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lincoln16

First Post! Trying To Learn More!

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Guest Skeptical
Let's also be fair. He can switch to A shares if he wants. All of those B share purchases convert to A shares after 8 years. It seems to me that a sound case can made for him to switch to A shares if he wants to keep the funds he is in.

 

TR,

 

By "switch" you mean to begin purchasing class A shares, and keep his B shares until they convert?

 

Jim

 

 

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For other folks out there: none of this A share, B share, C share, R share nonsense is applicable if you simply invest directly with reputable no load companies such as T. Rowe Price, Vanguard, and Fidelity.

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Ok, so if I'm in year 7 of the fund in shares- should I wait until they convert to A shares? Its just one more year correct?

 

What if I just kept the American Funds as they are- 20,000 dollars worth and just started putting the 400 monthly into the new Vanguard funds?

 

Thoughts? I am open to all advice and scrutiny

 

YES!

 

First - you should be more diversified. contact your advisor and make him earn his commissions and ask him to recommend how to rebalance your current $20,000.

 

If he doesn't respond consider doing an internal exchange to 50% AFIBX - Fundamental Inv. and 50% BALBX - Amer Balanced Fund. Just an example, not saying you should pick those funds.

 

Second - Contact the customer service center, not your rep. and ask when the CDSC on your current balance is up. Also ask if any amount is penalty free to transfer out. This will give you a time frame of when and what you can move if you decide to in the future. Don't make a decision before you have this info.

 

Third - Continue contributing to the end of the school year. This will give you 6 - 7 months until the next school year for you to research/read/figure out what is best for you going forward.

 

Fourth - If you pick to go with Vanguard for new contributions, pick a target retirement date fund. Then research/read etc. if you want to do it on your own later on.

 

Bottom Line - your account should have a better balance/diversification today and going forward. Whether with American Funds or Vanguard is up to you.

 

Pull up the prospectus for any American Fund and read about share classes. It's only a page or two. I am not a fan of B-shares because if you want to switch you can't. Just my opinnion.

 

 

 

 

 

 

 

 

 

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Guest Skeptical
SNIP:

 

First - you should be more diversified. contact your advisor and make him earn his commissions and ask him to recommend how to rebalance your current $20,000.

 

If he doesn't respond consider doing an internal exchange to 50% AFIBX - Fundamental Inv. and 50% BALBX - Amer Balanced Fund. Just an example, not saying you should pick those funds.

 

Second - Contact the customer service center, not your rep. and ask when the CDSC on your current balance is up. Also ask if any amount is penalty free to transfer out. This will give you a time frame of when and what you can move if you decide to in the future. Don't make a decision before you have this info.

Ricky.bobby,

 

First, while I disagree mostly with your points, I have to admit I think your member name is cool. GO FAST!

 

Anyhow, I wouldn't waste my time with the current registered rep. He had plenty of chances to earn his commission and shouldn't get another chance because the client knows better today. I would probably write a letter to American asking that he and Genworth be removed as the broker-of-record. Question; Do BDs get a trail payment on American class B shares or just the up front 4% commission?

 

Second, do you disagree that he'll pay the same expense through a CDSC today or higher 12b-1 fees over the balance of the surrender term. I think he's incurred those costs either way, with little recourse. He saves a 2-3% (or so) redemption fee on the original investment amount by waiting, but pays a .75% fee on the current balance over the next few years. I think, as we say here in Texas, that horse has left the barn. In my opinion that CDSC is a mental barrier devised by the firms to keep folks from bailing.

 

Jim

 

 

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SNIP:

 

First - you should be more diversified. contact your advisor and make him earn his commissions and ask him to recommend how to rebalance your current $20,000.

 

If he doesn't respond consider doing an internal exchange to 50% AFIBX - Fundamental Inv. and 50% BALBX - Amer Balanced Fund. Just an example, not saying you should pick those funds.

 

Second - Contact the customer service center, not your rep. and ask when the CDSC on your current balance is up. Also ask if any amount is penalty free to transfer out. This will give you a time frame of when and what you can move if you decide to in the future. Don't make a decision before you have this info.

Ricky.bobby,

 

First, while I disagree mostly with your points, I have to admit I think your member name is cool. GO FAST!

