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  1. Hi Steve, Thank you for taking the time to post the above. I’m familiar with Vanguards founder John Bogle and most of our savings are invested via Vanguard. Interesting that you mentioned Jason Sweig. Jason use to have a column in Money Magazine. Even the editor is gone. The new editor, 2 months on the job, is another guy I never heard of before. I’m not saying they are bad people, just saying that I get use to writing style and I have lost confidence in a magazine that suddenly has such tremendous turnover. My guess is they are replacing high paid people with low paid people. I don’t know enough about Paul Lim to make an educated assessment. I became frustrated / mad at him after reading one article that I completely disagreed with. Before I received the March 2009 issue I had never heard of him. Unfortunately for him, I have not previously read a article from him that I liked. So I read from him one article and it ticked me off. As to the research on market timing, I think you and I have different definitions on market timing. One definition is to be a day trader, making many decisions over and over. I’m not. I decided to make 2 decisions. To sell and then in the future to buy back in. The sell is done. I did not get out at the peak. If I had I would have told you I sold at dow 14,000. I did not sell at dow 14,000. I sold at a bit over 8,500. I have one more decision to make. When to buy back in. Even if I chose to buy today the decision would result in me buying back in at a level way below where I sold. John Boggle had a clear goal when he started the index 500 fund. He had a goal of matching the market, not beat it. He did this in a way with low costs and operational efficiency. His goal was clear. Many people were against what he was doing. Today he is very well respected. Years ago I went to Vanguard.com and took the test that told me my risk tolerance. I answered honestly. It asked things like did I sell back in the 1992 downturn or the 2000 downturn. I answered honestly, that I did not sell. The test never asked me what I would do if the current market conditions became reality. Look, I hold John Boggle in high regard. He is no longer steering the ship at Vanguard. I look back at things like Vanguard target date retirement funds and how much equity exposure they have for people at early retirement. No way is that anything other then extremely aggressive. I question if Vanguard is following John Boggle ideology. If I don’t buy back in at the bottom I’m OK with that. If I don’t buy back in until the market is above where I sold I am OK with that. Sitting back and seeing two decades of savings go any lower is what I could no longer do. Again, go back and understand my goal as posted above. My goal is not to beat the market. My goal is not to match the market. My goal in the short term is to preserve what is remaining. This is why I sold.
  2. It’s a fair question but it’s a long answer. First background. Presentation = two people, a married couple. Wife = elementary school teacher Husband = works for a electrical components manufacturer that has exposure to industrial OEM, MRO and commercial sales with real time national sales data access. I noticed something. After I noticed it I went back and checked records. Historically I noticed a correlation between our sales and the movement S&P 500. The short term sales results of our business year over year or sales per work day per month is strongly correlated to the S&P 500 with the S&P having about a 4 to 6 week delay. A delay! So the data I see is my magic crystal ball into the future of the stock market. So its clear, the correlations is much stronger to industrials then to the financial sector, but the correlation is strong enough that when used to gauge the general S&P 500, I’m going to run with it. Of course I can’t buy or sell stock in my employer with this information. But I can sure as heck buy or sell broad based mutual funds. After figuring this out I am kicking myself for not figuring it out sooner. I sold in mid January when I saw our number coming in below the same month of the previous year and below the run rate of sales per work day. So, when do I revert back to an 80 / 20 equity mix? Its my plan that when I see a full month of no more declining in sales data. I don’t think I will wait until I see improvement. At the current run sales rate today, now, right now, the market is ready for a future drop consistent to the drop we saw in October. Keep in mind its 6:14 PM AFTER the close of todays 299 point drop on the dow. Today the dow closed at 6763 and its March 2 2009. So I don’t get accused of talking in riddles again, here it is. Based on what I am seeing I expect to see the Dow to drop another 15%-18%, so this means the dow will drop to below 6,000 with in the next 4-6 weeks. Sub 6,000 within 4-6 weeks would be consistent with the historical correlation I have seen with the sales numbers I see and the changes to the dow. I don’t know how low it