Ponderings on My Financial Planner

[QofQuimica]

Question for those of you who have been at this for a while. How do I know if my financial planner really knows what he's doing? I had asked him to suggest some investing books I could read, and one of them was "Simple Wealth, Inevitable Wealth," which is strongly pro-advisor. That's fine; the author readily admits that he is biased that way. But ironically, one thing the author said that really hit home for me is that it's essential to trust your advisor even when you disagree with his advice, and it made me realize that I'm not sure if I do (or should).

Just to be clear, he hasn't done anything that struck me as the least bit shady or wrong. I'm kind of gauging his advice based on what I've been reading, and most of what he has said makes sense once he explains it. (In fact, he advised me to do the back door Roth just like several of you did.) But I guess I'm a little concerned for a couple of reasons.

One is that he's pretty new himself (only been out of college a few years). How do I know if he has enough experience to help me manage my retirement accounts and/or a brokerage account? He hasn't had much time to build up a track record.

The other is that he and I still haven't really made an overall financial plan. I'll admit to that being at least partly my fault, because I've been asking him about different components of a financial plan like disability insurance, umbrella insurance, investing, financing a house, etc., and so we keep going off on tangents. But the net result is that I just don't feel like we're very organized with a real long term plan. It's more like we're just adding on new rooms to my financial house as we go along without having drawn up an architectural plan before beginning to build. I think that's what makes me nervous about him more than anything.

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[thesauce]

If you have time to read a book about how to invest, you have enough time to do it yourself and not throw money away on a planner.

I spoke to a planner who came highly recommended and it took me little time to realize he knew significantly less than me and just wanted to sell some over-priced products. For instance, I have an account making 5%+ with zero risk (yes, literally zero) that I was keeping my savings in. He was blown away by this and asked ME all kinds of questions about it. This is the kind of thing I would expect HIM to bring to the table.

I recommend you start with the white coat investor and boggleheads forums. Those alone should give you everything you need. It isn't rocket-science and, from questions you've asked in the past, I think you have a better handle on finances than you think - and certainly better than many/most financial planners.

 

[krl7044]

Question for those of you who have been at this for a while. How do I know if my financial planner really knows what he's doing? I had asked him to suggest some investing books I could read, and one of them was "Simple Wealth, Inevitable Wealth," which is strongly pro-advisor. That's fine; the author readily admits that he is biased that way. But ironically, one thing the author said that really hit home for me is that it's essential to trust your advisor even when you disagree with his advice, and it made me realize that I'm not sure if I do (or should).

Just to be clear, he hasn't done anything that struck me as the least bit shady or wrong. I'm kind of gauging his advice based on what I've been reading, and most of what he has said makes sense once he explains it. (In fact, he advised me to do the back door Roth just like several of you did.) But I guess I'm a little concerned for a couple of reasons.

One is that he's pretty new himself (only been out of college a few years). How do I know if he has enough experience to help me manage my retirement accounts and/or a brokerage account? He hasn't had much time to build up a track record.

The other is that he and I still haven't really made an overall financial plan. I'll admit to that being at least partly my fault, because I've been asking him about different components of a financial plan like disability insurance, umbrella insurance, investing, financing a house, etc., and so we keep going off on tangents. But the net result is that I just don't feel like we're very organized with a real long term plan. It's more like we're just adding on new rooms to my financial house as we go along without having drawn up an architectural plan before beginning to build. I think that's what makes me nervous about him more than anything.

I think you have several valid concerns:
1) The first step in any engagement should be creating an overall plan that addresses multiple areas such as tax planning, insurance, estate planning, investments, debt repayment, etc. Without that there is really no planning happening.
2) Without a plan in place, any proactive planning is out of the question. The adviser has to not only provide the framework, but also act in a proactive fashion to implement the plan, thereby (as you correctly noted) helping you get organized.
3) Experience (in the right areas) is extremely important. Someone who has not had enough experience working with complex systems (wither financial or others) might not have the right mindset and life experience to know how to look at the whole rather than concentrating on individual parts.
4) The tools you use to implement your plan depend on your goals, and are to be selected after the overall plan has been drawn up.

