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bigred

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Everything posted by bigred

  1. Hi bigred, True, but my point is that Vanguard does not charge the fee. RIA's do and thats to their credit that they are choosing Vanguard to looks out for the best interests of the investor. They are like fee only adviser only its not an upfront per hour fee. Personally, I would never pay 1% of the assets. That would be $14000 per year! Yikes! Those high net worth people might not realise how much they are paying. A 10 million dollar account is $100,000 in fees! As long as they know, its nobody's business. Investopedia sezs: Paid much like mutual fund mangers, RIAs usually earn their revenue through a management fee comprised of a percentage of assets held for a client. Fees fluctuate, but the average is around 1%. Generally, the more assets a client has, the lower the fee he or she can negotiate - sometimes as little as 0.35%. This serves to align the best interests of the client with those of the RIA, as the advisor cannot make any more money on the account unless the client increases his or her asset base. The most common definition of a high-net-worth investor is someone with a net worth of $1 million or more. The reason for this is that most RIA firms will establish an account minimum for anyone wishing to become a client. Amounts below this tend to be more difficult to manage while still making a profit. Consider that the average management fee is 1% of assets annually - this would come to only $1,000 on a $100,000 account, which is probably less than the costs the firm would incur internally to service the account. Have a great turkey day, Steve Steve, I always appreciate your thoughts. Most RIA's I'm familiar with have a sliding fee scale so an account over 1 million is less than 1%. It is always shocking to see how much people waste on poor financial decisions. When I worked in banking I could list you a bunch of names that cost themselves over 10k a year in overdraft fees. Needless to say these are not people who are successfully building any wealth. Cheers,
  2. Steve I totally agree with the Kudos to Vanguard. But they do have an ria sales team in Scottsdale and they do also have an institutional sales team. But they must all be doing fine because they are opening up the window to signal shares in most classes now.
  3. I will agree whole-heartedly with Tony. There is a risk/reward trade-off with bonds and history has shown that taking the extra yield in long-term does not compensate for the risk. FBIDX would be a good fund if it is available.
  4. That is a little mind blowing. Considering they have a couple thousand school districts signed up @ 40/hd and 15bps. Did you talk to your tpa or to directly to aspire?
  5. http://www.403bplan.info/find-your-plan.php This will help you find your district. From there you may have to work with the district and aspire to get the funds available you are looking for. Aspire has 18,000 funds available but in a lot of districts they have only "allowed" for 40 funds through Ed Jones advisors. I have a ton of experience with these guys and am plenty happy to help you get pointed around to get some good low cost options available to you. Their cost is going to be $40/head annually and .15% bps.
  6. My wife does carry a balance and gets a statement annually that shows only her portion because the school portion is only available @ retirement. They credit it at some measly interest rate.
  7. No problem on the Big Ben, I don't go to night clubs with underage women(Ben Rothleisberger, Pittsburgh Steelers quarterback) Here is a great link to the Nebraska School Teachers Plan. I think it can explain the rule of 85 better than I. In my wife's scenario if she retires immediately @ 55 she would get a benefit of about 65% of pre-retirement income. If you had any more questions just let me know. https://npers.ne.gov/whalecomfb0318c98356c776ad65/whalecom0/SelfService/public/planInformation/school/schoolPlanInfo.jsp
  8. Tony, I don't mean to sound like an attack here but just trying to understand the difference in benefits across states. My wife teaches Spanish in Nebraska and from day they have had to contribute 7.28% of her paycheck to the pension plan. The district also sent roughly 7.8%. Last year they increased to to 8.28% and around 8.8% for these two years. With that plan they are on the rule of 85 schedule for full retirement benefits. How does that compare to VA?
  9. I come on here because I found Mr. Schullo posting on Boglehead's(of which I read alot) forum. I work for a financial services company and get paid for it so that makes me the devil around here. I would love to help educate people about investing, benefits of a roth vs taxable or just a traditional, but I haven't figured out how to do that and still put bread at the table.
