I am not educated on the nuances of such. My basic understanding is that I take losses against gains. But, I don't have any gains in 2024 as of yet. I could sell some appreciate stock and create those gains. Might be a good way to liquidate the individual stock positions anyway.
    ...
    Gains aren't a "must" to tax loss harvest. But you can sell holdings with losses and holdings with gains at the same time if you want.
    See the wiki: https://www.bogleheads.org/wiki/Tax_loss_harvesting

    Also, depending on what you intend to do with the proceeds from selling for a loss, see the wash sale wiki page.
    https://www.bogleheads.org/wiki/Wash_sale

    Regards,
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    Stinky
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    Re: Morgan 85 page analysis needs analysis

    Post by Stinky »

    As to the possibility of tax loss harvesting -

    You posted a similar thread about a month ago, and indicated that you considered liquidating some or all of your fixed income was going to result in a pretty large bid-ask spread. Here’s a link to that thread.

    viewtopic.php?p=7823064#p7823064

    I’m generally in favor of tax loss harvesting, especially to clear out the weeds in a portfolio like yours. I wonder if your bid-ask spread was just on the bonds on your portfolio, many of which you could choose to hold to maturity (or at least a little longer). Meanwhile, I’d hope that you could sell the preferred stocks at a much lower bid ask spread.
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    josephny
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    I do indeed need to learn about tax loss harvesting -- thank you.

    I believe all the holdings in this account (corp bonds and preferred stocks) have an unpleasant bid-ask spread, resulting in an even larger below-par value.

    AS for holding, maturity as per the report is 2079. Each individual position says "Due" in 2064. Callable year varies (but I believe it is callable by the issuer). So, holding to either Due or Maturity is not an option.
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    ruralavalon
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    Re: Morgan 85 page analysis needs analysis

    Post by ruralavalon »

    josephny wrote: Sun May 12, 2024 5:38 am In my ongoing frustration to understand my portfolio, Morgan Stanley ran an analysis and report on one of my accounts.

    The report is 85 pages -- I understand about 1% of it.

    . . . . . .
    Never invest in anything you don't understand.

    If Morgan Stanley puts you in investments you don't understand and can't or won't explain them to you, then leave Morgan Stanley.

    I suggest finding a fee-only planner, to help you switch to a simple, very diversified, low-cost investment portfolio which you might manage yourself. Two links for finding an advisor:
    http://www.napfa.org/consumer/index.asp
    http://www.garrettplanningnetwork.com/

    Here is an online book chapter to help you find a fee-only planner: Chapter 10 – On Your Own or Hire an Advisor
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    exodusNH
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    Re: Morgan 85 page analysis needs analysis

    Post by exodusNH »

    josephny wrote: Sun May 12, 2024 5:38 am Do I understand correctly that if the weighted average coupon for this account is 5.73% then I'm not doing poorly?
    It depends on how much you paid for the bond. If you paid a premium, your effective return is lower.
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    Rocinante Rider
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    “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,” Joe Moglia, former CEO of TD Ameritrade.

    I don't have much to add to the great suggestions already made about why and how to try to unwind your holdings and leave MS. I doubt that avoiding the spread would be a good reason to hold onto an otherwise unwanted investment until 2079, especially if you can sell it and TLH.

    As an aside, 90 basis points on your other 1.5M at MS comes to $13,500/year in fees. VTI or VOO would cost you $450/year. And if the 90 basis points are just the AUM fee and do not include other costs (e.g., expense ratios for any active funds you hold, trading costs, tax drag), then the annual fees for your 1.5M at MS could be much, much higher.
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    bertilak
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    Re: Morgan 85 page analysis needs analysis

    Post by bertilak »

    Investing isn't inherently complex but you are in deep investment weeds.

    That 85 page document sounds like a master example of obfuscation, designed to keep you confused, not to enlighten you. First step: Ignore that document. Don't bother asking questions about it. Trying to understand it will not get you any closer to a good portfolio. It is a waste of your time and energy. There is nothing of value in it.

