http://www.pragcap.com/should-you-use-an-automated-investment-service
Conclusion
@shawbridge If you schedule yourself in some time weekly/semi-monthly/monthly look at your accounts. If you have too many accounts to view quickly and decide if any action(s) need to be taken, see if you have diversification benefits or can simplify. Re-balancing periodically doesnāt take much time. Maybe you find paying $XXX for these services takes decision making off of your shoulders.
The timely decisions one makes is putting together the overall plan, and then what funds/group of funds you want to use, or if you want to use FA services. We found that a good FA could be very helpful for us in our overall plan. Before we found our FA, the weight was on our shoulders, and I was very uncomfortable with the risk/lack of diversification outside of stock market.
We have a lot of our retirement money with a financial advisor, Roth IRAās, Annuities, etc. FA Don makes suggestions and we decide. He has market update/group presentations twice a year - we then schedule a short time later to go over our investments in a meeting, so we have current information on what is going on with the markets, etc. and what our best options based on current opportunities. We understand what is being suggested. We find our FA is win-win for him and us. We find there is diversification with lower risk and good returns, so we believe we are getting good value with our FA.
We also have a sizable 401k that H and I manage. We are 6 years away from retirement, so we will continue to see how our financial advisor overseeing our retirement money does, and how our 401k does. After H retires, we can decide what we want to do with those funds. I may look at 401k once a month - we have 14 investment choices (plus company stock) - my view is to look at trends, not jumpy market. However totally divested of international markets due to poor performance in 2014 (of our two international fund choices). Our 401k is in 5 accounts, ranging from 15% to 24% of holdings; intermediate bond, large cap stock - value, large cap stock-growth, mid cap stock-value, and small cap stock-blend.
Good luck with feeling more assured. Hope it is not keeping you in worry. Have to make decisions based on analysis and not sheer terror/fear. We all are dealing with risk.
From what I understand, Wealthfrontās ETFs average 17 bps and then thereās the 25 bps for the robo services. Thatās 42 bps, or $4,200 per million per year. Vanguardās Total Stock Market, a phenomenally tax efficient indexed fund, can be had for $500 per million per year (and Iāve seen some 401ks charging as little as $200 per million per year).
I am in a different camp from SOSConcern and Shawbridge. Whether robo or human, I have to be convinced that Iām getting value for the $3,700 (or more) per million per year I would be charged. I remain more than skeptical.
As regards being informed about the markets and such, IMO itās noise, the soundtrack to financial porn. Barring inside information, being part of a HFT group, or being privy to special deals (you and I canāt get the warrants that Warren Buffett gets), it is difficult to generate alpha in publicly traded liquid assets.
An occasional lurker on this thread hereā¦not in the league with most of you but do have a questionā¦a matter of opinion, I suppose. Curious about what I believe is called the 4% withdrawal ruleā¦Is it a good ārule of thumbā? Withdraw 4 percent from accounts (ie 401K accts.) and the money lasts 30ish years?? Or is it bunk?
You can sell ETF right away while for mutual fund you have to wait till the end of the day for a price. If the market swings really hard, there is some price difference.
I will keep that $3700/million number in mind when I see how much we are being charged by our investments with FA @lxnaybob . I know it is based on percentage, and last time we met, we looked at our gains and risk. There is a percentage by FA and investment mgmt firm where all trades are done through. FA just changed our ācoverā firm with Roth IRA accounts (we went into office to sign paperwork) because he found lower charge and better services for those type of accounts. The peace of mind, diversification, and return relative to risk has us happy. I just donāt have the charge % and what that amounts to per year instantly retrievable from my chemo brain.
With Don/FA, we have 60% in annuities and 40% in Roth IRAs. The annuities are with Allianz 360 (no longer open for investments) - FA found this deal for us. Sometimes insurance companies offer products that turn out to be not as advantageous to them as they thought, so they stop offering.
Right now about 30% of our money is with FA, and 70% is with Hās 401k. We kept some money in Hās former company, just in case he went back to work for them (it would reserve him as an employee under āoldā/better retirement plans and benefits) - but I am researching rolling them over, maybe next year and have them convert to Roth IRA and pay the taxesā¦Paying taxes this year on a conversion chunk.
