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Posts posted by EdLaFave

  1. Thanks Tony, I'm not sure how smart I am but I do try to listen to and understand the geniuses and giants who've given all of us so much. In this case we should all listen to Bogle, because at this point I'm just repeating his findings.


    ...in a lot of ways he is an improbable hero for those lucky enough to be able to invest. The ethical path was obviously less profitable but he did it anyways. I wonder if it ultimately made him more money in the long run?

  2. Thanks.


    I'd be 100% comfortable replacing total bond with intermediate bond. I'm not super knowledgeable about the nitty gritty details of bonds because they make up such a small part of my portfolio but my understanding is intermediate is slightly more risky. If that bothered someone, they could slightly reduce their stock allocation to compensate for the switch away from total bond...my intuition suggests such a change is unnecessary though.


    Sales reps are great at what they do. They tap into your greed, fear, and submission to authority all at the same time. When I have to talk to a particularly slick rep they can sometimes activate those primal parts of my brain and trigger that nervous feeling in my stomach. Luckily my logic, knowledge, and experience being repeatedly exploíted is too strong to be overcome, but I totally understand how they overwhelm people. It is a science.

  3. Well you've got to go with the best option available. Hopefully enough competition and customer knowledge exists to guarantee we have at least one solid option.


    If for some reason Vanguard became evil overnight then I'd probably transfer my assets to Fidelity the next morning.


    I'm just arguing for open eyes not perfection in an imperfect world.

  4. TIAA are crooks just like the rest of Wall Street. People should go to jail over this, but they won't.


    As I've said from day one, you shouldn't invest in TIAA. This was my bottom line on them for OCPS (Fl), "Over 30 years the 0.63% annual fee costs you 26.2% of your real profits." The numbers don't lie, people who charge fees that high aren't operating in your best interest. It is in black and white, pure unemotional math. So I am not at all surprised to read about TIAA's latest troubles.


    I think some in the education field were blinded by TIAA's reputation. I had the advantage of knowing nothing about their reputation. I think we should all take this as a lesson, nobody in the financial industry is your friend.


    Take my sacred cow, Vanguard. We can't love Vanguard, we can only love low fees and ethical behavior. The moment Vanguard doesn't represent that then we must turn on them, quickly and dramatically. Jack has been gone for a while now, anything can happen. Blind loyalty and money shouldn't mix.

  5. Almost everything I've heard about the tax ideas the Republicans are batting around sounds terrible. I'd be surprised if reducing the 401k contribution limit makes it into a bill; wouldn't that alone cause some Republican senators to vote no? I imagine a huge outcry from employed voters and the financial services industry.


    Just my two cents, but I suspect most/all of the proposals to reduce government expenditures will be abandoned and Republicans will settle for a bill that cuts taxes, explodes the deficit, and expires in ten years. That would still be a huge win for them.



    Amen to Ed's suggestion about contacting elected representatives. Especially the Republicans. Alas, I'm in California, virtually all of my representatives are Democrats who don't need swaying and don't matter in this decision.


    Calling may seem intimidating but it is really easy. An aid will answer the phone and usually ask you for your name and where you live and what your message is. Then you tell them what you want your congressperson to do. They're really friendly, professional, and normal people. Easy, it is a 30 second phone call.


    Calling a congressperson that agrees with you gives them support to maintain and expand their position. There will be Dems who vote for the tax cut bill.

  6. I could talk at length about Republican legislation, but for now at least I'll say one thing...

    They hope to pass permanent tax cuts through a process called reconciliation, which only requires a simple majority (i.e. they can lose all Dem votes and two Rep votes). The "problem" with reconciliation is that it must be defecit neutral after ten years or it expires. So their plan seems to be to cut healthcare programs and deductions (the 401k deduction, mortgage interest deduction, etc) so that permanent tax cuts are given largely to the wealthiest in this country. With such a proposition and recent history, I think the odds of passage are very low.