    I suggest you clear your head a bit. Start by learning about the three-fund portfolio.
    See the first few posts in viewtopic.php?t=88005
    See The Wiki: https://www.bogleheads.org/wiki/Three-fund_portfolio

    Simplicity is the key. There are other simple approaches but learning about the three fund strategy will get you in the right mind set. Added complexity does NOT improve performance.

    The tricky part may be unwinding your current portfolio. Figure out how to do that. Constructing a decent portfolio is the easy part.

    See the thread viewtopic.php?p=7861564 for someone in a similar situation and my detailed response.
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    Rocinante Rider
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    bertilak wrote: Sun May 12, 2024 10:40 am ...Ignore that document. Don't bother asking questions about it...
    The tricky part may be unwinding your current portfolio. Figure out how to do that. Constructing a decent portfolio is the easy part.
    Well said! Sage advice. Put your time and effort into just figuring out how to unwind. I'd add only that constructing your own decent portfolio is the easy part provided that you understand some basic BH principles and you feel confident enough to DIY. The understanding should give you the confidence.
    HomeStretch
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    Re: Morgan 85 page analysis needs analysis

    Post by HomeStretch »

    josephny wrote: Sun May 12, 2024 8:09 am … So my question is (as, yes, it has been for several posts): What do I do with this account? …
    I see a lot of good feedback to this question in your separate thread from last month where you were considering moving to Fidelity or Schwab. What are your thoughts now about making a move?
    viewtopic.php?p=7825009#p7825009
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    like2read
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    Re: Morgan 85 page analysis needs analysis

    Post by like2read »

    I wonder if a personal advisor at Fidelity might assist in helping you unwind. Might be worth a call or visit.

    If going this route, I would add the caveat to the advisor that your desired destination for the funds would be ultra low cost index funds.
    afan
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    Re: Morgan 85 page analysis needs analysis

    Post by afan »

    I have not read through this and your other thread. I gather there is something keeping you at MS? If so, then you can simply tell them that you want to switch to a handful of index funds. You can buy them at MS, although I do not know what they will charge. The people who assembled this portfolio should find it simple to convert to indexing. They may not like it, but I assume they will go along if you insist.

    MS has a self-directed option. That might work if you have to stay at the firm but have the option to manage the assets yourself.

    Painful as your statement may be, it should show the basis for each holding. If the basis is greater than the current value, then you have a loss and can sell at no tax cost. I do not know whether MS will charge a commission. If the would then maybe you could transfer in-kind to the self-directed option, then sell. There might be no or lower commissions.

    In, weak, defense of MS, strange as it may be to those on this site, some people want complicated portfolios. For them MS may be a good choice.

    At least there are no PE or VC funds. I think.
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    Re: Morgan 85 page analysis needs analysis

    Post by livesoft »

    josephny wrote: Sun May 12, 2024 9:40 am I do indeed need to learn about tax loss harvesting -- thank you.
    Don't make this complicated. Just sell all this crap from Morgan Stanley and sever the relationship.

    Tax-loss harvesting is usually selling a loser and using the money to buy something else substantially similar, but not substantially identical, because you like the asset class and want to stay invested in it. One doesn't have to have capital gains to offset because the realized losses can be used to offset ordinary income (but not all at once). That is, you only really lose out on losses when you die, so you won't even care about that.

    Loss Aversion is a terrible Behavioral Finance Trap. Sell now to get out of the trap.
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    josephny
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    What is the analysis that results in a decision to liquidate this?

    The best I can come up with is holding will likely result in around a 6% return, possibly substantially higher is the value of the bonds increases.

    Selling means I can simplify the portfolio and also means I would need to deploy those funds, hopefully earning more than 6% — and, with the bid-ask spread, the liquidated cash would need to earn substantially more than the 6%.