Some questions to ask:
1) Is your adviser working for you or are they employed by a firm that asks them to sell/push products?
2) Are they compensated for providing comprehensive advice, or are they simply paid as a percentage of assets and/or commission (which makes them less interested in providing comprehensive advice).

I think that one thing that is missing in the advisory industry is to be able to bring value to the clients that exceeds the fee. Also, a real fiduciary would be doing the following (at the very minimum):
1) Have no conflicts of interest, none at all (a good examination of their disclosure will reveal all of such conflicts).
2) Commit to use proven investment methods (such as using low cost index funds and globally diversified portfolios).
3) Work to help their client across multiple areas, such as developing a budget, debt repayment and consolidation, finding the best retirement plan for the practice, working with other advisers (such as CPAs).
4) Charge hourly or flat fees paid by the client only, never by third parties (never AUM fees or commission).
5) Demonstrate value to the client by providing proactive advice and helping the client save money in multiple ways.

 

[QofQuimica]

Thanks, those are some good points. He told me he could be compensated either as a percentage of the assets under management or by the hour for advice. I am not sure whether his firm asks him to sell specific products.

FWIW, I think another part of the problem is that so much of what other people plan for simply doesn't apply in my case. I was a nontraditional med student and am single with no med school loans, kids, or house. I've been habitually living below my means and saving money since I started working as a teenager, even while I was earning minimum wage. So I don't need help with developing a budget or debt repayment. My biggest issue is that now all of a sudden I'm faced with way more income than I need, and I am struggling to figure out what to do with all the extra money once I'm done maxing out my retirement accounts so that I can be financially independent as quickly as possible. I know that's a good "problem" to have, but I still want to find a well thought out solution to it!

I should also clarify that I actually have two planners at the moment. The first is the guy who manages my Roth, which I opened 17 years ago and have been funding this whole time. He does not provide any kind of planning help outside of investing (managing my Roth), and he was leery of the backdoor Roth when I asked him about it. I honestly don't think he knew much about it. I've also come to realize that I'm paying too much for my Roth account to be managed (~2% including fund fees + $150/yr flat fee), but I definitely was not comfortable with trying to go it alone.

That's why I started talking to a separate ostensibly comprehensive financial planner (the young guy). This one I got through one of my residency classmates. He's certainly been more help on cobbling together something of a plan than the first guy, but I'm still not sure he's the help I'm looking for and need. Like I said, I feel like I've made some progress on individual issues, but I still don't have a good plan for what to do with my extra money. He's also not able to help me manage my 403(b) or 457 accounts anyway (and neither is the original guy), because neither of their firms is one of the ones that my employer uses for our retirement account options. So that made me realize I'm going to have to learn what to do myself even if I'd rather pay someone else to do it all for me.

I'm starting to be convinced that I can do it, but I also would like to have someone I can run things by...and to help me come up with an overall plan that is appropriate for someone with my life situation. I'm just not sure this guy fits the bill. :-/

 

[krl7044]

Thanks, those are some good points. He told me he could be compensated either as a percentage of the assets under management or by the hour for advice. I am not sure whether his firm asks him to sell specific products.

FWIW, I think another part of the problem is that so much of what other people plan for simply doesn't apply in my case. I was a nontraditional med student and am single with no med school loans, kids, or house. I've been habitually living below my means and saving money since I started working as a teenager, even while I was earning minimum wage. So I don't need help with developing a budget or debt repayment. My biggest issue is that now all of a sudden I'm faced with way more income than I need, and I am struggling to figure out what to do with all the extra money once I'm done maxing out my retirement accounts so that I can be financially independent as quickly as possible. I know that's a good "problem" to have, but I still want to find a well thought out solution to it!

I should also clarify that I actually have two planners at the moment. The first is the guy who manages my Roth, which I opened 17 years ago and have been funding this whole time. He does not provide any kind of planning help outside of investing (managing my Roth), and he was leery of the backdoor Roth when I asked him about it. I honestly don't think he knew much about it. I've also come to realize that I'm paying too much for my Roth account to be managed (~2% including fund fees + $150/yr flat fee), but I definitely was not comfortable with trying to go it alone.

