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Hey Everyone,

 

I wrote in awhile ago to get help choosing which fund company to go with. I went with Fidelity and asked a friend of mine (ML advisor) to help me choose a great mix of funds. His name is not on the account as my advisor so he does not receive any kickback from this. Here is what he came up with:

 

25% Fidelity Four in one Index- FFNOX

15 % Contrafund - FCNTX

10% FID LEVERAGED CO STK -FLVCX

10%- FIDELITY LOW PR STK - FLPSX

10%- FID INTL SMALL CAP- FISMX

10%- FID DIVERSIFIED INTL -FDIVX

10%- FID STRATEGIC INCOME FSICX

10% FID TOTAL BOND - FTBFX

 

Is this too many funds? I was thinking about going straight indexing and reducing the amount of funds. I am thankful to have Fidelity but was just looking for a second opinion.

 

Thanks

 

No one is a prognosticator of what will happen in the markets ever. A suggestion would be to go to the FINRA website and use their fund analyzer software to satisfy your own curiosity. Often times, consumers find a company they believe in and and use them exclusively and, they can do that. However, no one company, Fidelity and Vanguard included, manage all asset classes well or even mostly well. This is why we, a financial advisor, seek to diversify our client's holding not only within different asset classes (assuming the minimum deposits are reached for that fund) but also among different fund families (e.g. Fidelity for stocks funds, Vanguard for index funds, PIMCO for bonds.) We are attempting to get "best of breed". I am a big believer in staddling my clients positions; meaning, indexed funds and actively managed funds, etc. One's preference for seeking lower fees might be overlooked if there was a fund whose past performance was 40% but the fund expense was 9% (Bernie comments excluded please). My point is fees are not the only issue when selecting a fund or fund company. I will use an annuity, in the payout (retirement) phase, not because I am paid a big commission as is commonly thought but because my client can never out live a specific amount of money that the carrier will paid her/him...never out-live that amount. A mutual fund can not state that. But I will also use a managed account such as ASPire's platform because again, none of us can determine what will happen in the future so I try to cover as many bases for my clients as possible. ASPire is a recordkeeper and has most any fund and fund family one could possible want; thereby allowing one to construct a portfolio using several asset classes and fund families.

A case can be made for indexed funds only or actively managed funds or low expenses or modest ones or alpha or diversification or dividing your assets according to your age (if your 40 years old, you have 40% in bonds and 60% in stocks. 50 years old, 50% stocks, 50% bonds, and so it goes). Investing is not simply setting it once and forgetting it. Too many funds depends upon how much money you are referring to but typically when designing a portfolio one could have as many as 15 though it is stated not to have more than 18. What is the projected rate of return for this portfolio and what is the standard deviation for it too? One last comment, before you decided on these funds did you complete a risk analysis on yourself and if so how did you score? And,is this portfolio in line with your risk/reward scoring?

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Hey Everyone,

 

I wrote in awhile ago to get help choosing which fund company to go with. I went with Fidelity and asked a friend of mine (ML advisor) to help me choose a great mix of funds. His name is not on the account as my advisor so he does not receive any kickback from this. Here is what he came up with:

 

25% Fidelity Four in one Index- FFNOX

15 % Contrafund - FCNTX

10% FID LEVERAGED CO STK -FLVCX

10%- FIDELITY LOW PR STK - FLPSX

10%- FID INTL SMALL CAP- FISMX

10%- FID DIVERSIFIED INTL -FDIVX

10%- FID STRATEGIC INCOME FSICX

10% FID TOTAL BOND - FTBFX

 

Is this too many funds? I was thinking about going straight indexing and reducing the amount of funds. I am thankful to have Fidelity but was just looking for a second opinion.

 

Thanks

 

No one is a prognosticator of what will happen in the markets ever. A suggestion would be to go to the FINRA website and use their fund analyzer software to satisfy your own curiosity. Often times, consumers find a company they believe in and and use them exclusively and, they can do that. However, no one company, Fidelity and Vanguard included, manage all asset classes well or even mostly well. This is why we, a financial advisor, seek to diversify our client's holding not only within different asset classes (assuming the minimum deposits are reached for that fund) but also among different fund families (e.g. Fidelity for stocks funds, Vanguard for index funds, PIMCO for bonds.) We are attempting to get "best of breed". I am a big believer in staddling my clients positions; meaning, indexed funds and actively managed funds, etc. One's preference for seeking lower fees might be overlooked if there was a fund whose past performance was 40% but the fund expense was 9% (Bernie comments excluded please). My point is fees are not the only issue when selecting a fund or fund company. I will use an annuity, in the payout (retirement) phase, not because I am paid a big commission as is commonly thought but because my client can never out live a specific amount of money that the carrier will paid her/him...never out-live that amount. A mutual fund can not state that. But I will also use a managed account such as ASPire's platform because again, none of us can determine what will happen in the future so I try to cover as many bases for my clients as possible. ASPire is a recordkeeper and has most any fund and fund family one could possible want; thereby allowing one to construct a portfolio using several asset classes and fund families.