    Am I missing something?
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    Rocinante Rider
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    josephny wrote: Sun May 12, 2024 3:37 pm What is the analysis that results in a decision to liquidate this?
    I doubt that there's anybody who you can rely on able to analyze this mess.
    josephny wrote: Sun May 12, 2024 3:37 pm The best I can come up with is holding will likely result in around a 6% return
    Not sure what "analysis" you used to come up with a 6% return, but if you're comfortable with how you arrived at the number, then you've probably answered your original question about whether you should liquidate and replace.
    josephny wrote: Sun May 12, 2024 3:37 pm Am I missing something?
    I think what you may be missing is that most BH DIY investors on this forum would run away as fast as possible from MS.
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    Boglenaut
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    Re: Morgan 85 page analysis needs analysis

    Post by Boglenaut »

    josephny wrote: Sun May 12, 2024 5:38 am In my ongoing frustration to understand my portfolio, Morgan Stanley ran an analysis and report on one of my accounts.
    This is really where you could have stopped reading. You cannot analyze one account. It is only meaningful when taken in context of the entire portfolio, your needs, etc.

    Every 401K account provider we have is screaming that we are either too conservative or too aggressive. They see 5% of our assets and assume they know something. It does more harm than good, but we still have to pay for this "advice" every quarter.
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    Re: Morgan 85 page analysis needs analysis

    Post by livesoft »

    josephny wrote: Sun May 12, 2024 3:37 pmAm I missing something?
    Yes. You are missing the tax savings that you should get by selling this now. Basically, you get other tax payers to help you pay for your loss.

    I am assuming this is not held in a tax-deferred account nor a Roth account.
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    I want and need to analyze this account, and this account alone.

    This is a non-retirement account, with a market value of $917,000. Of course, in this case market value doesn't mean market value: If I sell, I will get somewhere between 90%-95% of that because of the bid-ask process.

    I do not need this money to live on for the foreseeable future (5-10 years), and I do not need to live on the earnings of this money for that period of time either.

    I am not particularly averse to risk: I do not need extremely low risk positions (like treasuries), but I also would not put it all down on Nvidia, Tesla, FB, etc.

    So why is it such an irrational question to ask: Would the experts here advise to liquidate this account and put it in something like VOO/FXAIX (or some other ETF)?

    I am at the beginning on my journey to understand this (and moving slowly), but from what I read here, with a 5-10 year timeframe, something in the VOO/FXAIX world will very likely yield in the 9-11% range (on the 92.5% of $917,000).

    This is an analysis I would need to make regardless of whether I am with MS.
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    grabiner
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    Re: Morgan 85 page analysis needs analysis

    Post by grabiner »

    josephny wrote: Sun May 12, 2024 5:38 am Do I understand correctly that if the weighted average coupon for this account is 5.73% then I'm not doing poorly? I understand there would have been better places for the money, but I've also learned here that looking back with an eye towards regret isn't particularly helpful. That is, is it reasonable to conclude that with 5.73% ave coupon I should not be in a rush to liquidate and redeploy?
    A good advisor should explain what the number means.

    The coupon on a bond is not a good measure of its past or future return. SEC yield on the wiki has an example which illustrates this. Bond B in that example is worth $1090.23, with a par value of $1000, and pays a coupon of $15 every six months. Although the $30 annual coupon is 2.75% of the bond value, you will not earn a 2.75% return by holding the bond, because the price will decline to $1000 when the bond matures. The SEC yield of Bond B is 2.00%, which is the actual return you will get for holding it to maturity.

    In your case, the "yield to worst" is 6.75%. That is, if every bond you hold were called at the least favorable time, you would get a 6.75% return.

    But what is most misleading is that "yield to worst" sounds like "worst-case yield", which it is not. If a bond has a yield to worst of 6.75%, you will get a 6.75% return if the bond is redeemed when called or at maturity, but a much lower return if the bond defaults. And the reason your bonds are offering such high yields is that some of them may default. (Preferred stock is even riskier; the corporation is not required to pay the dividend on the preferred stock.)
    I think (from what I have gleaned here) that I should not focus on the current value of these bonds (that is, how that value is substantially below their original cost). I wonder if the value returns to par (for example), I should reconsider liquidating?
    The current value is important; the past value is not, except for tax purposes. That is, you currently have X dollars, and you want to decide on the best way to invest X dollars.