That's why I started talking to a separate ostensibly comprehensive financial planner (the young guy). This one I got through one of my residency classmates. He's certainly been more help on cobbling together something of a plan than the first guy, but I'm still not sure he's the help I'm looking for and need. Like I said, I feel like I've made some progress on individual issues, but I still don't have a good plan for what to do with my extra money. He's also not able to help me manage my 403(b) or 457 accounts anyway (and neither is the original guy), because neither of their firms is one of the ones that my employer uses for our retirement account options. So that made me realize I'm going to have to learn what to do myself even if I'd rather pay someone else to do it all for me.

I'm starting to be convinced that I can do it, but I also would like to have someone I can run things by...and to help me come up with an overall plan that is appropriate for someone with my life situation. I'm just not sure this guy fits the bill. :-/

One problem I already see is that you have too many advisers ;-)

A comment regarding AUM vs. hourly. This makes no sense at all. They are not interchangeable. Someone who charges AUM fees can not all of a sudden charge hourly fees. They charge hourly fees IN ADDITION to AUM fees. That explains why he can't provide advice on your 403(b) and 457 plans, or why they don't put together a comprehensive plan for you! So you need a third adviser to do that? Silly, isn't it? All of this has to do with compliance problems that some advisers have who work for broker dealers or other firms that are not fiduciaries for you. A real fiduciary would look at every single account (including all retirement plans) and provide investment management support there as well. Without me looking at their disclosure you will probably have no idea how to determine whether they are fiduciaries or not, or whether they have conflicts of interest that prevent them from providing quality advice to you.

Basically, AUM fees are wasted fees, and here's why (you are already starting to see the reasons yourself):
http://litovskymanagement.com/2012/08/no-aum-fees

My litmus test would be the following:
1) If your adviser is not using low cost Vanguard index funds to build portfolios, then the explanation is on them as to why.
2) If your adviser is charging AUM fees, then it is a conflict of interest and a waste of money. Only flat/hourly fees should be charged for advice. No advice is worth paying for many times over.

Your adviser has to be fairly compensated for high quality advice they are providing, so the model I prefer is a flat retainer that does not depend on the amount of assets, and that includes all kinds of proactive advice, not self-serving advice (yes, roll over that IRA into broker-dealer so that I can add to my AUM vs. roll it into Vanguard). So a single adviser can provide comprehensive advice on investments, insurance, retirement plans, etc., and as your needs change, the advice will be offered accordingly.

I'm actually having a conversation with someone who studies advisory practices and who believes in flat fee practice, and I think I know why this is not very widespread. It is difficult to make good money offering such advice because the competition (salespeople and AUM advisers) are making money from clients without having to really do anything other than throw some money into some funds and push re balance at the end of the year, and make a huge fee for it that grows as the assets grow. But if you can find a good flat fee adviser (and a fiduciary) who can do everything for you, they will be worth every penny!

 

[The White Coat Investor]

10 Reasons to Fire Your Financial Planner

1) He sold you whole life insurance.
2) He sold you loaded mutual funds.
3) He recommended any mutual fund with an ER over 0.80%
4) He thinks he can time the market
5) He thinks anyone else can time the market
6) He thinks actively managed mutual funds are a good idea
7) He doesn't know anything about PAYE or PSLF
8) His AUM fees are more than 1% and/or more than $10K per year.
9) He is under 30.
10) He has any complaints against him with the SEC.

Sounds to me like you need an hourly or flat-fee financial planner to help you draw up a plan that you can then follow mostly on your own with occasional check-ins. You might try someone from the Garrett Financial Network, Allan Roth out in Denver, or perhaps Mr. Litovsky who replied to you above.

 

[QofQuimica]

One problem I already see is that you have too many advisers ;-)

Haha, I'm working on consolidating them.

Seriously, though, I don't feel like the young guy is the right financial planner for me, and that's the main issue here. The original guy isn't really a planner at all so much as just managing my Roth investments. Up to this point, I haven't been involved in managing my Roth at all beyond sending the money in each month and looking at my quarterly statements. I understand now that I can and should take over managing my Roth from him in the near future, but it doesn't have the same urgency for me that coming up with a good planner to replace the young guy does. And I don't feel ready to manage the Roth on my own just yet.