A case can be made for indexed funds only or actively managed funds or low expenses or modest ones or alpha or diversification or dividing your assets according to your age (if your 40 years old, you have 40% in bonds and 60% in stocks. 50 years old, 50% stocks, 50% bonds, and so it goes). Investing is not simply setting it once and forgetting it. Too many funds depends upon how much money you are referring to but typically when designing a portfolio one could have as many as 15 though it is stated not to have more than 18. What is the projected rate of return for this portfolio and what is the standard deviation for it too? One last comment, before you decided on these funds did you complete a risk analysis on yourself and if so how did you score? And,is this portfolio in line with your risk/reward scoring?

 

 

Hi evan,

 

Good summary of your thinking about diversification and constructing a portfolio that meets an individual needs. But I sense you rely on managed funds for what it looks like to me as part of the diversification. Managers cannot predict the future either as you correctly said at the beginning.

Here are my other comments, unsolicited of course. Just to give readers and chance to see differing investing philosophies. Managers do not add value. Some get lucky and add value, a few quite a bit, but they soon fall out of favor. It is never long lasting. The index fund will beat 99% of all active funds over many years according to Rick Ferri’s new book. It’s very convincing. Good luck getting that 1%. But I don’t want to base my strategy on luck, that’s for Vegas, not investing.

Other comments:

Pimco is too expensive.

Fidelity has index funds too, their excellent Spartan funds.

Fees are the only issue when selecting a fund.

Yes, you can set up a simple portfolio and stay the course. You are partly correct. An investor has to "rebalance" to get back to original stock bond split and the diversification plan.

A 30% equity / 70% bond fund has a 7.2% historical returns with low volatility.

Purchasing an annuity for lifetime ###### of income, after the accumulation phase in equities, is fine as long as the annuity is from TIAA CREF or Vanguard.

 

Later,

Steve

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Hey Everyone,

 

I wrote in awhile ago to get help choosing which fund company to go with. I went with Fidelity and asked a friend of mine (ML advisor) to help me choose a great mix of funds. His name is not on the account as my advisor so he does not receive any kickback from this. Here is what he came up with:

 

25% Fidelity Four in one Index- FFNOX

15 % Contrafund - FCNTX

10% FID LEVERAGED CO STK -FLVCX

10%- FIDELITY LOW PR STK - FLPSX

10%- FID INTL SMALL CAP- FISMX

10%- FID DIVERSIFIED INTL -FDIVX

10%- FID STRATEGIC INCOME FSICX

10% FID TOTAL BOND - FTBFX

 

Is this too many funds? I was thinking about going straight indexing and reducing the amount of funds. I am thankful to have Fidelity but was just looking for a second opinion.

 

Thanks

 

No one is a prognosticator of what will happen in the markets ever. A suggestion would be to go to the FINRA website and use their fund analyzer software to satisfy your own curiosity. Often times, consumers find a company they believe in and and use them exclusively and, they can do that. However, no one company, Fidelity and Vanguard included, manage all asset classes well or even mostly well. This is why we, a financial advisor, seek to diversify our client's holding not only within different asset classes (assuming the minimum deposits are reached for that fund) but also among different fund families (e.g. Fidelity for stocks funds, Vanguard for index funds, PIMCO for bonds.) We are attempting to get "best of breed". I am a big believer in staddling my clients positions; meaning, indexed funds and actively managed funds, etc. One's preference for seeking lower fees might be overlooked if there was a fund whose past performance was 40% but the fund expense was 9% (Bernie comments excluded please). My point is fees are not the only issue when selecting a fund or fund company. I will use an annuity, in the payout (retirement) phase, not because I am paid a big commission as is commonly thought but because my client can never out live a specific amount of money that the carrier will paid her/him...never out-live that amount. A mutual fund can not state that. But I will also use a managed account such as ASPire's platform because again, none of us can determine what will happen in the future so I try to cover as many bases for my clients as possible. ASPire is a recordkeeper and has most any fund and fund family one could possible want; thereby allowing one to construct a portfolio using several asset classes and fund families.

A case can be made for indexed funds only or actively managed funds or low expenses or modest ones or alpha or diversification or dividing your assets according to your age (if your 40 years old, you have 40% in bonds and 60% in stocks. 50 years old, 50% stocks, 50% bonds, and so it goes). Investing is not simply setting it once and forgetting it. Too many funds depends upon how much money you are referring to but typically when designing a portfolio one could have as many as 15 though it is stated not to have more than 18. What is the projected rate of return for this portfolio and what is the standard deviation for it too? One last comment, before you decided on these funds did you complete a risk analysis on yourself and if so how did you score? And,is this portfolio in line with your risk/reward scoring?