 

Anyhow, I wouldn't waste my time with the current registered rep. He had plenty of chances to earn his commission and shouldn't get another chance because the client knows better today. I would probably write a letter to American asking that he and Genworth be removed as the broker-of-record. Question; Do BDs get a trail payment on American class B shares or just the up front 4% commission?

 

Second, do you disagree that he'll pay the same expense through a CDSC today or higher 12b-1 fees over the balance of the surrender term. I think he's incurred those costs either way, with little recourse. He saves a 2-3% (or so) redemption fee on the original investment amount by waiting, but pays a .75% fee on the current balance over the next few years. I think, as we say here in Texas, that horse has left the barn. In my opinion that CDSC is a mental barrier devised by the firms to keep folks from bailing.

 

Jim

 

 

Jim,

 

Both your points are valid. I was just trying to give Lincoln a short term fix for a long term (7 years so far) problem.

 

I'm sensing a little uncertainty from his posts and wanted a solution that will give him some breathing room to make a clear and informed decision.

 

First, if his funds are the standard B-share the rep./advisor/seller or whatever he/she is gets a up front load of 1%(yes they do, it doesn't say so in the prospectus but they do) on any new contribution (12b-1) and a trail (12b-1) of the same 1% after the first year on that contribution. So Lincoln is paying 1% to the rep. each year on the value of the assets in the account. $20,000 would be $200 a year on average for service. The BD gets a piece of that, the reps firm gets a piece and the rest goes to the rep.

 

Second, I agree the CDSC and the offset option of lower fees elsewhere may equal out. What if he takes the CDSC, goes to Vanguard and realizes he doesn't want to do it on his own and needs help? He's already out the CDSC and never recoups the cost through lower expenses. He just cost himself $500 - $750 of CDSC for nothing and ends up back with American Funds to pay another load.

 

I actually think he should bail on his American funds or at least the rep., if he got the same service from a waiter at a restaurant he wouldn't keep going back for seven years and leave a tip.

 

If he leaves today or 3 months from today when he's certain he wants to switch isn't going to cost him as much as making the wrong decision.

 

Jim, you already now the facts and what you want from an investment so it's easy for you to make a decision on the spot, Lincoln just needs time to digest the info and the right answer will apppear for him.

 

 

 

 

 

 

 

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WOW! Thanks for the link -- Steve -- what a handsome rascal you are!!! Great ad!

 

Lincoln -- Again and again as I have learned more and more about investing and trying to do it well, I have recalled a piece of advice that I heard or read, heaven knows where. So here it is: Nearly all of the time, investing advice you get for free is far better than investing advice you pay for. Embroider that on a pillow and put it on your sofa so you can see it every day!

 

And the investing advice you get from here, from Steve and Tony and folks like that is.... FREE! You can get free advice other places, too, and some of these guys may suggest some. Let me start with two: investing advice about asset allocation and such from Vanguard.com (I THINK you can go there without being a customer) and the recommended reading list from www.bobbrinker.com. Not to mention that you can go to your local library and find books by John Bogle. Oops, that's three! See how easy it is?

 

Good luck... learning about this stuff is a never-ending quest.

 

JudyS.

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Tony,yes I do give his advisor the credit for starting him early. If he had done it on his own he would not be here asking such simple and confussed questions. Proper diversification? he is 100% in equities has a DB plan, I will bet the allocation he has will out perform your portfolio, and has out performed you. Prove me wrong and document it. It is an open forum and I have my opinion of you monday morning quarterbacks.

 

Sschullo, Brag that I beat one of your portfolios? I beat them all hands down and with the highest expense ratio in the contest.

 

Agent is just hilarious. He brags about having the highest expense ratio! I love it!

 

It just amazes me how the salesmen on this forum continually engage in self-destruction. They are unwittingly the best advocates for our cause.

 

Please, please, please, Agent, TR, Intruder, et.al., keep those posts coming!

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Guest Skeptical

Ricky.bobby,

I agree there is no rush to do anything. See my post below from the other thread on this topic

Jim

 

Lincoln,

 

You've received from great advice from among others, Dan & Steve.