10 Reasons to Fire Your Financial Planner

1) He sold you whole life insurance.
2) He sold you loaded mutual funds.
3) He recommended any mutual fund with an ER over 0.80%
4) He thinks he can time the market
5) He thinks anyone else can time the market
6) He thinks actively managed mutual funds are a good idea
7) He doesn't know anything about PAYE or PSLF
8) His AUM fees are more than 1% and/or more than $10K per year.
9) He is under 30.
10) He has any complaints against him with the SEC.

Sounds to me like you need an hourly or flat-fee financial planner to help you draw up a plan that you can then follow mostly on your own with occasional check-ins. You might try someone from the Garrett Financial Network, Allan Roth out in Denver, or perhaps Mr. Litovsky who replied to you above.

Yes, I've read this post of yours, and it has obviously given me plenty of food for thought. You've made me quite the malcontent over the past few months, when up until that point, I had been perfectly fine with the status quo. :-d

Thanks again to you both.

 

[ThoracicGuy]

Haha, I'm working on consolidating them.

Seriously, though, I don't feel like the young guy is the right financial planner for me, and that's the main issue here. The original guy isn't really a planner at all so much as just managing my Roth investments. Up to this point, I haven't been involved in managing my Roth at all beyond sending the money in each month and looking at my quarterly statements. I understand now that I can and should take over managing my Roth from him in the near future, but it doesn't have the same urgency for me that coming up with a good planner to replace the young guy does. And I don't feel ready to manage the Roth on my own just yet.


Yes, I've read this post of yours, and it has obviously given me plenty of food for thought. You've made me quite the malcontent over the past few months, when up until that point, I had been perfectly fine with the status quo. :-d

Thanks again to you both.

You might also look to the Boglehead forum for free advice. Their website and forum will give you plenty of information to do what you want with your investments and help you keep the costs low. Right now it sounds like you're paying way too much.

As for managing your Roth, there shouldn't be any big problems with that. You need to determine what percentage of your investments are stocks and which part are bonds. Then for the stocks, which part domestic and how much international. Once you determine those numbers, you can make them all fit together between all your accounts. Rebalance 1-4 times a year and you should be good to go.

 

[TexasPhysician]

Do you not have time to learn to manage your assets yourself?

 

[QofQuimica]

Do you not have time to learn to manage your assets yourself?

That's like asking me do I not have time to learn to rebuild my own car engine. Sure, I have some time to learn more about how to do this. I even have interest, motivation, and presumably sufficient intellect. But I need a functioning car now, not a few months or years from now after I have had a chance to read several books/websites and go through several rounds of trial and error with putting the parts together. And no, given my current level of knowledge and experience, I'm not going to be comfortable with driving any car I built myself on the highway any time soon.

 

[Apramana]

This may be helpful, for simplicity for Q, and for anyone else just starting up:

Three Fund Portfolios: http://www.bogleheads.org/wiki/Three_fund_portfolio
- "This study by Rick Ferri found that for the 10-year period (2003-2012) The Three Fund Portfolio outperformed 87.7% of its managed fund counterparts." (http://www.bogleheads.org/forum/viewtopic.php?p=2115312#p2115312)

How to deal with your new attending-level salary is something beyond the scope of my experience. Congratulations on the significant increase in pay, however

Maximizing tax-advantaged space seems to be worthwhile, and guidelines for how to do that are found here: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

These topics, and others, are extensively covered on the Bogleheads Wiki: http://www.bogleheads.org/wiki/Main_Page

Even if someone were to decide to use a financial planner, it seems that the payoff for increasing our knowledgebase even a little can be substantial. Not knowing enough to know if our "expert" is really worthy of the title seems like it could be quite costly in most areas of our lives, especially in our finances.

I hope the information helps others at least as much as it has helped me. Please have a great day.

 

[QofQuimica]

This may be helpful, for simplicity for Q, and for anyone else just starting up:

Three Fund Portfolios: http://www.bogleheads.org/wiki/Three_fund_portfolio

Simplicity is in the eye of the beholder, I suppose. I couldn't even read the first sentence of this link without having to stop and look up what "slice and dice" was, only to find out I don't need to be concerned with it right now as a beginner anyway. But that's a perfect example of why reading the Bogleheads website makes for slow, painful going for me. It's not nearly as beginner-friendly as WCI's site.