 

 

Hi evan,

 

Good summary of your thinking about diversification and constructing a portfolio that meets an individual needs. But I sense you rely on managed funds for what it looks like to me as part of the diversification. Managers cannot predict the future either as you correctly said at the beginning.

Here are my other comments, unsolicited of course. Just to give readers and chance to see differing investing philosophies. Managers do not add value. Some get lucky and add value, a few quite a bit, but they soon fall out of favor. It is never long lasting. The index fund will beat 99% of all active funds over many years according to Rick Ferri’s new book. It’s very convincing. Good luck getting that 1%. But I don’t want to base my strategy on luck, that’s for Vegas, not investing.

Other comments:

Pimco is too expensive.

Fidelity has index funds too, their excellent Spartan funds.

Fees are the only issue when selecting a fund.

Yes, you can set up a simple portfolio and stay the course. You are partly correct. An investor has to "rebalance" to get back to original stock bond split and the diversification plan.

A 30% equity / 70% bond fund has a 7.2% historical returns with low volatility.

Purchasing an annuity for lifetime ###### of income, after the accumulation phase in equities, is fine as long as the annuity is from TIAA CREF or Vanguard.

 

Later,

Steve

 

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Hey Everyone,

 

I wrote in awhile ago to get help choosing which fund company to go with. I went with Fidelity and asked a friend of mine (ML advisor) to help me choose a great mix of funds. His name is not on the account as my advisor so he does not receive any kickback from this. Here is what he came up with:

 

25% Fidelity Four in one Index- FFNOX

15 % Contrafund - FCNTX

10% FID LEVERAGED CO STK -FLVCX

10%- FIDELITY LOW PR STK - FLPSX

10%- FID INTL SMALL CAP- FISMX

10%- FID DIVERSIFIED INTL -FDIVX

10%- FID STRATEGIC INCOME FSICX

10% FID TOTAL BOND - FTBFX

 

Is this too many funds? I was thinking about going straight indexing and reducing the amount of funds. I am thankful to have Fidelity but was just looking for a second opinion.

 

Thanks

 

No one is a prognosticator of what will happen in the markets ever. A suggestion would be to go to the FINRA website and use their fund analyzer software to satisfy your own curiosity. Often times, consumers find a company they believe in and and use them exclusively and, they can do that. However, no one company, Fidelity and Vanguard included, manage all asset classes well or even mostly well. This is why we, a financial advisor, seek to diversify our client's holding not only within different asset classes (assuming the minimum deposits are reached for that fund) but also among different fund families (e.g. Fidelity for stocks funds, Vanguard for index funds, PIMCO for bonds.) We are attempting to get "best of breed". I am a big believer in staddling my clients positions; meaning, indexed funds and actively managed funds, etc. One's preference for seeking lower fees might be overlooked if there was a fund whose past performance was 40% but the fund expense was 9% (Bernie comments excluded please). My point is fees are not the only issue when selecting a fund or fund company. I will use an annuity, in the payout (retirement) phase, not because I am paid a big commission as is commonly thought but because my client can never out live a specific amount of money that the carrier will paid her/him...never out-live that amount. A mutual fund can not state that. But I will also use a managed account such as ASPire's platform because again, none of us can determine what will happen in the future so I try to cover as many bases for my clients as possible. ASPire is a recordkeeper and has most any fund and fund family one could possible want; thereby allowing one to construct a portfolio using several asset classes and fund families.

A case can be made for indexed funds only or actively managed funds or low expenses or modest ones or alpha or diversification or dividing your assets according to your age (if your 40 years old, you have 40% in bonds and 60% in stocks. 50 years old, 50% stocks, 50% bonds, and so it goes). Investing is not simply setting it once and forgetting it. Too many funds depends upon how much money you are referring to but typically when designing a portfolio one could have as many as 15 though it is stated not to have more than 18. What is the projected rate of return for this portfolio and what is the standard deviation for it too? One last comment, before you decided on these funds did you complete a risk analysis on yourself and if so how did you score? And,is this portfolio in line with your risk/reward scoring?

 

 

Hi evan,

 

Good summary of your thinking about diversification and constructing a portfolio that meets an individual needs. But I sense you rely on managed funds for what it looks like to me as part of the diversification. Managers cannot predict the future either as you correctly said at the beginning.

Here are my other comments, unsolicited of course. Just to give readers and chance to see differing investing philosophies. Managers do not add value. Some get lucky and add value, a few quite a bit, but they soon fall out of favor. It is never long lasting. The index fund will beat 99% of all active funds over many years according to Rick Ferri’s new book. It’s very convincing. Good luck getting that 1%. But I don’t want to base my strategy on luck, that’s for Vegas, not investing.

Other comments:

Pimco is too expensive.

Fidelity has index funds too, their excellent Spartan funds.

Fees are the only issue when selecting a fund.

Yes, you can set up a simple portfolio and stay the course. You are partly correct. An investor has to "rebalance" to get back to original stock bond split and the diversification plan.

A 30% equity / 70% bond fund has a 7.2% historical returns with low volatility.

