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Why Indexing Should Be Part Of Your Portfolio.

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Guest Joel

"In those cases, the client gets it for free" Are you saying that when you use no-load funds the client receives your advisory service for nothing? Please clarify.

 

 

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TR Thank you for the well thought out answer that you gave to my question.

 

As part of your reply to Joe, you wrote, "BTW, if you want to spend $12.95 for investment advice, that's fine with me. Remember, in life you get what you pay for." I for one take exception with that comment. In many cases one who is aware can get a better deal by paying less. In investing, I believe that the reverse is true, the less you pay for say for an index fund, the more revenue you will receive, specifially, the Vanguard s &p 500 at about 0.2 annual cost versus say versus, a s&p 500 index fund from another company selling with an annual cost of over one percent. Over time, a person will receive substantially more from the Vanguard fund.

 

Happy holiday,

 

Ira

 

 

 

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TR

quote: "You think from a few posts here that you know me and what I do for my clients."

 

Now you talking. That statement is exactly true. We know more than you think because you represent the mania of Wall Street. Consider this:

 

1. You could care less about 403b reform, you said that you only work with the system as presented now.

2. You put your client’s money in loaded funds so you can get paid.

3. Its vague about that some clients can have no load funds because that client gets this for free. Joel has already asked that question.

4. You constant belittling about index funds and our challenging of managed funds is often immature.

5. Remember, I asked the original question: "Why indexing should be PART of your portfolio?"

6. Its a different investment culture here than your regular 1X1 with an naive educator about finances. In our minds what we do is right and what you do is wrong, not you personally, but the system you support is wrong. In your mind, you are right and we are wrong. Your investment culture is from the old media driven Wall Street macho crap about beating the benchmarks, raking in those trading costs and high fees that many folks also believing the and luck will give them an edge, but not on this site. The new investment culture is about controlling costs, thinking long term, using a simplified portfolio of no loads with passive and low cost managed funds in Vanguard, TC, Fidelity, TR Price and Dodge and Cox. We think investments as simply being part of the domestic and international economies, not .

 

One of your many problems, “pal”, is that you are trying to change us to your way of thinking.

 

Happy holidays,

Steve

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Guest TR1982

I love this. I am not trying to change the way you think. That would be a waste of time and I don't care. What I am trying to do is present another point of view. You may not agree and that's fine. That doesn't mean it's not legitimate!

 

 

TR Thank you for the well thought out answer that you gave to my question.

 

As part of your reply to Joe, you wrote, "BTW, if you want to spend $12.95 for investment advice, that's fine with me. Remember, in life you get what you pay for." I for one take exception with that comment. In many cases one who is aware can get a better deal by paying less. In investing, I believe that the reverse is true, the less you pay for say for an index fund, the more revenue you will receive, specifially, the Vanguard s &p 500 at about 0.2 annual cost versus say versus, a s&p 500 index fund from another company selling with an annual cost of over one percent. Over time, a person will receive substantially more from the Vanguard fund.

 

Happy holiday,

 

Ira

 

 

Ira,

I would not consider owning an index fund and therefore paying a management fee within the fund itself as investment advice. I see your point (and you are correct) but that was not what I was referring to.

 

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Groundswell,

 

It is your arguements that are poor.

 

Just because somebody buys something doesn't mean it is the best and just because something is sold doesn't mean it will outperform, that is just ludicrous. Perhaps the reason so many people bought them is BECAUSE of their early outperformance (surely that explains Magellan, why would it not explain the others). There is no evidence that these funds will outperform going forward, in fact the only fund to actually beat its benchmark is the Dodge and Cox Stock fund. The rest underperfomed a real Large Cap Value index.

 

Value stocks have outperformed by an average of 200 basis points long term because they have more risk. Do just a little research on the nature and types of risks and you will learn a little something about Value stocks and the relationship of risk vs return.

 

As for Dodge and Cox and 20 years...they have outperformed a Large Value index by about 200 basis points. We would fully expect some funds to outperform, just by randomness and it appears Dodge and Cox is one of them. Will they continue to outperform in the future? It seems likely, but no guarantee.

 

None of these arguements have any meaning anyway as your comparisons make absolutetly no sense. I am not even sure what we are arguing? Are we arguing that the vast majority of funds fail to beat their benchmark, or that there are a few funds that have beaten their benchmark and because of it have attracted capital? Is this an active vs passive debate? Or is this a debate about a properly balanced portfolio?