How to deal with your new attending-level salary is something beyond the scope of my experience.

Mine too. Like I said, I'm not complaining, cause it's a good problem to have, but the array of options is still a little overwhelming for me at the moment.

Maximizing tax-advantaged space seems to be worthwhile, and guidelines for how to do that are found here: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

Even if someone were to decide to use a financial planner, it seems that the payoff for increasing our knowledgebase even a little can be substantial. Not knowing enough to know if our "expert" is really worthy of the title seems like it could be quite costly in most areas of our lives, especially in our finances.

Agree completely. Thanks for the links. I'll keep reading.

 

[TexasPhysician]

That's like asking me do I not have time to learn to rebuild my own car engine. Sure, I have some time to learn more about how to do this. I even have interest, motivation, and presumably sufficient intellect. But I need a functioning car now, not a few months or years from now after I have had a chance to read several books/websites and go through several rounds of trial and error with putting the parts together. And no, given my current level of knowledge and experience, I'm not going to be comfortable with driving any car I built myself on the highway any time soon.

I think you are overestimating the complexity of investing. See the post above this and bogleheads forum. Simple mutual fund strategies can work very well. An advisor will recommend similar allocations and take 1% as fees for doing so.

Sandy Botkin books and IRS website have gotten me to maximize deductions better than multiple accountants I've tried. This doesn't include saving me the fees involved.

If you don't want to do it yourself, I'd recommend interviewing at least 6-10 advisors and accountants first. The majority I've me at events, their office, or from friends merely want to sell products to pull in commissions and referral fees.

 

[Apramana]

You're very welcome. I am just trying to pay back some of the compassion and generosity you have extended in your 17,000+ posts here. I have a ways to go

WCI created a two-fund portfolio that follows similar principles of the three-fund portfolio here: http://whitecoatinvestor.com/the-default-portfolio/

As with many of his posts, it seems very physician-centric in its presentation.

The three-fund portfolio wiki page, or the forum discussion linked at the very bottom of the page, identify the three funds that provide the most diversity for the least cost. The Wiki page also gives fund options outside of Vanguard, which can be helpful for those of us who can't move all our accounts there or do not want to: http://www.bogleheads.org/wiki/Three_fund_portfolio

Another option would be to present your situation to the Bogleheads forums, and see what feedback you get. I have found the community to be extremely supportive. Here is the link for that section of the forums: "Asking Portfolio Questions" http://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212

Honestly, the Bogleheads forums are my SDN equivalent for all things financial. I cannot recommend the resource enough.

The learning curve can seem steep, but I have found that once we get the basics down it all quickly becomes easier to understand. Good luck in your efforts. I would imagine that it is far less challenging than getting through medical school and residency, but a theme of WCI's posts seems to emphasize that this is a "second job" that we have to take on if we want to maximize our chances of success, regardless of the rigors of our first job. (http://whitecoatinvestor.com/about/)

I hope everyone is having an amazing day

 

[sazerac]

Besides the boggleheads website and white coat investor book / website, are there any decent (small) books or other resources for getting started in money management? Something that covers not only mutual fund allocations, but other basic stuff like insurance and retirement accounts and credit cards?

When I was at Q's stage, way back in the 1990s, I had a book by Jane Bryant Quinn (probably "making the most of your money") and a one-year subscription to Money magazine. Those were enough to teach me the basics and get my investments all pointed in the right direction. I'm sure those resources are horribly dated by now.

 

[ThoracicGuy]

Besides the bogleheads website and white coat investor book / website, are there any decent (small) books or other resources for getting started in money management? Something that covers not only mutual fund allocations, but other basic stuff like insurance and retirement accounts and credit cards?

When I was at Q's stage, way back in the 1990s, I had a book by Jane Bryant Quinn (probably "making the most of your money") and a one-year subscription to Money magazine. Those were enough to teach me the basics and get my investments all pointed in the right direction. I'm sure those resources are horribly dated by now.