Purchasing an annuity for lifetime ###### of income, after the accumulation phase in equities, is fine as long as the annuity is from TIAA CREF or Vanguard.

 

Later,

Steve

 

 

 

Thank you Steve for your insights and please forgive me yet, I can not be painted into a corner or box or another's opinion. When I stated: "No one knows" I stated something very clear: "no one knows the future performance of the markets or the investments". Not me or you or Fred or Peter Lynch or Ben Bernanke. If you want to believe that an index fund is the method to use to invest you will. But an index is fictitious and therefore by the very nature of a true index fund, it will never beat the performance of the fictitious index. If it does, then that fund is not a true index fund (meaning it is doing something that the fictitious index isn't doing to beat the fictitious index.) And since in the future the composition of that fictitious index can change, performance will too. If one believes the statement: "past performance is no indication of future performance"; then, ipso facto, one can not rely upon the past performance of any fund, index or otherwise as a means for investing in a fund. I do not rely upon managers, as you stated, what I do do is rely upon my clients to tell me what they want. They determine if the investment I am suggesting is "right" for them. It is my hope that I present sound enough reasoning as I do not rush to judgement. While you might like TIAA, I am not particular fond of them. They are paternal in their behavior and design of their accounts. Imagine a TIAA account holder may not take a lump sum withdrawal, but must take that distribution over a minimum of 10 years. If you investigate any of their lawsuits filed against them you will note, they are not very pleased with ###### rights as it pertains to a contract holders beneficiary selection.

AS I recall, TIAA was taken to court over their restrictive withdrawal option of a lifetime annuity years ago; one could not lump sum the TIAA side. TIAA was forced to change this restriction from never being allowed to lump sum the TIAA side to withdrawing it over a 10 year period. No wonder their assets are as large as they are...whose wouldn't be if you dictated to a client how they could withdraw their own money. TIAA was set up to provide a fixed dollar annuity for the annuitant; with no other option. (see: http://ftp.resource.org/courts.gov/c/F2/691/691.F2d.1054.79-7739.79-7737.79-7715.1375.1376.html scoll down to item 9) And they were taken to court to change their mortality tables from M/F to unisex. This is interesting:http://www.congress.org/congressorg/bio/userletter/?letter_id=6203879956. And, apparently they do not play fair with ###### beneficaries either. See http://www.aidslawpa.org/wp-content/uploads/2011/04/press_release_5-28-10.pdf Big brother anyone? Companies are fallible and who they are today is not who they will be tomorrow and last point Steve is: No one knows. But I am not admitting defeat only awareness to this single and very important fact, so I design my course accordingly. But I do not think it is better because the fees are lower or the performance is better or whatever "it" happens to be as my critical deciding factor; that was yesterday. Thank you.

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Hey Everyone,

 

I wrote in awhile ago to get help choosing which fund company to go with. I went with Fidelity and asked a friend of mine (ML advisor) to help me choose a great mix of funds. His name is not on the account as my advisor so he does not receive any kickback from this. Here is what he came up with:

 

25% Fidelity Four in one Index- FFNOX

15 % Contrafund - FCNTX

10% FID LEVERAGED CO STK -FLVCX

10%- FIDELITY LOW PR STK - FLPSX

10%- FID INTL SMALL CAP- FISMX

10%- FID DIVERSIFIED INTL -FDIVX

10%- FID STRATEGIC INCOME FSICX

10% FID TOTAL BOND - FTBFX

 

Is this too many funds? I was thinking about going straight indexing and reducing the amount of funds. I am thankful to have Fidelity but was just looking for a second opinion.

 

Thanks

 

No one is a prognosticator of what will happen in the markets ever. A suggestion would be to go to the FINRA website and use their fund analyzer software to satisfy your own curiosity. Often times, consumers find a company they believe in and and use them exclusively and, they can do that. However, no one company, Fidelity and Vanguard included, manage all asset classes well or even mostly well. This is why we, a financial advisor, seek to diversify our client's holding not only within different asset classes (assuming the minimum deposits are reached for that fund) but also among different fund families (e.g. Fidelity for stocks funds, Vanguard for index funds, PIMCO for bonds.) We are attempting to get "best of breed". I am a big believer in staddling my clients positions; meaning, indexed funds and actively managed funds, etc. One's preference for seeking lower fees might be overlooked if there was a fund whose past performance was 40% but the fund expense was 9% (Bernie comments excluded please). My point is fees are not the only issue when selecting a fund or fund company. I will use an annuity, in the payout (retirement) phase, not because I am paid a big commission as is commonly thought but because my client can never out live a specific amount of money that the carrier will paid her/him...never out-live that amount. A mutual fund can not state that. But I will also use a managed account such as ASPire's platform because again, none of us can determine what will happen in the future so I try to cover as many bases for my clients as possible. ASPire is a recordkeeper and has most any fund and fund family one could possible want; thereby allowing one to construct a portfolio using several asset classes and fund families.