will go nor am I predicting when it will turn around. I’m only comfortable using this to adjust our own money. Again, I’ll rebalance when I see the stop in the decline in sales for one month. I don’t want to overstate my success or experience using my new buy / sell indicator. So far I did one thing one time. I sold. I used the information to conclude a pending big drop in the broad stock maker, sold, and it worked one time. Success rate = 100% Number of times = 1 Look, I could be completely wrong. I could be like the Indians thinking that the way they dance can make it rain because it worked once. Maybe it was pure luck and it will never work again. All I know is I lost enough savings over the last 1 ½ years that it’s more then we make combined in 1 ½ years. I’m talking gross income. I listened to others including financial advisors, read Money Magazine, have a piece of onion skin on the wall with my name on it that proves I graduated from a business college. I had been doing all the things the books say to do. Yesterday I received the newest copy of Money Magazine, the March 2009 issue. Who the heck are these authors? All the regulars I am use to are gone. Bunch of kids. One author named Paul Lim made the case that the last 10 years was not that bad. If he was in front of me I would have punched him. I have gray chest hairs older then him. If the market performance of the last decade is acceptable then I must abandon this system and become exceptional. I sat by dollar cost averaging for too long. Accepted poor performance for too long. I’m going to do something here. I’m going to try to time the market. I have no intention to buy / sell often like a day trader. All I intend to do is make a general buy / sell decision. The sell decision is done. I have only one more decision to make, when to jump back in. It’s not going to be today.
  3. Apteacher, sschullo, and dan, Thank you all. Looking at the very short term, like what the stock market has done so far today, I’m so glad to have a reduced equity exposure. At this point I am far more worried about more loss then worried about missing out on some gain.
  4. Please do some research on the word forbearance. With 5 years I am predicting that this word becomes part of our normal vocabulary. The word will be used in same sentence as the word municipality.
  5. Exactly when do you recommend they sell? I wanted to sell. I was told not to sell when I wanted to sell as the DOW crossed 12,000. Our local financial planner ‘expert’ said with a strong Indian accent “Da bottom is da birdie birdie worst time to sell.” He succeeded in talking me out of it. As it crossed 10,000 it happened to me again. The dow briefly went to the mid 7,000's in December’ish then it went back to the upper 8,000's. Everything I saw told me we are not near the bottom of this thing. I sold 80% of our equity and moved to the total bond market and treasures around a month ago. I sold at around dow 8,500. So why did I sell? It was not to lock in my losses. It was to protect what is left. Today I’m feeling better that I ‘locked in my loss……to prevent further loss’ and that my friend is the reason to sell. I see no reason why the DOW will not drop big time today, Monday March 2, 2009 and I see no reason why the DOW will not get below 5,000 within the next quarter that ends June 30, 2009. Each day I talk to someone new that has decided to reduce or eliminate their equity contributions. Until that abates the DOW is not likely to recover. I am done listening to people like you. Never again. Its my money and going forward I will never again be talked into our out of moving the money as I see fit. Buy and hold dollar cost averaging. It does not work in this market. It may have worked in the past, it may work in the future but it does not work now. Show me a person who has remained buy and hold and I’ll show you a person who has lost a greater % of their savings than I did. No longer going to drink the cool aid. No longer trusting the SEC. No longer trusting financial experts. Making my own decision. In January I made a decision. At least I did something. What did you do?
  6. Steve, thank you for your kindness Thank you all for letting me vent a bit and for your replies. We have not sold any of our equities. We are saving as much as ever. What is different? #1) Instead of having the savings buying more equities via payroll deduction into the 403b, we are getting a larger paycheck and it’s going into a bank savings account. For the time being, our ‘emergency fund’ is growing. Our emergency fund is a FDIC insured interest bearing account. #2) We have not yet made our 2008 Roth IRA contributions. This would be $5000 times two. Instead, for the time being, the money is sitting in our emergency fund. I’m 50/50 on sending this money in before we do our 2008 taxes. #3) We have not yet made our 2008 kids education savings account contributions. Instead, for the time being, its sitting in our emergency fund. I’m 50/50 on sending this money in before we do our 2008 taxes.