Those two resources likely will cover most any of those questions. The guys behind the Boglehead site also have an in-depth book that would be worthwhile reading.

 

[TexasPhysician]

The whitecoatinvestor writer wrote a book that others seem to like. I haven't read it myself.

 

[ThoracicGuy]

The whitecoatinvestor writer wrote a book that others seem to like. I haven't read it myself.

It was a good and quick read. He also includes alot of references for further reading at the end of each chapter. I recommend both his book and the Boglehead book.

 

[The White Coat Investor]

You might also consider hiring a GOOD planner for a year or two while you learn. There's nothing wrong with paying a fair price for good advice. The difficulty comes in that once you know what a good planner looks like, you probably know enough to do it yourself.

 

[QofQuimica]

I have started the process of moving my Roth and traditional IRAs away from the current full service advisor and over to Schwab. I emailed my advisor yesterday evening to let him know. Got three emails back overnight, including one sent at 4 am with the performance brochure of some of my funds, which happily have no loads but have ERs in the 0.88-0.98 range. He still never did explain his investment strategy even though I had asked him about that a few months ago. Well, now it's moot.

He also advised me to get an accountant to help me with taxes this year, which I was planning to do anyway. I've usually done my own taxes up to this point, but things have gotten a wee bit more complicated, and I was wanting some help anyway since I have income in two states, a Roth conversion, etc.

Thanks again for all the advice you all gave here. Oh, and FWIW, I liked the second grader portfolio book by Allan Roth too and would add it to the list of good basic books for beginners.

 

[TexasPhysician]

.9 is pretty high. Vanguard is under .2 in many funds. My highest with vanguard is .26 and it's a European fund. You are at almost 4x my highest cost.

 

[QofQuimica]

.9 is pretty high. Vanguard is under .2 in many funds. My highest with vanguard is .26 and it's a European fund. You are at almost 4x my highest cost.

I understand that now, which is why I'm moving the accounts.

Unsurprisingly, the chart he wanted me to look at on page 2 of the prospectus showed how the fund was beating the S&P (no doubt minus the dividends like they often do when they make these comparisons). The charts I was interested in were the ones on pages 4-6 that showed all the expenses. Those charts didn't tell such a pretty story. But I was happy to see that there were no loads at least.

 

[krl7044]

Schwab has some nice ETFs (not enough in my opinion to go there), but their mutual funds lineup is a very limited, and quite significantly more expensive than Vanguard's. Ameritrade actually has 100+ Vanguard and other best in class ETFs with no transaction fees, so even at Vanguard I'd have to pay commission on about 3 out of 13 asset classes I end up using for a globally balanced portfolio.

 

[QofQuimica]

For those of you with DFA funds, you presumably bought those through an advisor. What happens to your DFA investments if you stop using that advisor? Do they make you sell them? Or can you keep the ones you have but just not buy any more of them in the future?

 

[QofQuimica]

Schwab has some nice ETFs (not enough in my opinion to go there), but their mutual funds lineup is a very limited, and quite significantly more expensive than Vanguard's. Ameritrade actually has 100+ Vanguard and other best in class ETFs with no transaction fees, so even at Vanguard I'd have to pay commission on about 3 out of 13 asset classes I end up using for a globally balanced portfolio.

Not to be ignorant, but do I really need all that many choices? One could do, say, a three fund portfolio with large cap blend + small cap blend + international (foreign large blend), all of which have very reasonable ERs (0.19 or less).

My problem is that I don't have the option of putting any of my employer retirement accounts (one 457 and three 403b's) with Vanguard. I do have the option of investing the 457 with Schwab and two of the 403b's with Fidelity, so that's what I'm doing. My third 403b is with TIAA-CREF. Given that I already have these four accounts with three different companies, I'd really like to avoid having to open another account with Vanguard or any other fourth company if possible.

 

[krl7044]

For those of you with DFA funds, you presumably bought those through an advisor. What happens to your DFA investments if you stop using that advisor? Do they make you sell them? Or can you keep the ones you have but just not buy any more of them in the future?