 

The fact is you just through up a bunch of numbers that have no real clear relationship to each other and no application to the discussion. What is your point? State it clearly with support.

 

ScottyD

 

As for TR.......YAWN.

 

You obviously hate TC and will argue against them regardless of the facts. You failed to respond to the fact that if school districts went through an RFP process their is little likelihood they would consistently choose TC without a major revamp of their program. Why do assume that all school districts would suddenly choose TC in an RFP just because TC wanted to see real competition in K-12? Your arguements don't support the the reality.

 

ScottyD

 

 

Hey ScottyD,

 

If you re-read the posts you will see that you have me mixed up with someone else. I did think that TC was just looking out for themselves with their backing of AB2506. Or at the very least, I just wanted to make sure that people understand that their backing wasn't 100% altruisitc like Sschullo made them out to be. They still have a business to run. I appreciated your response and agree that I don't know all the facts. I also agree that they would not be competitive if we went to a one provider system.

 

I never said anyting about Dodge and Cox or value stocks and I didn't make any comparisions...wasn't me. (I would like to reserve the right to make comparisons that don't make sense at some later point)

 

I haven't looked at this site for the past week...c'mon have you people not seen the great surf we've been having?!! 80 degrees and offshore winds? Hey this site is great and everything but...I've got priorities.

 

So, we're not arguing afterall!

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Hi,

TR: "BTW, if you want to spend $12.95 for investment advice, that's fine with me." Hey, I wished those books only cost $12.95. But I know that they have saved me thousands upon thousands of dollars. Best Wishes.

 

Joe

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Guest Sierra

"In those cases, the client gets it for free" Are you saying that when you use no-load funds the client receives your advisory service for nothing? Please clarify.

=====================================================================

TR, did you inadvertently forget about my query to you? Please respond.

 

Joel

 

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Guest TR1982

"In those cases, the client gets it for free" Are you saying that when you use no-load funds the client receives your advisory service for nothing? Please clarify.

=====================================================================

TR, did you inadvertently forget about my query to you? Please respond.

 

Joel

 

 

You got it.

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Why don't you bill the no-load client directly for your advice?

 

Do you think advising a client using no load funds and billing them directly is the most ethical way a rep can provide advice?

 

What fee do you feel would be appropriate for providing the following:

 

A written retirement plan based on data gathered at the initial meeting

Establishing a risk tolerance level

creating a customized portfolio using no-load funds including a breakdown of why each fund is selected and why it works within the balance of the portfolio (correlation etc...)

 

What flat fee would be appropiate?

 

What about follow-up services? rebalancing each year etc..? should that be charged at an additional flat rate?

 

Would the rep just perform the above services and then never see the client again? No other responsability to the client? Here's your plan and your portfolio, go contact Fidelity Funds and start your program. What if the client has a follow up question? Does the rep charge them for that based on an hourly rate?

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Guest Sierra

It all depends on the client's circumstances. The fee can be based on value of assets under management or on an hourly fee basis----this is all spelled out in the written advisory agreement. A fee only advisor must be registered with the SEC as a Registered Investment Advisor as well as the appropriate state agency where he/she conducts business.

 

Does TR care to respond to the question which was specifically asked of him?

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It all depends on the client's circumstances. The fee can be based on value of assets under management or on an hourly fee basis----this is all spelled out in the written advisory agreement. A fee only advisor must be registered with the SEC as a Registered Investment Advisor as well as the appropriate state agency where he/she conducts business.

 

Does TR care to respond to the question which was specifically asked of him?

 

It seems like charging someone a fee on the assets under management is frowned upon on this site so I'm surprised that you mentioned it as an option.

 

I'm wondering what other people on this board think. Is charging an asset based fee an ethical business practice? what about charging a flat rate? and what would be an appropriate flat rate to charge?

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Guest TR1982

Why don't you bill the no-load client directly for your advice?

 

Because it's usually not worth it to me. You have to evaluate each situation on its merits. If I think the client might give me future business, I might just provide it gratis. Some clients might not be able to provide any future compensation and I just want to help them out. The problem in our industry is that it's tough to work with clients who don't have any or very little money. They don't have any way to pay for the advice except to pay on an hourly basis and many people can't even afford that. That's why, IMHO, the annuity can be a useful tool in 403b plans. It provides a way for individuals to pay for the advice when they have no other method. I know it's not perfect, but there is no perfect method.

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