I can make a pretty good case that most people would do better in one fund (the appropriate Vanguard LifeStrategy Fund) than what advisers recommend. We have most of our assets in two funds (Total Stock Market and Total Bond Market). Some people add Total International Fund to that, which is okay.
My wife and I did pretty well over the past 10 years, and it Is mostly because we “stayed the course.” Two big dangers are being frightened and being greedy – they’re actually two sides of the same coin. Pick an age and risk-tolerance appropriate asset allocation and invest according to it. We have been slowly gliding to 50% bonds and 50% stocks for a while. For others, more stock is appropriate (and vv for others). The trick is to decide and stick to it, otherwise you’ll be making moves based on emotion, otherwise known as the dreaded “market timing.”
There are a zillion things I don’t know about investing. My ignorance costs me a few bucks, maybe, but mostly my control of my emotions saves me heaps. The people who got hurt were the ones who panicked.
@HImom, that reminds me of the book “Where Are the Customers’ Yachts: or A Good Hard Look at Wall Street.” The secret is that there is no secret; there’s a lot of hand waving, but in the end, it’s not rocket science to manage a medium sized portfolio for retirement and education. You might not know enough to manage the Harvard or Yale endowments, but that’s probably not the problem in front of us today.
Yes, with good passive index funds that have expense ratios of $2 a year per $1000 invested, it’s so much cheaper than paying someone $10 per $1000 per year plus the fees per investment, commission and load (charge added to buy and/or sell). These fees really add up over time.
Vanguard’s Total Stock Market Index Fund has an ER of 0.05% versus an average ER of comparable funds if 1.08%.
If you invest $10,000 for 10 years in the average fund, fees will be $2,436. In the Vanguard Fund, $118.
As @HImom says, “these fees really add up over time.”
Ps. The fees are higher for the Investor fund (0.17%) rather than the Admiral fund example here, but the minimum balance for Admiral shares is $10k, so it’s not prohibitive, especially if you’re doing a 2 or 3 fund portfolio.
I realize I didn’t give enough information. He is not an independent, he’s part of a large wealth management group, RBC Wealth Management. I am confident it’s not a “scam,” but I am guessing I could do better managing the money myself, if I pay attention. I’m headed for vacation… And plan to read about investing while sitting on the balcony in Hawaii watching the whales go by… HImom… I will wave to you as I fly by
Think of the fees you pay the advisors that you could KEEP and use for va actions instead. I can think of a lot of things I’d rather do than pay someone to watch my money.
Hawaii, I am so jealous! I’m planning a long weekend to go visit east coast kids, and the low in NYC one day is going to be two degrees. Seriously. I love them dearly, but I’d rather plan a long weekend to Hawaii. It would actually be cheaper, too. Sigh. The things we do…
Busdriver11, I can relate. I have one near Albany NY… Brrrrr… This is our “empty nest celebration.” We have 3 in college so we can’t celebrate too much, but we did manage to save enough for almost all of their college before they got there. Now we need to focus more on other investing and otherwise trying to put ourselves in a good position for retirement.
I think you’ll definitely be in the right frame of mind to think about retirement while sipping a pina colada or glass of wine on a balcony in Hawaii! Just don’t read something too dry and boring.
I just had visions of cancelling our NE trip and going to Maui instead. Would they forgive us? Probably not, younger kid has a major part in a play. But I can fantasize a bit about Hawaii.
@1214mom, it doesn’t have to be a scam in the Madoff sense to be something where you’re the fish. On vacation, read some Bogleheads.org and the books recommended there. It’s honestly not rocket science.
Do you know what Warren Buffett recommended that his widow should do after he dies? Invest in a Vanguard S&P 500 indexed fund. I personally prefer total stock market, but they correlate highly.
The wiki on Bogleheads.org has some helpful videos and guides. Our S is doing great following the tips on Bogleheads.org.