In most cases you can only get the funds if you keep the money with the adviser in a special advisory account. When the relationship is over, my understanding is that you have to roll the money out. I'm not a big fan of DFA funds - the math is a little cooked on them, and therefore Vanguard is good enough.

 

[krl7044]

Not to be ignorant, but do I really need all that many choices? One could do, say, a three fund portfolio with large cap blend + small cap blend + international (foreign large blend), all of which have very reasonable ERs (0.19 or less).

My problem is that I don't have the option of putting any of my employer retirement accounts (one 457 and three 403b's) with Vanguard. I do have the option of investing the 457 with Schwab and two of the 403b's with Fidelity, so that's what I'm doing. My third 403b is with TIAA-CREF. Given that I already have these four accounts with three different companies, I'd really like to avoid having to open another account with Vanguard or any other fourth company if possible.

I guess if you do it yourself Schwab will work. It is not about the number of choices, but the type of portfolio you are looking to build. My portfolios are typically tilted towards dividends and small caps, so that's where Schwab is lacking. Also, there isn't much as far as bond selection (and the cost on most choices is much higher than Vanguard's). Inside 401k plans I might have a 4 asset-class portfolio (if that's all that is available), but that's certainly not nearly diversified enough in my opinion. Vanguard does not have all 13 asset classes but comes close with 12 as far as mutual funds, and nails all 13 with ETFs (some of which are not from Vanguard in IRAs/brokerage). You can use Schwab's ETFs as well (I have some portfolios built out of Schwab/Vanguard ETFs), so that can make up the difference. I also like Vanguard's bond desk for individual municipal bonds and access to Vanguard ETFs transaction-free. Schwab probably has its own ETFs as transaction free as well, so I'd use ETFs, not mutual funds, in a Schwab IRA.

 

[ThoracicGuy]

Not to be ignorant, but do I really need all that many choices? One could do, say, a three fund portfolio with large cap blend + small cap blend + international (foreign large blend), all of which have very reasonable ERs (0.19 or less).

My problem is that I don't have the option of putting any of my employer retirement accounts (one 457 and three 403b's) with Vanguard. I do have the option of investing the 457 with Schwab and two of the 403b's with Fidelity, so that's what I'm doing. My third 403b is with TIAA-CREF. Given that I already have these four accounts with three different companies, I'd really like to avoid having to open another account with Vanguard or any other fourth company if possible.

A fourth company isn't that much of a burden, to be honest. The main thing you want to do is keep your costs low. I'm not real familiar with everything Schwab has to offer, though I have heard they have a few reasonable offerings. Your 3 fund portfolio is a bit off, though. You need a Total Market, Total International, and Bond fund to make up your portfolio. Now with the 457/403b's you have the added ability of doing your 3-fund portfolio via any combination of funds in the accounts. You don't have to have the same makeup in each account, just overall as a whole. If you want assistance in which funds to pick between them all, posting on the boglehead forum with all your details will get you plenty of help in making it happen.

 

[QofQuimica]

Thanks, might be interesting to see what they come up with. Not sure I want to do a bond fund considering I have a guaranteed 3.5% return annuity as a cash option.

 

[ThoracicGuy]

Thanks, might be interesting to see what they come up with. Not sure I want to do a bond fund considering I have a guaranteed 3.5% return annuity as a cash option.

That would be reasonable as a bond option. I assume thats in one of the 403b's?

 

[QofQuimica]

That would be reasonable as a bond option. I assume thats in one of the 403b's?

Yes, as well as the 457.

 

[RogerBalz]

Besides the boggleheads website and white coat investor book / website, are there any decent (small) books or other resources for getting started in money management? Something that covers not only mutual fund allocations, but other basic stuff like insurance and retirement accounts and credit cards?

When I was at Q's stage, way back in the 1990s, I had a book by Jane Bryant Quinn (probably "making the most of your money") and a one-year subscription to Money magazine. Those were enough to teach me the basics and get my investments all pointed in the right direction. I'm sure those resources are horribly dated by now.

I would recommend Point and Figure Charting by Thomas J Dorsey, the first edition. Or The Three Point Reversal Method by A W Cohen written back in 1948.