    Call your reps and senators if you think this is bad policy, https://whoismyrepresentative.com/

  7. jebjebitz, that is a great portfolio. Those would have been my exact choices.


    I just wanted to speak to the justified fear that financial institutions are trying to trick you out of your money. We opened a Security Benefit NEA DirectInvest account in April 2017. On 7/7/2017 we were charged an $8.75 fee. On 10/6/2017 we were charged another $8.75 fee. So they seem to be honestly upholding their promise of charging just $35/year.


    Even though Security Benefit itself is an unethical company, we couldn't be happier with the plan.

  8. After this insane run we've seen for the last 10 years, I'd like to remind people of a few things:

    1. What bond percentage did you decide was appropriate back in 2008? Make sure you have that percentage today.
    2. Nobody can predict the future, but your emotions will constantly disagree with this fact.
    3. A crash is coming. Maybe tomorrow, maybe next year, maybe some years from now. Mentally prepare for it now, it'll be an expected surprise.

  9. 100% agree, I do it twice a year. Just one of life's very mildly irritating chores.


    If anybody has a 401k with matching (might be true for other accounts) be aware of a little catch. When your employer says they'll match Y% of your salary most people think if they just contribute Y% on the year then they'll get the full match. Unfortunately, it isn't that simple for many people.


    Most employers actually mean they'll match the first Y% of each contribution on a per paycheck basis. So if there are any paychecks where you don't contribute at least Y% of the paycheck (maybe you hit the yearly max before the last paycheck or you took a month off to pay for an unexpected expense) then your yearly match will be less than Y% of your salary.

  10. I enjoyed this read. Behavioral economics is usually interesting. My wife sometimes plays Freakanomics in the car, if anybody liked this article they may also like that podcast.



    assumed people behaved rationally and in their own self-interest

    I casually study human behavior specifically because I've always been amazed by how irrational and self-destructive people are. So I'm always amazed when people claim to have built models/systems/institutions on ideas that seem so self-evidently false...I'm never sure if they're lying, foolish, or unobservant.


    I remember after the financial crisis, Greenspan saying something like, "I made a mistake in assuming the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders."



  11. I highly recommend Security Benefit's DirectInvest option. My wife and I are enrolled in it and we love it.

    I documented the plan here.

    I explained how to enroll in the plan here.

    The enrollment instructions have some OCPS (FL) specific information but the rest should be relevant to you. If you need any help sorting it out, I'm always available to help.


  12. I think we should avoid becoming Vanguard cultists.


    I agree 100%, but I will reserve some space for Vanguard loyalty that some may think is unwarranted.


    If another company offered a superior product then I'd be forced to abandon Vanguard because superior products are how Vanguard won my support in the first place. However, until that happens I will vote with my dollars and support the only company to take an ethical stand on behalf of investors. Fidelity and Vanguard both offer fantastic total market index funds, but given the choice, I don't need a nanosecond to know that I'm going to use Vanguard and I'd encourage others to do the same. I'd even be (happily) willing to put up with some rough edges if need be (slower customer service, less fancy website, etc).

  13. I highly recommend Security Benefit's DirectInvest option. My wife and I are enrolled in it and we love it. I don't have personal experience with Lincoln, but my unreliable memory is telling me it is more expensive than Security Benefit's DirectInvest.


    I documented the plan here.

    I explained how to enroll in the plan here.


    The enrollment instructions have some OCPS (FL) specific information but the rest should be relevant to you.


    ...I don't know this for a fact but I believe the 0.01% 12b-1 fee is included in the ERs. I believe this because the ER for VTSAX is 0.04% but using Security Benefit's DirectInvest it is listed at 0.05%. This was too small of a fee for me to dive in and really research.

  14. Tony is 100% right. The philosophical idea is that we don't have any powers of prediction even though we feel in our souls that we do.