A case can be made for indexed funds only or actively managed funds or low expenses or modest ones or alpha or diversification or dividing your assets according to your age (if your 40 years old, you have 40% in bonds and 60% in stocks. 50 years old, 50% stocks, 50% bonds, and so it goes). Investing is not simply setting it once and forgetting it. Too many funds depends upon how much money you are referring to but typically when designing a portfolio one could have as many as 15 though it is stated not to have more than 18. What is the projected rate of return for this portfolio and what is the standard deviation for it too? One last comment, before you decided on these funds did you complete a risk analysis on yourself and if so how did you score? And,is this portfolio in line with your risk/reward scoring?

 

 

Hi evan,

 

Good summary of your thinking about diversification and constructing a portfolio that meets an individual needs. But I sense you rely on managed funds for what it looks like to me as part of the diversification. Managers cannot predict the future either as you correctly said at the beginning.

Here are my other comments, unsolicited of course. Just to give readers and chance to see differing investing philosophies. Managers do not add value. Some get lucky and add value, a few quite a bit, but they soon fall out of favor. It is never long lasting. The index fund will beat 99% of all active funds over many years according to Rick Ferri’s new book. It’s very convincing. Good luck getting that 1%. But I don’t want to base my strategy on luck, that’s for Vegas, not investing.

Other comments:

Pimco is too expensive.

Fidelity has index funds too, their excellent Spartan funds.

Fees are the only issue when selecting a fund.

Yes, you can set up a simple portfolio and stay the course. You are partly correct. An investor has to "rebalance" to get back to original stock bond split and the diversification plan.

A 30% equity / 70% bond fund has a 7.2% historical returns with low volatility.

Purchasing an annuity for lifetime ###### of income, after the accumulation phase in equities, is fine as long as the annuity is from TIAA CREF or Vanguard.

 

Later,

Steve

 

 

 

Thank you Steve for your insights and please forgive me yet, I can not be painted into a corner or box or another's opinion. When I stated: "No one knows" I stated something very clear: "no one knows the future performance of the markets or the investments". Not me or you or Fred or Peter Lynch or Ben Bernanke. If you want to believe that an index fund is the method to use to invest you will. But an index is fictitious and therefore by the very nature of a true index fund, it will never beat the performance of the fictitious index. If it does, then that fund is not a true index fund (meaning it is doing something that the fictitious index isn't doing to beat the fictitious index.) And since in the future the composition of that fictitious index can change, performance will too. If one believes the statement: "past performance is no indication of future performance"; then, ipso facto, one can not rely upon the past performance of any fund, index or otherwise as a means for investing in a fund. I do not rely upon managers, as you stated, what I do do is rely upon my clients to tell me what they want. They determine if the investment I am suggesting is "right" for them. It is my hope that I present sound enough reasoning as I do not rush to judgement. While you might like TIAA, I am not particular fond of them. They are paternal in their behavior and design of their accounts. Imagine a TIAA account holder may not take a lump sum withdrawal, but must take that distribution over a minimum of 10 years. If you investigate any of their lawsuits filed against them you will note, they are not very pleased with ###### rights as it pertains to a contract holders beneficiary selection.

AS I recall, TIAA was taken to court over their restrictive withdrawal option of a lifetime annuity years ago; one could not lump sum the TIAA side. TIAA was forced to change this restriction from never being allowed to lump sum the TIAA side to withdrawing it over a 10 year period. No wonder their assets are as large as they are...whose wouldn't be if you dictated to a client how they could withdraw their own money. TIAA was set up to provide a fixed dollar annuity for the annuitant; with no other option. (see: http://ftp.resource.org/courts.gov/c/F2/691/691.F2d.1054.79-7739.79-7737.79-7715.1375.1376.html scoll down to item 9) And they were taken to court to change their mortality tables from M/F to unisex. This is interesting:http://www.congress.org/congressorg/bio/userletter/?letter_id=6203879956. And, apparently they do not play fair with ###### beneficaries either. See http://www.aidslawpa.org/wp-content/uploads/2011/04/press_release_5-28-10.pdf Big brother anyone? Companies are fallible and who they are today is not who they will be tomorrow and last point Steve is: No one knows. But I am not admitting defeat only awareness to this single and very important fact, so I design my course accordingly. But I do not think it is better because the fees are lower or the performance is better or whatever "it" happens to be as my critical deciding factor; that was yesterday. Thank you.

 

 

I had no idea that I painted anybody. We are just having a frendly debate right? You have to take a stand, so how can you not be in a corner. I love corners.

Indexes are indeed dumb and boring. Thats precisely why investors will do better over long periods of time than actively managed funds. Your clients want to see action in their portfolio, so be it. I don't and the writers such as Ferri, Bogle, Swedroe, Schultheis, Bernstein, Malkiel, Bogleheads Guide to Investing and Buffett all say that because of indexing low costs and tax efficiency, investors will get their fair share of the market over individual stocks or actively managed funds.