  10. in the future. As a general rule, the thing that determines whether a Roth- or traditional retirement vehicle is better is the difference in tax brackets you are in at the times of deposit and withdrawal. I am in the 15% bracket now. I will probably retire with a similar income level (adjusted for inflation) but I expect people at that income level will pay more than 15% of that income to the US IRS in future years -- the US debt is very large and growing fast. However, I am near the top of the 15% bracket; indeed, I would be in the 25% bracket if I did not divert lots of my income to my 403b and 457 accounts. I don't expect to have a retirement income in the 25% bracket, so I don't want to pay taxes at a 25% rate. That is important: when one converts, one must pay the income taxes on the amounts which are moved into post-tax (i.e. Roth) status. So the amount I will convert will be (top income level of 15% bracket)-(my taxable income for 2010). In my case I will be moving from IL to TX this summer. TX has no state income tax, while IL has a 3% flat income tax rate. (That's as of now; IL is deep in debt and may raise income taxes to fix it.) So I am in no hurry to do the conversion: for now, I am dumping money into my traditional 403b and 457 accounts, thus avoiding US and IL income taxes. When I am in Texas I will convert some of these new monies to the Roth account but will only pay the US income taxes, and nothing to TX. By postponing the conversion I avoid a 3% loss. N.B. - The conversion process prompts a number of reflections on the tax system. When I say I am in the 15% tax bracket, that of course means I pay 15% of each _additional_ dollar as income tax; the actual amount of Federal income tax that I pay is at most 10% of my income. That much tax I'm used to. Income taxes don't feel confiscatory at that rate. But losing 25% of my retirement to federal taxes now really hurts. Even knowing that I will ultimately have to pay a comparable (but smaller) amount as taxes later hardly softens the blow -- this is one of those cases when I understand the math just fine but am still affected on a human level by the tax bill! It seems rather odd that there is a quantum difference at certain income levels. THat is, up to a certain number of 403b dollars, I want to convert; and beyond that I definitely won't because I would be in a different tax bracket. It would be fairer if the tax brackets themselves changed gradually with income, e.g. if your (marginal) income tax rate were proportional to the logarithm of your income. But I suspect that such a change would never appeal to a Congress which is math-phobic enough that it apparently cannot distinguish positive numbers (surplus) from negative numbers (deficit) or to recognize that negative numbers here have consequences... dave If your money is still in a 403b plan and cannot be converted over to an IRA you will not be able to convert in a plan.
  11. Just letting the money sit in that account for 20 years and if you have it in a diversified portfolio that averages 6%, that is a very realistic number, you can end up with over $55,000. Does that sound like it would be worth being patient for? Or would you rather get to use 9,000 to work on your kitchen. I know what I would choose.
  12. Steve, Is vanguard going to drop fund costs at some point to account for the recovery? I know last year a bunch of them went up.
  13. Steve, I spend a lot of time lurking here and really do appreciate what you are doing. Keep it up!
  14. This is the link to the SPIVA study that talks about underperformance for the last 5 years ending 12/31/08. http://www.standardandpoors.com/indices/spiva/en/us Check out the US Scorecards.
  15. What remedy does a person have if they are missing $500 from the Gatekeeper fiasco earlier this year and Gatekeeper(or whatever it is now) will not pick up the phone or make an attempt to look for it? Letters from lawyers have been sent but they have not done much. TIA
  16. There is no IRS requirement that a 403b plan offer either loans or inservice withdrawals. Taking a loan from a 403b is not the bad thing that some posters believe because the interest rate will usually be lower (e.g. 2% over prime -5.25% v 10 to 20% on a cc), period of repayment is limited to 5 years instead of an infinite period in a revolving credit line, and the loan is equilvalent to an investment in a fixed rate security such as bond where the interest goes back to the participant's account. The risk on a plan loan is that loan balance becomes taxable when employment ends. The problem is that after taking out the plan loan employees must stop using their other debt obligations by cutting up their cc and closing down bank lines of credit such as overdraft accounts to avoid increasing their debt. Mr Intruder, Isn't it also a poor tax strategy because you have to put after-tax dollars back into the account to pay off the loan. Then when you take the money out in distributions you have to pay income taxes again on it. Assuming it is a traditional account.