 

[RogerBalz]

A fourth company isn't that much of a burden, to be honest. The main thing you want to do is keep your costs low. I'm not real familiar with everything Schwab has to offer, though I have heard they have a few reasonable offerings. Your 3 fund portfolio is a bit off, though. You need a Total Market, Total International, and Bond fund to make up your portfolio. Now with the 457/403b's you have the added ability of doing your 3-fund portfolio via any combination of funds in the accounts. You don't have to have the same makeup in each account, just overall as a whole. If you want assistance in which funds to pick between them all, posting on the boglehead forum with all your details will get you plenty of help in making it happen.

Just out of curiosity how well did 3 fund portfolio fair during 2000 and 2008?

 

[RogerBalz]

He's also not able to help me manage my 403(b) or 457 accounts anyway (and neither is the original guy), because neither of their firms is one of the ones that my employer uses for our retirement account options. :-/

There are advisors who can help you manage your 403(b) or 457 accounts. Some are flat fee others aum fees.

 

[ThoracicGuy]

Just out of curiosity how well did 3 fund portfolio fair during 2000 and 2008?

The same way that the market performed in 2000 and 2008. That's the point.

Do you think you can guess which stocks are going to be hot and which are not? Do you think that an active fund manager can predict those things too? That's one reason why passively managed index funds are ideal for the long term. Yes, you will have some years that are bad. Holding the course is how you win out. If you are too scared of a market performance like 2008, then maybe you need to stick with CDs and savings accounts...

I see by your recommendations above that you favor trying to time the market as well as stocks rather than index funds. I think the 3-fund portfolio over 20 years would perform better than your guesswork.

 

[QofQuimica]

There are advisors who can help you manage your 403(b) or 457 accounts. Some are flat fee others aum fees.

Thanks. But as it turns out, I don't need an advisor. The people here are right. Once you're knowledgeable enough to select a good advisor, you're knowledgeable enough to do it yourself. I was initially a bit intimidated by the prospect of self-managing a six figure portfolio spread across six different retirement accounts held at three different brokerages, with no experience or guidance (soon to be eight accounts once I start using my taxable account and open my niece's 529 plan). But it's not rocket science. And I was in the market in 2000 and 2008, and I lost money in my actively managed account just like the people who were in index funds did. No more active management for me.

For anyone else who is just getting started and finds this thread, I finally did join the Bogleheads investing forum too. Very helpful discussions there, even if you mainly lurk. As is their wiki.

 

[sazerac]

Just out of curiosity how well did 3 fund portfolio fair during 2000 and 2008?

In 2008 the market and my three-fund mutual fund both dropped in value. It was an excellent opportunity to move my funds from a Vanguard Lifestyle fund to a Vanguard Target Retirement fund instead. Because the market was down there were lower tax implications than if I had done the same horizontal move a year earlier.

In the dot com bust of 2000 I still owned and rebalanced three individual Vanguard funds manually. So when the stocks dropped I bought more (by selling bonds), and when bonds dropped I bought more (by selling stocks) to get my portfolio back in balance. I thought it was fun for a while, but it gets tiresome and I am glad Vanguard has fund-of-funds that do this automatically.

 

[QofQuimica]

In 2008 the market and my three-fund mutual fund both dropped in value. It was an excellent opportunity to move my funds from a Vanguard Lifestyle fund to a Vanguard Target Retirement fund instead. Because the market was down there were lower tax implications than if I had done the same horizontal move a year earlier.

In the dot com bust of 2000 I still owned and rebalanced three individual Vanguard funds manually. So when the stocks dropped I bought more (by selling bonds), and when bonds dropped I bought more (by selling stocks) to get my portfolio back in balance. I thought it was fun for a while, but it gets tiresome and I am glad Vanguard has fund-of-funds that do this automatically.

Curious based on what you said: how often were you rebalancing? It doesn't seem like something that should be so much work that it would get tiresome if you're only doing it once or twice a year like most people seem to do.

 

[sazerac]

Curious based on what you said: how often were you rebalancing? It doesn't seem like something that should be so much work that it would get tiresome if you're only doing it once or twice a year like most people seem to do.

Once a year, in January. I was doing a lot of travel at the time (like months and months in third world countries) and the Internet wasn't as ubiquitous as it is today.