TIAA CREF has one fund that has surrender fees and should be sued for that, but the rest of their funds and their philosophy is good. I do worry that the culture is reflecting more of Wall Street than main street when they hired a Wall Street connected CEO a few years ago. Heck, if TIAA CREF can get me more money, Ill take "big brother" anytime when they don't charge commissions and excess fees. Here is their mission statement:

Serving the Greater Good

For over 90 years, TIAA-CREF has been helping those in the academic, medical, cultural and research fields plan for and live in retirement. We do this with a full array of financial products and services to help them live to and through retirement and invest for life's other goals along the way. In keeping with our strong nonprofit heritage, we offer low fees, a long-term approach to investing, and a full line of financial products and services provided by consultants who never receive commissions. Instead, they are compensated primarily on how well they serve you, not what they sell you.

 

We have different philosophies of investing and life. Its pretty clear, but nobody cares. We have an active passive debate going on. People want to know whats best for them. When it comes to investing, playing dumb will make you richer than playing smart thinking you can beat the averages. Telling people that they can beat the averages is a sales job, not objective. Beating the averages will fail over long periods of time.

The OP was given the 4 in one index which is very good option that will serve him for the rest of his life. Thats what this is all about.

 

Have a good day,

Steve

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Hey Everyone,

 

I wrote in awhile ago to get help choosing which fund company to go with. I went with Fidelity and asked a friend of mine (ML advisor) to help me choose a great mix of funds. His name is not on the account as my advisor so he does not receive any kickback from this. Here is what he came up with:

 

25% Fidelity Four in one Index- FFNOX

15 % Contrafund - FCNTX

10% FID LEVERAGED CO STK -FLVCX

10%- FIDELITY LOW PR STK - FLPSX

10%- FID INTL SMALL CAP- FISMX

10%- FID DIVERSIFIED INTL -FDIVX

10%- FID STRATEGIC INCOME FSICX

10% FID TOTAL BOND - FTBFX

 

Is this too many funds? I was thinking about going straight indexing and reducing the amount of funds. I am thankful to have Fidelity but was just looking for a second opinion.

 

Thanks

 

No one is a prognosticator of what will happen in the markets ever. A suggestion would be to go to the FINRA website and use their fund analyzer software to satisfy your own curiosity. Often times, consumers find a company they believe in and and use them exclusively and, they can do that. However, no one company, Fidelity and Vanguard included, manage all asset classes well or even mostly well. This is why we, a financial advisor, seek to diversify our client's holding not only within different asset classes (assuming the minimum deposits are reached for that fund) but also among different fund families (e.g. Fidelity for stocks funds, Vanguard for index funds, PIMCO for bonds.) We are attempting to get "best of breed". I am a big believer in staddling my clients positions; meaning, indexed funds and actively managed funds, etc. One's preference for seeking lower fees might be overlooked if there was a fund whose past performance was 40% but the fund expense was 9% (Bernie comments excluded please). My point is fees are not the only issue when selecting a fund or fund company. I will use an annuity, in the payout (retirement) phase, not because I am paid a big commission as is commonly thought but because my client can never out live a specific amount of money that the carrier will paid her/him...never out-live that amount. A mutual fund can not state that. But I will also use a managed account such as ASPire's platform because again, none of us can determine what will happen in the future so I try to cover as many bases for my clients as possible. ASPire is a recordkeeper and has most any fund and fund family one could possible want; thereby allowing one to construct a portfolio using several asset classes and fund families.

A case can be made for indexed funds only or actively managed funds or low expenses or modest ones or alpha or diversification or dividing your assets according to your age (if your 40 years old, you have 40% in bonds and 60% in stocks. 50 years old, 50% stocks, 50% bonds, and so it goes). Investing is not simply setting it once and forgetting it. Too many funds depends upon how much money you are referring to but typically when designing a portfolio one could have as many as 15 though it is stated not to have more than 18. What is the projected rate of return for this portfolio and what is the standard deviation for it too? One last comment, before you decided on these funds did you complete a risk analysis on yourself and if so how did you score? And,is this portfolio in line with your risk/reward scoring?

 

 

Hi evan,

 

Good summary of your thinking about diversification and constructing a portfolio that meets an individual needs. But I sense you rely on managed funds for what it looks like to me as part of the diversification. Managers cannot predict the future either as you correctly said at the beginning.

Here are my other comments, unsolicited of course. Just to give readers and chance to see differing investing philosophies. Managers do not add value. Some get lucky and add value, a few quite a bit, but they soon fall out of favor. It is never long lasting. The index fund will beat 99% of all active funds over many years according to Rick Ferri’s new book. It’s very convincing. Good luck getting that 1%. But I don’t want to base my strategy on luck, that’s for Vegas, not investing.

Other comments:

Pimco is too expensive.

Fidelity has index funds too, their excellent Spartan funds.