    The tax issue actually makes it more attractive to liquidate. If you sell your portfolio and buy a simple three-fund portfolio, you will get the returns of the three-fund portfolio, plus the tax benefit of the capital loss. That is, you will have future returns which are slightly better than those of an established investor in that portfolio.
    josephny wrote: Sun May 12, 2024 9:11 am I thought about tax loss harvesting. I am not educated on the nuances of such. My basic understanding is that I take losses against gains. But, I don't have any gains in 2024 as of yet. I could sell some appreciate stock and create those gains. Might be a good way to liquidate the individual stock positions anyway.
    You can take $3000 per year of capital losses against ordinary income. Any extra capital losses will be carried over to the next year, when you can offset capital gains. (A good example of the benefit: I sold stock for large capital losses in the 2008-2009 market crash. In 2013, I needed to sell stock at a market peak to make a home down payment; unused losses from 2008-2009 canceled out the gains and I owed no federal tax on the gain.)
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    Re: Morgan 85 page analysis needs analysis

    Post by grabiner »

    josephny wrote: Sun May 12, 2024 5:12 pm So why is it such an irrational question to ask: Would the experts here advise to liquidate this account and put it in something like VOO/FXAIX (or some other ETF)?
    I do recommend liquidating this portfolio to save on fees and get the tax benefit.

    Whether you should put it in bonds or stock is a harder question, as it depends on your risk tolerance and on the rest of your investments. If you have the risk tolerance, you can move this account to a diversified stock portfolio such as VTI/VXUS; you might also reduce the risk by moving stock in your IRA/401(k) to bonds.

    If you do hold bonds in your taxable account, the best bonds depend on your tax situation.
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    Re: Morgan 85 page analysis needs analysis

    Post by livesoft »

    josephny wrote: Sun May 12, 2024 5:12 pm So why is it such an irrational question to ask: Would the experts here advise to liquidate this account and put it in something like VOO/FXAIX (or some other ETF)?
    I doubt anybody here would advise that given the information in this thread. Despite your hints, I doubt anybody would look at $917K of someone's assets in a stand-alone fashion. That does not mean that you cannot "analyze" the account alone. It is the pretty clear from your statement that the account has losses. After selling, it is less clear what the money and the account should be invested in.

    See also:
    https://www.bogleheads.org/wiki/Asking_ ... _questions
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    Yikes!

    1) I can't follow the coupon vs. yield difference, or yield to worst. It looks like the coupon (e.g., 5.3% for Goldman Sachs) means that each year a dividend of 5.3% of the face value (i.e., the par value which is what I paid for it -- in this case $44,000) is earned ($2,232). I (basically) understand that at maturity (in the year 2064) the total yield might not be 5.3%/yr. And, I (basically) understand that if I sold it now I would get less than the face value.

    2) Am I right that that the only way continuing to hold these would make sense is if the value of the bonds/preferred-stocks increase. Otherwise, the current yield is unimpressive for the risk.

    3) Am I right that the yield is a percentage based on the par value? That would mean that the bond with a par value of $100 and a yield of 5% throws off a fixed $5/yr even when the bond value drops to $80. This would mean I would be earning $5 on $80, or 6.25%. Is this correct? If so, wouldn't that be a very important consideration?

    4) What "hints" am I giving?

    5) The account now has about $115K in unrealized losses. I understand this has real (tax savings) value -- either at $3,000/yr against ordinary income or against realized gains. I just don't know how to factor that into a single equation that would result in an answer about whether I should liquidate.
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    josephny wrote: Mon May 13, 2024 11:24 am Yikes!

    1) I can't follow the coupon vs. yield difference, or yield to worst. It looks like the coupon (e.g., 5.3% for Goldman Sachs) means that each year a dividend of 5.3% of the face value (i.e., the par value which is what I paid for it -- in this case $44,000) is earned ($2,232). I (basically) understand that at maturity (in the year 2064) the total yield might not be 5.3%/yr. And, I (basically) understand that if I sold it now I would get less than the face value.

    2) Am I right that that the only way continuing to hold these would make sense is if the value of the bonds/preferred-stocks increase. Otherwise, the current yield is unimpressive for the risk.

    3) Am I right that the yield is a percentage based on the par value? That would mean that the bond with a par value of $100 and a yield of 5% throws off a fixed $5/yr even when the bond value drops to $80. This would mean I would be earning $5 on $80, or 6.25%. Is this correct? If so, wouldn't that be a very important consideration?