  7. The below is my response to another posters reply. Since its not in line with the original post, I diecde to start a new post rather then make a off topic reply. Exert ###### Steve, I don't know. It’s not like the peak was a peak. Even with the DOW topping 13,000, the stock market return on the DOW, the S&B 500, the NASDAQ has been terrible ever since the first digit of the year turned to a “2.” In the past our household had a maxed out 401k, 403b, and Roth IRA’s for the last several years. We had been contributing to college savings accounts for the kids in equity accounts as well. I was not in ‘get rich quick’ schemes; I was in low expense, diversified equities like the Vanguard total stock market fund. We did dollar cost averaging via payroll deduction. I read Money magazine and some other popular ‘self-help’ advice type media sources. We did all the things that all the experts said we should be doing. >>> Add it up. We are losers. We have been losers for a decade. <<< Had we put the money in our mattress today we would have a higher balance. Had we put the money in government insured interest bearing accounts like CD’s we would have been way better off. Today I read no good news about the economy, domestically nor abroad. Today I do not hear of companies expanding, they are having layoffs. Today we have discontinued our 403b contribution. This started January 1 2009 since we did not sign up with the new school districts program with this fee going to this company then that fee then this percent BS. I was copied on a letter. In our school district, only 1/3rd of those that were contributing to the old 403b program have signed up with the new one. We have not yet sent in our $5,000 ###### 2 for our 2008 contributions for our ROTH IRA and at this point I don’t see any reason to do it. The money is better sitting in the bank. We have not made our 2008 contribution to our kid’s education savings account. Since they have been born the contributions we have made in past years, when totaled, exceeds the accounts current balance by a lot. We have not sold our equities, we are even still doing the 401k contribution, but that’s less then half of what we had been putting into equities for the last decade. Steve, if the peak was a brief peek, a level where only a small % of our purchasing occurred it would not hurt so badly. We had been buying equities at prices in the range of dow 10,000-12,000 for a decade. Some was a bit outside of this, but not most. It’s high time that the financial advice community fess up and let people know that at least since the 21st century began, equities have been a poor place to invest and the mattress would have been better so far. Many people have stopped putting money in the stock market. There is a word for those of us who still are. We are suckers that keep buying into a ponzi scheme and keep listening to the cool-aid servers. Sorry, I'm in a poor mood. I just found out a relative passed away but perhaps its in this time that my mistakes of investing in the past become clear. My style of investing, buying in tax sheltered accounts like 401k, 403b, Roth IRA via dollar cost averaging payroll deduction and put it into low expense, passive, diversified funds is a system that may have worked at one time but it does not work anymore. If you choose to reply to this message and rebuking the above, ask yourself this first. How bad would it have to get before you change your advice? If you can not answer that, you are the type of person that would drink the cool aid.
  8. Steve, Based on my research here is what I found. I am not a plan administrator; just an employee but I do have my degree in business and read quite a bit on the subject. Vanguard does have an ISA (information sharing agreement) and it was written in cooperation with other low cost investment companies. Each of the low cost providers then made slight, very slight, modifications to the ISA to meet the individual investment companies’ needs. Fidelity was one of the other low cost providers involved. However it’s a standard issue ISA. This means everyone gets the same ISA. The Vanguard lawyers make one agreement one time and it’s done. So as a new agreement is put into place Vanguard does not need to have a lawyer review each and every individual custom ISA. The individual school districts have individual lawyers that are motivated by self-greed. These individual lawyers want to make a custom, one of a kind ISA and get paid for it, then have the company sign the lawyers ISA. They also often include a ‘hold harmless’ agreement. Of course this means the investment company must read each individual ISA at a cost to the investment company. Low cost providers such as Vanguard have low fee structures so they don’t have a bunch of lawyers to review all these on of a kind custom ISA’s. Other companies such as Janus have simply said ‘we give up’ and will not make their own ISA and will not sign a school districts custom ISA meaning they are exiting the 403b market. In my opinion, Bob Architect’s changes of the IRS rules is resulting in school districts to move from offering low cost index type investing to a “brokers commission dream world” of insurance annuities and high fee investment alternatives. If course these brokers will use examples that will compare their fee structure to ultra high expense A share load mutual funds and with small account balances to make it look like their platforms are less expensive. They will not give you examples comparing their fee structure to investing in something like the Vanguard total stock market fund or target retirement date funds.