  17. Yes I am an RIA and our firm is an approved DFA advisor. We used Swedroe's firm he is affiliated with years ago(BAM) and have gone a different route since. We use mostly DFA for equity funds and DFA for bond funds but I have been on a crusade for using more Vanguard for quite a while. So yes I am an unabashed DFA fan because they are one of the few companies that can back up their claims. My wife is an educator and in her 403b we use Vanguard and DFA. I put my money where my mouth is.
  18. How can we get the fund companies to get shares voted against re-electing these boards of directors. This is one of my favorite articles showing just how terrible a product a fund company can put out. One other thing. I think I've seen people on here reference Swedroe. This is one on him talking about DFA. http://www.moolanomy.com/749/ask-the-exper...ust-2008-issue/ I know how much you despise paying an advisor but it might provide a little more insight on the history/structure of DFA.
  19. Agreed. Most of us will never forget the past 9 months. And now know who can and cannot stick with a plan(it could still get real ugly again). I do not have any knowledge whether or not they did do anything but they have the flexibility allowed to do it. The biggest differences are the way they define an asset class, say US small cap value, VISVX owns 980 stocks while, DFFVX owns 1,554. And the other portion that makes sense is the not having to buy on EXACT day of inclusion to an index. You have to trust a company to stick to these principles and DFA has. They do not even have a 1-800 number I am told. I like that. As far as the advisor, to each their own. If you have retirment plan access take advantage of it. But it seems like they can possibly provide a slight increase in returns and they are definitely going to push you for a larger equity stake. They are also going to make sure that you are really globally diversified.
  20. My twist. Age 30 less factor of 15=15. Stock Allocation 85% Bond Allocation 15% Age 40 less 15= 25 Stock Allocation 75% Bond 25%. By drawdown I mean during retirement when are beginning to use those funds for living. Say retire @ 55, don't need this cash until 60 so @ 60 you are 40% Equity 60% Bonds. I like Bogle's rule but when you very young and in the accumulative stage it seems to be slightly too conservative. It is ideal for the 55-60 on up age range. Warren Buffett "My favorite holding period is forever." I hope I can achieve something close to that. I agree that you can cherry pick anything and hindsight is 20/20. I just found it ironic that an apples to apples comparison of our discussion was right there in the article. I am very sorry if you feel you must lump in DFA with all of the other enhanced funds, because they are not the same type of company at all. Now watch what is happening with Cisco Systems as it is being added to DJIA. Studies have shown that there has been shown a price increase after announcement, leading up through the effective date, and then a drop off after that date. I agree that there are studies for most sides of arguements but this is a pretty basic principle. DFA operates the funds very similarly to an index and the above is a main difference and the other main difference is the way they define the market and include many more stocks than Vanguard and others do. Steve I hope you enjoy the spirited debate as much as I do. I think it is fun to have my principles challenged.