    4) What "hints" am I giving?

    5) The account now has about $115K in unrealized losses. I understand this has real (tax savings) value -- either at $3,000/yr against ordinary income or against realized gains. I just don't know how to factor that into a single equation that would result in an answer about whether I should liquidate.
    MS has essentially created a personal bond fund for you. In aggregate the personal bond fund they've constructed for you has certain characteristics such as yield, average duration, credit rating, etc. Trying to figure out those characteristics is something that you "can't follow" and the 85 page "analysis" from MS has not been helpful. Why not realize the loss and then you can invest the proceeds in a good bond fund with more understandable characteristics that meets your desired criteria for duration, credit rating, etc.? How much of the sale proceeds to put into a simple and more understandable fixed income investment depends on your target asset allocation for your total portfolio. Deciding on a target AA that makes sense for you is a different and separate question than whether you should stick with MS and the complicated, obscure, and likely expensive investments they've put you into.

    If it were me, I would not have the expertise or desire to try to answer the questions you're posing. I'd simply look at it as selling and realizing a loss on one bond fund with obscure characteristics that I want to get out of and replacing it with a better fund. If the "fund" you're selling has comparable characteristics to the one you're buying, then it seems no different from TLHing VOO for VTI.
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    Rocinante Rider wrote: Mon May 13, 2024 11:53 am
    josephny wrote: Mon May 13, 2024 11:24 am Yikes!

    1) I can't follow the coupon vs. yield difference, or yield to worst. It looks like the coupon (e.g., 5.3% for Goldman Sachs) means that each year a dividend of 5.3% of the face value (i.e., the par value which is what I paid for it -- in this case $44,000) is earned ($2,232). I (basically) understand that at maturity (in the year 2064) the total yield might not be 5.3%/yr. And, I (basically) understand that if I sold it now I would get less than the face value.

    2) Am I right that that the only way continuing to hold these would make sense is if the value of the bonds/preferred-stocks increase. Otherwise, the current yield is unimpressive for the risk.

    3) Am I right that the yield is a percentage based on the par value? That would mean that the bond with a par value of $100 and a yield of 5% throws off a fixed $5/yr even when the bond value drops to $80. This would mean I would be earning $5 on $80, or 6.25%. Is this correct? If so, wouldn't that be a very important consideration?

    4) What "hints" am I giving?

    5) The account now has about $115K in unrealized losses. I understand this has real (tax savings) value -- either at $3,000/yr against ordinary income or against realized gains. I just don't know how to factor that into a single equation that would result in an answer about whether I should liquidate.
    MS has essentially created a personal bond fund for you. In aggregate the personal bond fund they've constructed for you has certain characteristics such as yield, average duration, credit rating, etc. Trying to figure out those characteristics is something that you "can't follow" and the 85 page "analysis" from MS has not been helpful. Why not realize the loss and then you can invest the proceeds in a good bond fund with more understandable characteristics that meets your desired criteria for duration, credit rating, etc.? How much of the sale proceeds to put into a simple and more understandable fixed income investment depends on your target asset allocation for your total portfolio. Deciding on a target AA that makes sense for you is a different and separate question than whether you should stick with MS and the complicated, obscure, and likely expensive investments they've put you into.

    If it were me, I would not have the expertise or desire to try to answer the questions you're posing. I'd simply look at it as selling and realizing a loss on one bond fund with obscure characteristics that I want to get out of and replacing it with a better fund. If the "fund" you're selling has comparable characteristics to the one you're buying, then it seems no different from TLHing VOO for VTI.
    That's a great analysis.

    I am truly thiiiiiis close to pulling that trigger.

    I understand it's a different question entirely, but I would lean toward putting this capital into a equities ETF (e.g., VOO, VTI) and not further into bonds. Leaving aside the risk appetitie/AA analysis, does that change the analysis of whether to sell these holdings?

    Thank you.
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    josephny wrote: Mon May 13, 2024 11:58 am I understand it's a different question entirely, but I would lean toward putting this capital into a equities ETF (e.g., VOO, VTI) and not further into bonds. Leaving aside the risk appetitie/AA analysis, does that change the analysis of whether to sell these holdings?
    It is a different question entirely, but if you've decided that you want no bonds and only stocks that would seem to just reinforce the decision to sell. Why hold onto bonds if you don't want any, especially given that selling them diminishes instead of increases your tax liability?