    The data on active management supports this idea. In 2005 when John Bogle reviewed the performance of the 355 mutual funds that existed in 1970:

    • 223 funds (62.8%) were closed before 2005 (usually they collapsed because of abysmal performance).
    • 60 funds (16.9%) lagged the market by 1% or more.
    • 48 funds (13.5%) were within +/- 1% of the market.
    • 15 funds (4.2%) beat the market by 1-2%.
    • 9 funds (2.5%) beat the market by 2% or more.

    When we look at the big winners many of them have been getting crushed and owe their status to a period of early dominance. Then comes the matter of figuring out if they won because of skill or luck...I believe they were just as skillful as the rest, which means they got lucky. Their strategy happened to work. So if it was luck that means the chance of you picking one of the big winners is also luck.


    This is why I advocate taking what the market returns and instead of paying some fund manager to outperform...put those payments right into your own investments.

  15. I support virtually everything said in this thread. Here are a few of my thoughts:


    1. I documented the fundamentals of investing on my site, which speaks to a lot of what's been said so far https://educatorsfightingforfairness.wordpress.com/investing-101/


    2. If you're going to make a change it is because you're moving into something better. Therefore, there is no reason to do it incrementally.


    3. Any problems with your portfolio are "slow moving". Don't needlessly delay, but take your time and learn everything that is relevant. Then when you're 100% comfortable, make the changes. No rush, no pressure.


    4. I would roll the traditional 403b into a traditional IRA. Assuming 3% inflation and 6% market returns then over ten years the 0.35% fee for your 403b will consume 13% of real returns. I'm not willing to give that up and get nothing in return. However, doing such a rollover makes performing a backdoor roth less desirable so there is a potential con.


    5. I cannot stress enough how important it is to go through the exercise of selecting an asset allocation that you can live with in good times and bad. This is the key to wealth and sanity.


    6. You want total market, low cost, index funds.


    7. The things you've said lead me to believe you'd do great with an all in one fund at Vanguard (or any low cost provider). They have target date funds that get less risky as time goes on. They have LifeStrategy funds that remain static over time. This option will cost you 0.12-0.16%. Never pay more than that.


    8. If you wanted to get fancy and save a little money, you could directly own the individual funds inside the all-in-one fund. Vanguard Total Stock, Vanguard Total International, and Vanguard Total Bond. It'll cost you about 0.07% but it'll force you to do a little maintenance work and it'll expose you to behavioral errors because it'll require you maintain your asset allocation by buying stock in a crash and selling stock in a rally...people are traditionally bad at doing this.

  16. My girlfriend started working at a new school in a new state, and has access to a 403(b).

    Here in Florida the first choice an educator has to make is whether to participate in the pension or an FRS Investment Option (which has excellent low cost investment options and I believe an 18k/year limit). I believe they MUST do one or the other.


    Then the teacher has the optin to contribute up to 18k/year to a 403b vendor.


    Then the teacher has the option to contribute up to 18k/year to a 457b vendor.


    So make sure you understand all of the options available for your girlfriends situation.


    the vendor/provider charges a quarterly fee of $15, and a .9% fee

    The 0.9% fee is unacceptably high, ridiculous. Keep taking advantage of the IRA for sure, but even at 0.9% it is still probably worth using the 403b and then rolling over to an IRA when employment terminates.


    Is there really no way to avoid the .9% fee?

    Well Lincoln does have that self directed plan in certain areas, but you're probably not in one of those areas but make sure. Otherwise, I'm not sure if you have other options.


    Can she select another vendor? I think the answer is no, this school has chosen a single vendor.

    It sounds like you're stuck then. But you can lobby for a better vendor as I'm currently doing in OCPS (FL) and I'd be gald to help you.


    Shouldn't there be someone on staff at the school itself?

    Our district has a "Retirement Services", which can answer some questions but they provided us with flat out wrong information.


    Our district uses a third party plan administrator (TSA Consulting Group), which has a website that lists our available vendors but nothing else.


    Neither one would tell us anything about the plans. This is basically the wild west and it is all on you to fight through it.

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