Fees are the only issue when selecting a fund.

Yes, you can set up a simple portfolio and stay the course. You are partly correct. An investor has to "rebalance" to get back to original stock bond split and the diversification plan.

A 30% equity / 70% bond fund has a 7.2% historical returns with low volatility.

Purchasing an annuity for lifetime ###### of income, after the accumulation phase in equities, is fine as long as the annuity is from TIAA CREF or Vanguard.

 

Later,

Steve

 

 

 

Thank you Steve for your insights and please forgive me yet, I can not be painted into a corner or box or another's opinion. When I stated: "No one knows" I stated something very clear: "no one knows the future performance of the markets or the investments". Not me or you or Fred or Peter Lynch or Ben Bernanke. If you want to believe that an index fund is the method to use to invest you will. But an index is fictitious and therefore by the very nature of a true index fund, it will never beat the performance of the fictitious index. If it does, then that fund is not a true index fund (meaning it is doing something that the fictitious index isn't doing to beat the fictitious index.) And since in the future the composition of that fictitious index can change, performance will too. If one believes the statement: "past performance is no indication of future performance"; then, ipso facto, one can not rely upon the past performance of any fund, index or otherwise as a means for investing in a fund. I do not rely upon managers, as you stated, what I do do is rely upon my clients to tell me what they want. They determine if the investment I am suggesting is "right" for them. It is my hope that I present sound enough reasoning as I do not rush to judgement. While you might like TIAA, I am not particular fond of them. They are paternal in their behavior and design of their accounts. Imagine a TIAA account holder may not take a lump sum withdrawal, but must take that distribution over a minimum of 10 years. If you investigate any of their lawsuits filed against them you will note, they are not very pleased with ###### rights as it pertains to a contract holders beneficiary selection.

AS I recall, TIAA was taken to court over their restrictive withdrawal option of a lifetime annuity years ago; one could not lump sum the TIAA side. TIAA was forced to change this restriction from never being allowed to lump sum the TIAA side to withdrawing it over a 10 year period. No wonder their assets are as large as they are...whose wouldn't be if you dictated to a client how they could withdraw their own money. TIAA was set up to provide a fixed dollar annuity for the annuitant; with no other option. (see: http://ftp.resource.org/courts.gov/c/F2/691/691.F2d.1054.79-7739.79-7737.79-7715.1375.1376.html scoll down to item 9) And they were taken to court to change their mortality tables from M/F to unisex. This is interesting:http://www.congress.org/congressorg/bio/userletter/?letter_id=6203879956. And, apparently they do not play fair with ###### beneficaries either. See http://www.aidslawpa.org/wp-content/uploads/2011/04/press_release_5-28-10.pdf Big brother anyone? Companies are fallible and who they are today is not who they will be tomorrow and last point Steve is: No one knows. But I am not admitting defeat only awareness to this single and very important fact, so I design my course accordingly. But I do not think it is better because the fees are lower or the performance is better or whatever "it" happens to be as my critical deciding factor; that was yesterday. Thank you.

 

 

I had no idea that I painted anybody. We are just having a frendly debate right? You have to take a stand, so how can you not be in a corner. I love corners.

Indexes are indeed dumb and boring. Thats precisely why investors will do better over long periods of time than actively managed funds. Your clients want to see action in their portfolio, so be it. I don't and the writers such as Ferri, Bogle, Swedroe, Schultheis, Bernstein, Malkiel, Bogleheads Guide to Investing and Buffett all say that because of indexing low costs and tax efficiency, investors will get their fair share of the market over individual stocks or actively managed funds.

TIAA CREF has one fund that has surrender fees and should be sued for that, but the rest of their funds and their philosophy is good. I do worry that the culture is reflecting more of Wall Street than main street when they hired a Wall Street connected CEO a few years ago. Heck, if TIAA CREF can get me more money, Ill take "big brother" anytime when they don't charge commissions and excess fees. Here is their mission statement:

Serving the Greater Good

For over 90 years, TIAA-CREF has been helping those in the academic, medical, cultural and research fields plan for and live in retirement. We do this with a full array of financial products and services to help them live to and through retirement and invest for life's other goals along the way. In keeping with our strong nonprofit heritage, we offer low fees, a long-term approach to investing, and a full line of financial products and services provided by consultants who never receive commissions. Instead, they are compensated primarily on how well they serve you, not what they sell you.

 

We have different philosophies of investing and life. Its pretty clear, but nobody cares. We have an active passive debate going on. People want to know whats best for them. When it comes to investing, playing dumb will make you richer than playing smart thinking you can beat the averages. Telling people that they can beat the averages is a sales job, not objective. Beating the averages will fail over long periods of time.

The OP was given the 4 in one index which is very good option that will serve him for the rest of his life. Thats what this is all about.