    That said, you might want to consider posting a new question looking for advice on AA before making such a dramatic change in your overall AA. You should also read in the Wiki and other recommended references about this. There's many personal factors that go into an AA determination. I assume that you're with MS because you're uncomfortable with a BH DIY approach. The basic principles are not that hard to grasp, and your confidence should grow if you understand them. The payoff in avoiding complicated portfolios constructed by high fee advisors can be huge.

    Addendum: You don't have to pull the trigger immediately. You can take a little time to make sure you have an unwinding plan with which you're comfortable.
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    Rocinante Rider wrote: Mon May 13, 2024 12:14 pm
    josephny wrote: Mon May 13, 2024 11:58 am I understand it's a different question entirely, but I would lean toward putting this capital into a equities ETF (e.g., VOO, VTI) and not further into bonds. Leaving aside the risk appetitie/AA analysis, does that change the analysis of whether to sell these holdings?
    It is a different question entirely, but if you've decided that you want no bonds and only stocks that would seem to just reinforce the decision to sell. Why hold onto bonds if you don't want any, especially given that selling them diminishes instead of increases your tax liability?

    That said, you might want to consider posting a new question looking for advice on AA before making such a dramatic change in your overall AA. You should also read in the Wiki and other recommended references about this. There's many personal factors that go into an AA determination. I assume that you're with MS because you're uncomfortable with a BH DIY approach. The basic principles are not that hard to grasp, and your confidence should grow if you understand them. The payoff in avoiding complicated portfolios constructed by high fee advisors can be huge.

    Addendum: You don't have to pull the trigger immediately. You can take a little time to make sure you have an unwinding plan with which you're comfortable.
    I absolutely love your approach to analyzing investing and your method of helping -- thank you so much!

    I just sold the first dozen or so, and have ordered the sale of the remaining corp bonds.

    While I only know a tiny bit of the BH approach, I very much like it and see the credibility in it -- and would like to move towards implementing it.

    I am with MS because I was with Chase before and my guy at Chase moved to MS and I went with him. To put a little more context, I've done financially better than I ever imagined possible when I was young (think: Not a penny in my pocket but plenty of creditors very angry with me; poor student; no role models; no guidance; etc.). So, being with MS now does not indicate or imply anything about an investing approach (and certainly not an aversion to the BH approach).

    Next up: Liquidate the preferred shares and the muni bonds.

    Then, figure out if I should put that capital in 2 or 3 equity funds.

    Thank, everyone, again!
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    Re: Morgan 85 page analysis needs analysis

    Post by OhioGozaimas »

    If you are paying 90 bps on $1.5MM for the pleasure of your total relationship with MS: It’s costing you ~$13,500 / year.

    Add the TLH tax savings on $3,000, and your cash flow will improve by more than $14,000 / year.

    No matter how big the bid/ask spreads turn out to be, they will all be “paid back” in the relatively near future.

    Good luck.
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    OhioGozaimas wrote: Mon May 13, 2024 12:56 pm If you are paying 90 bps on $1.5MM for the pleasure of your total relationship with MS: It’s costing you ~$13,500 / year.

    Add the TLH tax savings on $3,000, and your cash flow will improve by more than $14,000 / year.

    No matter how big the bid/ask spreads turn out to be, they will all be “paid back” in the relatively near future.

    Good luck.
    Sorry for the confusion. The 90bps I'm paying is for 3 other (retirement) accounts. They are managed.

    I took a look inside those accounts and they include 5 mutual funds (nothing too obscure) and 12 ETFs (also nothing obscure or risky). So, yea, that's 90bps for a friendly voice on the phone every 4 months (i.e., not a good deal).

    When I switch brokerages, these retirement accounts won't be managed by someone else and they will treated carefully in line with the BH approach.
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    josephny wrote: Mon May 13, 2024 12:42 pm I absolutely love your approach to analyzing investing and your method of helping -- thank you so much!