Make an investment plan, including your asset allocation to stocks and bonds, based in your goals and risk tolerance, find low cost broad index funds, invest and stay the course with only small annual tweaks.
Thank you Attorney Mother, for walking me through switching the inherited IRA to a new trustee. You have been very helpful. I may go with Fidelity, since we have accounts there. Is there any advantage to going with Vanguard?
You know, I just am shaky when I start thinking about allocating to bonds, especially when I think about interest rates rising. Our allocation now (not including real estate) is perhaps 85% fairly aggressive stock funds, and 15% of a money market/high grade bond fund that pays about 2%, has never gone negative. We consider that fund like cash. We probably won’t withdraw for about 18 years, when we have to, which is why we’re so aggressive. But do you guys invest in any bond funds that you think will generally have a good return, even if interest rates rise? It seems like such a losing proposition.
I don’t visit this thread frequently, so please do the @-sign thing if you want to make sure I see something.
I thought that Vanguard was the ideal place for our niece, nephew and D to have their inherited IRAs for the reason that many like Vanguard - its offerings of low-cost index funds ideal for long-term young investors. We had to consolidate pieces of inherited IRAs into one account for each individual. There is nothing magically unique, just personal preference.
Fidelity can do the same thing - set up an inherited IRA for a trustee-to-trustee transfer. Fidelity also offers index funds if that’s what you want to consider for your new account. Just contact Fidelity to find out its process and good luck.
Personally, I like Fidelity because they have good customer service and a durable power of attorney. They gave low expense ratio Spartan Index funds. Vanguard has some good low expense ratio index funds.
You can call each brokerage and ask them to make you a proposal. If you have over $1mm in assets you will be investing in their products, Vanguard will give you a free consultation.
Fidelity will also work with you on a financial plan. Am not aware of any minimum amount for them to help you with a financial plan. They also offer cash bonuses for transferring assets to them and keeping them there for xx months. They pay any closing or transfer fees as well.
I am happy with assets at Schwab, Vanguard and Fidelity.
@busdriver11, I’ve done really well with my bond funds, but their biggest value has been as “dry powder.” For the past 5 years, I’ve made 8.9% annualized. Not as good as stocks, but not shabby either. But the reason that I’m intending to be 50% bonds is that, and pardon me for stating it bluntly, we’ve already won the game and I don’t need to keep playing. Basically, we need to keep up with inflation. If we can make 2, 3, 4% REAL (ie, after inflation), wheee! Bonds fund prices will go down as interest rates increase, but the yield will also go up as maturing bonds are replaced by bonds with a higher coupon.
Maybe I’ve had too much of the AA KoolAid, but I sleep well at night and I just let my stock and bond funds putter along.
I’m definitely for sleeping well at night, and I think I could if my bond funds did that well. But will your return crash and burn when interest rates go up?
And what bond funds do you have that do so well? That seems far better than most.
@busdriver11, to make life easier, I used Quicken’s numbers, but after you mentioned it, it did look suspiciously high, so I decided to check at Vanguard.
Our TIPS did well, fund and individual bonds, but that’s complicated because of the tax treatment of TIPS. Tax-exempt funds are complicated also, but for the opposite reason.
So, I looked at the Performance of Total Bond on Vanguard’s site, which was 6.7% for 1 year and 4.52% for 5 years. Considerably less than I had said, but still better than inflation.
And, tomorrow, I guess I’m going to have to figure out why the Quicken returns were out of whack. My guess is that it had to do with my wife’s 401k (45% Total Bond Market) which transferred from another provider to Fidelity this year.
My husband uses Quicken also, and sometime it’s completely messed up. I don’t know why, but it seems easily confused. Really, the only bond funds we have available to us at Vanguard are the Janus Flexible Bond Fund, Retirement Savings Trust 2, Inflation Protected, and the Total Bond Market Index Fund Institutional Plus. I wonder if the last one is what you have, or something similar. That one worries me because they say it’s at risk if interest rates go up. Though it has a pretty good return right now.