 

First, don't rush. Patience at this stage will provide a huge reward down the road. It sounds like you want to increase that contribution today. Don't worry you can adjust your contribution amount in a few months, catch up on the amount you wish to defer this year, and then reduce it back down to $400 a month, your desired savings rate. Example: Say you wait 6 pay periods before you increase it. Just divide that $1200 increase (6 times the $200 increase) over the remaining periods in the year, let's say 18 periods are left before 12/31. So instead of increasing $200 you increase it to $200 plus $66. (the $1200 / 18 periods) for a total of $266. You still save about $5000 this year pre-tax and January 1, 2009 you can decrease it back down to $200 pp. Hope that makes sense. You MIGHT even wish to discontinue your current contribution until you decide what you think is in your best interest, be it American or Vanguard or some other option.

 

Next, take an evening to spend some time using the free portfolio allocation tools available through morningstar, vanguard, fidelity, TR Price, and others. Go through their risk tolerance and time horizon questionaires. These tools help you decide how much to place in each asset category (or class). Steve mentioned a simple portfolio of bonds, US stocks, and International stocks. These tools will help you determine HOW MUCH to earmark for each.

 

After you have a good idea of your desired allocation you can then choose the specific investments available from the providers offered to you by your employer. Once again the biggest determinant of performance is the expense consumed by the investment, so EXPENSES MATTER. The American funds you hold may have LOW management expenses, the cost for a professional to actually pick the stocks in the fund, but have HUGE marketing and distribution costs, paid to your sales rep. Just forget that title "financial advisor" or "retirement counselor", they're meaningless, those folks SELL, period. And don't assume that your employer or union has performed ANY due diligence to see if the products offered are any good. Remember it's not employer money it's YOURS!

 

Let me say again, don't rush, there is no need. Take your time to learn more. This is a great place to start and Steve and the others have pointed out other resources.

 

Hope that helps,

Jim

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Wow. I am going to print this entire thread out and highlight the main points. This is obviously a lot to digest.

 

I guess we are all sold on the fact that my advisor did not do the right things for me? That would be a constant I have read. Even the "salespeople" on the thread didn't really seem to be thrilled with my shares. That scares me.

 

And I am not knocking anyone who contributed to the thread. I certainly do not know enough to do that. And I appreciate everyone's input.

 

Can someone atleast tell me that putting in for 7 years was a good thing. Even if the stocks aren't great. Its still a good thing? right? I think I need to hear that again because I'm a little numb right now.

 

Thanks for all the advice. I will certainly read, re-read, and look up all the extra information that people directed me too. I love my job and I love teaching. But, this financial stuff is hard.

 

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You are on the right track lincoln. Keep up your study!! Remember too that no one will look after your money better than yourself.

 

Experts are everywhere. Be weary of who you trust.

 

Read Dan Otters book. Teach and Retire Rich

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Wow. I am going to print this entire thread out and highlight the main points. This is obviously a lot to digest.

 

I guess we are all sold on the fact that my advisor did not do the right things for me? That would be a constant I have read. Even the "salespeople" on the thread didn't really seem to be thrilled with my shares. That scares me.

 

And I am not knocking anyone who contributed to the thread. I certainly do not know enough to do that. And I appreciate everyone's input.

 

Can someone atleast tell me that putting in for 7 years was a good thing. Even if the stocks aren't great. Its still a good thing? right? I think I need to hear that again because I'm a little numb right now.

 

Thanks for all the advice. I will certainly read, re-read, and look up all the extra information that people directed me too. I love my job and I love teaching. But, this financial stuff is hard.

 

Lincoln,

 

It was good that you started investing seven years ago. It was not such a good thing that you went through a salesman, who, based upon your comments, did a poor job. However, this forum is full of people who made far worse mistakes, and for far longer than you did. You should feel real good about starting to invest at such a young age. You are way, way ahead of your peers.

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Lincoln --

 

It is a GREAT thing that you started 7 years ago, and you should be proud of yourself. I am so impressed that you started so young.... shall I tell you about the 40 and 50 year olds I talk to all the time who have not a CLUE? "What's a 403b?" they ask. And here you are, miles ahead of the game.

 

You have learned a lot, including the art of asking questions, self-discipline, humility and an awareness of the big investing world out here. Nearly all of us here (and I bet it's actually 100% of us) started out just like you, with an advisor that we eventually became suspicious of. If it makes you feel any better, you are figuring things out in JUST 7 years -- it took me (and some of the rest of us?) much, much longer to begin to get wise.

 

Keep up the good work, and keep a good investing book on your bedside stand along with some good fiction and some stuff on other areas of interest. You did good, and you are going to be fine!

 

Congrats,

JudyS

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