    I just sold the first dozen or so, and have ordered the sale of the remaining corp bonds.

    While I only know a tiny bit of the BH approach, I very much like it and see the credibility in it -- and would like to move towards implementing it.

    I am with MS because I was with Chase before and my guy at Chase moved to MS and I went with him. To put a little more context, I've done financially better than I ever imagined possible when I was young (think: Not a penny in my pocket but plenty of creditors very angry with me; poor student; no role models; no guidance; etc.). So, being with MS now does not indicate or imply anything about an investing approach (and certainly not an aversion to the BH approach).

    Next up: Liquidate the preferred shares and the muni bonds.

    Then, figure out if I should put that capital in 2 or 3 equity funds.

    Thank, everyone, again!
    Thanks for the feedback.

    Most of us got here the hard way - lot's of mistakes first. Some of us are still trying to unwind undesired holdings that have large cap gains (all in all, not the worst problem to have).

    Read about the "three fund portfolio."
    https://www.bogleheads.org/wiki/Three-fund_portfolio
    It's all one really needs, but I suspect most BH's haven't achieved such simplicity despite the mantra. I certainly have not gotten there, but I get closer and closer all the time. The closer I get, the more relaxed I feel.

    The big secret to successful investing, which most financial advisors try to obscure, is that it's not all that complicated. As John Bogle said, “Effective investing can be incredibly simple: Create a simple, diversified asset allocation plan. Invest a part of each paycheck in low-cost, no-load index funds according to your plan. Check your investments periodically, rebalance when necessary, then stay the course.” As a retiree, I no longer have a paycheck, so the advice is even simpler for me to follow. :D
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    Re: Morgan 85 page analysis needs analysis

    Post by rule of law guy »

    the FI gave you only about 100bps extra yield over treasuries over the same duration (2 years). but much more credit risk. you may want to move your FI over to treasuries of a short duration if the extra yield is not that important. as for equities, I thin there is no better diversified equity investment that SPY
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    rule of law guy wrote: Mon May 13, 2024 4:34 pm the FI gave you only about 100bps extra yield over treasuries over the same duration (2 years). but much more credit risk. you may want to move your FI over to treasuries of a short duration if the extra yield is not that important. as for equities, I thin there is no better diversified equity investment that SPY
    I am not arguing or disputing as I have no standing whatsoever to do that, but everything I have read here and on the reddit BH board leads me to conclude that there are indeed wiser diversified investments than SPY. I'm thinking about the Fidelity and Vanguard total funds, for example (VTI/VTIAX; FSKAX/FTIHX). Indeed, there seems to be endless debate on this topic.

    Can you clarify?
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    Re: Morgan 85 page analysis needs analysis

    Post by rule of law guy »

    "Can you clarify?"

    SPY is an index of 500 of the largest most successful companies in the US. they are weighted by capitalization, so you own more of the largest most successful companies than the smaller ones. I do equate size with success. hard to be born on 3rd base as a company.

    while they all have international revenues, they are US listed companies. by far most US listed companies are US corporations. you dont have to worry about what the rule of law in Italy or Greece will allow their corporations to do. (spoiler alert, anything that a bribed administrator or judge thinks is worth the bribe).

    I do believe that tech innovation is a great creator of value. SPY gives you exposure to tech innovation, but mostly to the biggest and most successful tech...small tech can be very innovative but never get to profit.

    but with 500 companies in the index, you get massive diversification.
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    FSKAX includes 5000 companies.

    I'm just curious why you would choose SPY over FSKAX? Do you think the 500 S&P companies will perform better than the 5000 total market companies?
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    Re: Morgan 85 page analysis needs analysis

    Post by Rocinante Rider »

    josephny wrote: Tue May 14, 2024 6:14 am FSKAX includes 5000 companies.

    I'm just curious why you would choose SPY over FSKAX? Do you think the 500 S&P companies will perform better than the 5000 total market companies?
    S&P 500 index funds and total US stock market index funds have almost identical performance for at least two reasons I can think of. First, the large cap S&P 500 companies dominate the returns of the overall market. Second, the returns of small and mid cap stocks are correlated with returns of large caps (the cap segments of the overall market generally move in the same direction). I still prefer the greater diversity of a total stock mkt index over an S&P 500, but it probably doesn't make a significant difference.