 

Have a good day,

Steve

 

 

Thank you Steve and I like this discussion, if I seemed annoyed; I am not. What I have discovered is that choice is a good thing for investors. Too much choice can be overwhelming for most (50% of the investing public). Fees in and of themselves are not bad but in fact, necessary as advisors who work in this business deserve to be compensated. Should you not wish to pay for our services that is your prerogative. However, Bogle and Buffet and the others are not in the same league as the common investor. Their advice, it can be argued, is not for these investors in total for many reasons but the most important one is complete disinterest and/or misunderstanding on their part in their ability to apply it for themselves. And many people just do not want to invest their own funds; they want advice and trusted counsel. Regarding fees and returns, there are those in the not-for-profit world (who I work with) who believe in principle before profit. They want only Socially Responsible funds regardless of their performance (to a point). They dislike Wall Street mentality and they dislike big brother. I am glad we have them in our investing world. To be clear, I never stated I have told anyone they can beat the averages. Never. I have simply stated, no one knows and so straddle the investments. Also, I do use index funds just not for all asset classes. And we must remember, my advice to my clients can always be overruled by them. We have not discussed the greed factor and how it influences an investor's behavior. But this factor is real and present. It also appears, and I can be wrong, that you dislike sales. Perhaps, you dislike the high commissions (define high. The SEC sets the maximum sales commission for us), but the free market will take care of that. If it is the unethical sales practices, the regulators will take care of those miscreants (Perhaps they don't manage that aspect of the industry as swiftly as you and I would like but law and order before vigilantism). But sales is not a dishonorable profession; being a con person is. My rub, if you will, is not with the financial advising profession as I believe the majority of them to be honest and hard working. My distaste is at the top of corporations, with the: Board, the CEO and other Officers of the company. For them to abscond with outrageous compensation for failing at their supervisory and principle responsibilities is an outage and more of the public should be screaming bloody murder. These were the Officers in charge to make sure their products and services were suitable for their clients. They were the ones who approved the application but if it wasn't suitable for the client than it is not suitable for the company. This systemic problem is top down, not bottom up. Lastly, Steve, regarding TIAA, it is said, it is not what is written but what is done. Take a look at those lawsuits. Why does TIAA disallow a lump sum distribution from their fixed investments? If you dislike sales, one can look to the "sales" job TIAA has done. They are a non profit. Their advisors are paid salary but they do have incentives (for: saving assets and attracting more). They typically service the top of an organization and leave the rank and file to seminars or no service at all (How can they do anything else they do not have the salesforce). If your a small college with little assets you'll be lucky to see anyone from TIAA/CREF. Remember the study that was done on TIAA/CREF and their clients years ago? Many education employees who signed up in their money market or TIAA account decades ago were still in that same account when they retired. TIAA/CREF cannot service their clientele. They can not. To be fair, TIAA/CREF is not alone here, most of the firms can not service what clients they have. Yet the firms concentrate more on: "how many assets does a client/institution have" then it does on: how can we best service our clients? Clients judge an advisor by how many assets they manage or how will they manage their money for the highest return. Advisors are grilled by their brokerdealer under similar conditions; what have you done for the BD today? This is precisely why I am an independent advisor.

But I also think we are closer to our ideals than further apart; viz, keep our clients interest first and always and do what is best for them. If you want to paint me into a room, you may just make sure it doesn't have any walls or ceiling. I hope where you are the weather is enjoyable and perhaps we can discuss over a cup of coffee one day. My best, Evan

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I don't think your choices are bad. It seems you've got the market covered. In fact, I own Low Price Stock because it has beaten its index long term. I used to own Contra but dumped it for Vanguard Total Stock Market Index.

 

If I could do it all over again I would strickly do index funds. Thats the direction I keep moving to .Low cost and simplicy matters!! I probably would have more money too.

 

I think you could do the 4 in 1 Fund and probably do fine. Maybe you could add a Reitt component and maybe keep the small cap international fund. Other than that I think the 4 in 1 has many many advantages to it.

 

I've made all the managed fund mistakes and I strongly suggest you minimize them in your portfolio unless they are super low cost.

 

Take care and good for you for asking questions

 

Tony

 

 

Hi Tony,

 

When making changes in my 403b through Fidelity, will I have to pay fees for moving money from the funds I had originally had to the 4-1 fund? Any advice on this would be appreciated.

 

Thanks

 

Aaron

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No.

 

If you are in a 403b plan with Fidelity you can move from fund to fund with no tax consequences or any additional fees. Stay away from any loaded funds they may sell -they have a charge but I don't think Fidelity has loaded funds anymore but I am not sure.

 

Usually, if you create an account you can do this online on your own but you can also call them. Fidelity has great customer service.

 

I qualify my answer however. If you are dealing with any other intermediary you might want to double check with them too.

 

The 4 in 1 index fund is a great starting point for you. I really believe that. As you gain sophistication you may wish to add a few extra components but don't worry about that now. Invest all you can and increase your bond holdings as you get older. Stick with the spartan funds. They are an incredible deal.

 

 

Tony

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