I agree, which is why ETFs are more appropriate for trading. My MFs are purchased and probably wonāt be sold for 10, 20, 30 years. Inter-day swings donāt affect me. Horses for courses.
Btw, though, Iām not sure that in a market that is swinging hard you wonāt find some liquidity issues and/or widening bid/offer spreads. I have never owned an ETF, or researched them, so thereās a really good chance that Iām talking out my ā¦ hat.
@rutgersmamma, the 4% rule says that in year one, you will take out 4% of your assets. In year two, you will inflation-adjust that number, and continue doing it each year thereafter. Itās a popular rule of thumb, but not the only one. Many financial folks think that the 4% rule is too reliant on returns being as good going forward as they have been in the past, and are recommending (mostly) using 3% as the SWR (safe withdrawal rate).
Bob, you have the investment strategy of Warren Buffett. Iām trying to develop mine.
@rutgersmama ,
There are articles galore about the 4% SWR, if you care to read them. The NYTimes just put one out that I linked in an earlier post:
In it, youāll see references to Wade Pfauās studies and Michael Kitcesā take. You can read them at length and come out with essentially the same conclusion, that a one-size fits all approach makes no sense, especially for people who have a guaranteed stream of retirement income like pensions and, later, SS. They do not have to draw upon their own retirement assets to the same extent because their other sources of retirement income are essentially annuities.
Age of retirement also makes a difference. As does the state of the market during the first years of retirement.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2579123&download=yes
Pretty much what others have said. Iāve seen arguments that 4% might be optimistic and 3% is safer, so thatās what I plan on doing.
My new graduate D asks me to help with her benefit enrollment.
Can she decline medical benefits to receive no-coverage compensation about $30/month and continue to use my familiy medical plan until she is 26? Does Obamacare allow that?
Is it too early for her to participate in optional group term life insurance now?
@coolweather, I donāt know much about ACA, but I thought I remembered that the extended coverage was for students and dependents.
Why is she considering additional term life? Does she have any dependents?
^ I donāt know whether she can opt in later if she decline optional group term life insurance now. I told her to ask her employer to clarify. She has no dependents.
āCan she decline medical benefits to receive no-coverage compensation about $30/month and continue to use my familiy medical plan until she is 26? Does Obamacare allow that?ā
Verify this with your insurance company, of course, but as of last year, our insurance company said that any child could be on our insurance until they were 26, via the law. They said they were no restrictions, and it didnāt matter whether they were students, dependents, had insurance available, anything. They said it would be stupid for our son to have his own policy when he could stay on ours for no additional charge, and that there was no way the insurance his company was offering was better than ours. They were right, and there have been no questions, no verifications except for asking if he had other insurance, and they have paid for everything without question.
Bus, I think the cost of verification is horrendous for small savings. It probably makes no sense.
@coolweather, what weāve seen, in our employment, is that opting in later gives the insurer the right to get proof of insurability (physical, blood test, etc). At your Dās age, term insurance is probably incredibly cheap, so it might be reasonable to opt in. If she has any health or lifestyle issues, definitely opt in.
āBus, I think the cost of verification is horrendous for small savings. It probably makes no sense.ā
Ha! And when do what insurance companies do make sense? Actually, every year before this, we had to verify that our kids were students, though I doubt they ever bothered to verify anything. But just the fact that we had to sign a statement saying that, was enough to take note that if we were lying, they would not cover anything for the kids if they found out. Last year, it all changed. At least I think it was last year, maybe it was the year before. Since then, no statements to sign anymore. I have to admit, this part of the ACA that covers kids has been very nice for us, as the insurance covers just about everything with either a zero, or $20 copay. And we are the type of people, that any strange thing happening with our kids, we send them to specialists, and get batteries of blood tests. Would not do this without good insurance.
Ah, thanks for searching that, coolweather, I was going to look for something. It is really awesome to be able to keep your kiddo on your plan, that you already pay for. Especially if they switch jobs a lot.