    For an S&P 500 ETF, I'm not sure why one would choose SPY over VOO. At 0.09%, the expense ratio of SPY is 3x as much as VOO. They're still both very low, but why pay 6 basis points more for essentially the same product.

    Another potentially important consideration involves fund placement. I hold VOO in tax-deferred accounts (tIRA and 403b), along with smaller allocations in extended market funds to provide more of a completion index. I hold VTI in taxable accounts, which gives the potential to tax loss harvest without the risk of migrating the loss into the tax-deferred accounts where the realized loss would permanently vanish.
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    Re: Morgan 85 page analysis needs analysis

    Post by mikejuss »

    You've made a near-perfect argument for shifting over to a self-managed 3-fund portfolio, OP.
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    Re: Morgan 85 page analysis needs analysis

    Post by rule of law guy »

    josephny wrote: Tue May 14, 2024 6:14 am FSKAX includes 5000 companies.

    I'm just curious why you would choose SPY over FSKAX? Do you think the 500 S&P companies will perform better than the 5000 total market companies?
    yes. you can be over diversified. the top 500 US listed companies will do better than the market, and of course better than about 90% of financial advisors. its a jungle out there, and go with the best. if you chart SPY vs FSKAX, they are close, but SPY outperforms over the periods I reviewed.
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    Re: Morgan 85 page analysis needs analysis

    Post by mikejuss »

    rule of law guy wrote: Tue May 14, 2024 7:11 pm
    josephny wrote: Tue May 14, 2024 6:14 am FSKAX includes 5000 companies.

    I'm just curious why you would choose SPY over FSKAX? Do you think the 500 S&P companies will perform better than the 5000 total market companies?
    yes. you can be over diversified. the top 500 US listed companies will do better than the market, and of course better than about 90% of financial advisors. its a jungle out there, and go with the best. if you chart SPY vs FSKAX, they are close, but SPY outperforms over the periods I reviewed.
    So VFIAX always beats VTSAX? That's news to me.
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    Re: Morgan 85 page analysis needs analysis

    Post by ruralavalon »

    mikejuss wrote: Tue May 14, 2024 7:36 pm
    rule of law guy wrote: Tue May 14, 2024 7:11 pm
    josephny wrote: Tue May 14, 2024 6:14 am FSKAX includes 5000 companies.

    I'm just curious why you would choose SPY over FSKAX? Do you think the 500 S&P companies will perform better than the 5000 total market companies?
    yes. you can be over diversified. the top 500 US listed companies will do better than the market, and of course better than about 90% of financial advisors. its a jungle out there, and go with the best. if you chart SPY vs FSKAX, they are close, but SPY outperforms over the periods I reviewed.
    So VFIAX always beats VTSAX? That's news to me.
    Over the 31years since the creation of the first total stock market index fund, an S&P 500 index fund and a total stock market index fund have had almost identical performance. Some years one fund type is a little bit ahead, some years the other.

    Portfolio Visualizer, 1993-2024. I used the oldest share classes to get the largest possible number of years for comparison.

    A quick review of annual returns gives S&P 500 ahead 16 of 31 years.
    Last edited by ruralavalon on Wed May 15, 2024 10:29 am, edited 1 time in total.
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    Re: Morgan 85 page analysis needs analysis

    Post by bertilak »

    ruralavalon wrote: Wed May 15, 2024 9:39 am Over the 31years since the creation of the first total stock market index fund, an S&P 500 index fund and a total stock market index fund have had almost identical performance. Some years one fund type is a little bit ahead, some years the other.
    Isn't that the point/goal of the S&P500: Match total market with a more easily implemented portfolio? If so, history seems to show remarkable success.

    Probably today the S&P500 is not as important, with so many inexpensive Total Market" funds available. I guess technology has improved to make this possible. It still makes a great, notable and quotable, benchmark.
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    Re: Morgan 85 page analysis needs analysis

    Post by josephny »

    So why would someone choose anything other than SPY, if one wanted a diversified "total" market fund?
    Post Reply