  21. Steve, I respect and appreciate your opinions and in fact agree with most of them. Maybe my post does not put across my opinions because I am a poor writer and better speaker(I should have my wife post). In my opinion DFA would be an A++ and Vanguard would be an A+. TIAA & T Rowe Price would earn some degree of A. I am sure I am leaving someone out but that's how I see it. This is part of the problem with rigidly following an index, although I still love them. They do not have to purchase and sell on telegraphed days. There is the big runup before that date and sell off after that date. They also would have been able to dump shares a couple weeks ago when all GM Execs dumped all of theirs. DFA is available inside of 403b Plans and DFA funds are not purchased through a commissioned broker. They are available when there is a tie-in to an approved RIA. I do not disagree with you that the enhanced indexes are mostly junk. To much "financial innovation" is their way of innovating their way into my pockets. EFT's are the same boat with some being very good and then a whole slew of crap. But I wonder how closely you read the article. There is a paragraph on how VQNPX returned 2.7% for 2007. The very next paragraph showed that DFELX had a 5.1% return for 2007. Your article helped prove my point but I'm not interested in how a fund did for a 1, 3 or 5 year period. I am in it for a much longer period. Also I try to use Mr. Bogle's equity allocation % with a slight twist I know you will not like, but it works for me. Working years- Age minus 15 for your bond allocation. In drawdown-Age= bond allocation. Other thoughts?
  22. RED: According to DFA its investment style outperforms the passive indexes used by VG, e.g., S & P 500. If DFA Value out performs growth index funds why bother investing in large cap growth funds such as the VG S & P 500 which has a -2.5% annual return for the last 10 years? Why not invest in DFA value funds? If this is true why should anyone invest in VG passive index funds instead of DFA? You have hit the nail on the head. Now granted you still should have exposure to varied asset classes to create a truly diversified portfolio but your weightings should be heavily into the value realm. The DFA approach is truly a passive approach, very similar to Vanguard except without the rigid need to follow an index in lockstep. http://finance.yahoo.com/news/What-Impact-...set=&ccode= It is pretty hard to make a good arguement for active when the S&P 500 was forced to own GM during the death spiral in the past couple years. The S&P 500 still beat 72% of active funds.
  23. http://www.hillinvestmentgroup.com/include...ment_whyDFA.pdf Go to the 3rd page for the information on securities lending. Another reason why passive whips active. Also read on articleon Yahoo Finance about gm being booted from the S&P 500 that said something like "Even thought the index has been forced to hold GM during this inevitable downfall they have still beaten 72% of mutual funds for the period." Active really helping there also.
  24. If the high flying get rich schemes are are over why are the banks out performing the rest of the market? Wells Fargo reported $5B in profits due to mortgage financing. Speaking of boring banks why has Berkshire Hathaway which is run by Munger and his pal Warren buffet and is the largest shareholder of Wells Fargo increased its stake to 6.5%? Wells owns Wachovia bank which owns the third largest brokerage Co in the US as well has holds a $110B portfolio of sub prime mortgages which is hardly boring banking. Buffet/BRK also loaned $5B to Goldman Sachs with the right to buy shares at $122 each (GS is trading at $140 which gives BRK a 15% gain plus the 10% interest ($500B) on the loan. Goldman is not exactly your local retail bank that makes a living by selling home mortgages because it has no branches. Buffet also loaned $3B to GE which gets 50% of its profits form GE capital which is a stealth hedge fund. If they believe that banking is supposed to be boring why are Munger and Buffet investing in banks to big to fail other than boring banks dont give them a high enough return on their invesetment. Big difference my friend between Uncle Warren buying pieces of GS and GE or the preferred stock "loan" that he gave them @ 10% plus the warrants. If I had that kind of bargaining power I would sure be happy to ###### it. He got a much better deal than the government and he isn't trying to control them with nit-picky comp rules. The Wells Fargo pick does boggle me a little. It seems to have had a stricter underwriting program in place to prevent some of these worst offender's from getting on their books but I totally get the Wachovia point. I don't pretend to be as smart as Warren but to me it looks like he thinks the intrinsic value of the Franchises plus the present value of the future cash flows is going to be plenty higher than the dollar amount he paid for the shares. In that assumption he must be making that the banking incomes are going to be high enough to cover most of the future subprime losses from this point on the books. Your thoughts?
  25. Tony, can you or anyone else out there find a condensed down version of this? It looks really well thought through but I don't have 4 hours to read and digest. Thanks
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