  9. Under our new program we must go thru 403basp at a cost of $40/year per person then MG trust at a cost of .1%/year. AFTER the above, there is an agent that gets another .5%/year. Vanguard may become part of it. If so, we are being told the agent will not get their .5%/year.
  10. Well, I needed to get my recommendations submitted. I agree that an fixed account alternative was needed so I scratched the index 500 for the treasury fund. Final list: #1) VTSMX Total Stock market index (risk = 4 high, 3,000 stocks representative of the whole U.S. market.) #2) VMPXX Vanguard Treasury Money Market Fund (risk = 1 very low, solely in direct government obligations) #3) VTWNX Target retirement 2020 (risk = 3 medium, mixed investing) #4) VTHRX Target retirement 2030 (risk = 4 high, mixed investing) #5) VTORX Target retirement 2040 (risk = 4 high, mixed investing) #6) VFIFX Target retirement 2050 (risk = 4 high, mixed investing) Keep in mind the platform already had: YHGEX Vanguard Global Equity (risk = 5 very high, foreign stocks 54%, domestic stocks 46%) VBTLX Vanguard Total Bond (risk = 2 low, investment-grade non-government bonds)
  11. Hi Steve, Thank you for your feedback. >>> I am allowed to submit 6 total requests. <<< You are suggesting I add 2. What do I eliminate? In addition to the Vanguard funds, the ‘platform’ will have a variety of insurance annuities, a selection of American Century and American Finds, Jenison Dryden natural resources, Black rock global and small cap. All have expenses over 1%. They are trying to keep the total selection to not more then 30 alternatives. I can not ask for more then 6.
  12. Please help me pick 6 Vanguard funds After attending several meetings I am being allowed to recommend 6 Vanguard alternatives for our 403b ‘platform.’ Background: Our school district will be changing our 403(b) program effective 1/1/2009 due to the new IRS rule changes. Under the new program we must go thru 403basp at a cost of $40/year per person then MG trust at a cost of .1%/year. AFTER the above, there is an agent that gets another .5%/year. However the option exists to add Vanguard to the platform. The agent will not charge the .5%/year for Vanguard but made it clear that they get nothing and those investors will need to make their own investment decisions. I have no issue with this. So, I have been asked to submit 6 Vanguard investment alternatives. Vanguard investments already in the ‘platform’ : YHGEX Vanguard Global Equity VBTLX Vanguard Total Bond I’m thinking of recommending these: VFINX 500 Index VTSMX Total Stock market index VTWNX Target retirement 2020 VTHRX Target retirement 2030 VTORX Target regiment 2040 VFIFX Target retirement 2050 Question: If you had to pick 6 and only 6, would you make changes to this list? If so, what would you add / remove?
  13. Please let the IRS know how you feel about the new 403(b) changes and how this is effecting you. The lead person behind the changes is Robert J. Architect at the IRS. You can email Robert at Robert.J.Architect@irs.gov or call him at (202) 283-9634 Thank you.
  14. Can the school district force us to transfer current balance? My wife is a public school teacher. The school district is making changes to its 403b program. Presently you can invent directly into Vanguard as well as several other alternatives. Now they are going to a 3rd party administrator ($40/year + .1%/year) then you must go thru a agent (.5%/year) then you can pick from a platform of funds that I have never before heard of, none of them have expense less then 1%. Not only do I not like the fees but I have no trust in the 3rd party, agent nor the investment alternatives. I met with the sales person of the agent (qualifications = Series 7, not a certified financial planner, no college degree) and he says we should not worry bout costs but only look at return and said we would be better off paying 12% fees for 20% returns then .15% fees for 0% returns. I’m a no-load, low expense, dollar cost average into total stock market + target date retirement account + a little international type of investor. Those types of funds are not in the program. OK, my question, can the school district FORCE us to transfer our current 403B funds into the new program? We do not plan to continue to contribute to the new program unless they return to offering direct investment into no-load, low expense, index type funds from well a well known company. We intent to set up direct investment from savings to Vanguard outside of any retirement accounts. We already do this, we would simply do more. Background: I already max out the 401k at my job, we max out our Roth IRA’s (both max) and we do some contributions for kids college savings, not maxed out. Age = 41 (both) Again, can the school district FORCE us to transfer our current funds into the new program?
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