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mstevens · Oct 6, 2017

mstevens said:
Thank you both. My financial advisor just moved it a small firm and I doubt they have the online infrastructure to compete with some of the bigger online brokerage sites, so I should probably go with one of those for the account that I want to personally manage. Can someone point me in the right direction for what kind of account I want to open and where? (I want to be able to invest in some stable investments as well as have the option to get behind some specific stocks) - any video resources explaining some dos and don'ts would be great as well.

So I read the OP a little more carefully (okay, okay.. I skipped it the first time...) and it looks like I need to get into the US Total Stock Market and Total International Market. What is the best place to do that *and* would I be able to invest in specific stocks if I chose to do so with that same account? Vanguard? E*trade? Someone point me in the right direction, please

tokkun · Oct 6, 2017

mstevens said:
So I read the OP a little more carefully (okay, okay.. I skipped it the first time...) and it looks like I need to get into the US Total Stock Market and Total International Market. What is the best place to do that *and* would I be able to invest in specific stocks if I chose to do so with that same account? Vanguard? E*trade? Someone point me in the right direction, please

If you want Vanguard funds, you should probably get a Vanguard account. It's the only way to get their mutual funds, and the cheapest way to get their ETFs, since they don't charge commissions on them.

It is possible to trade stocks in a Vanguard account, but I can't really say how competitive they are on that front, since I don't personally buy individual stocks.

Smiley90 · Oct 6, 2017

tokkun said:
If you want Vanguard funds, you should probably get a Vanguard account. It's the only way to get their mutual funds, and the cheapest way to get their ETFs, since they don't charge commissions on them.

It is possible to trade stocks in a Vanguard account, but I can't really say how competitive they are on that front, since I don't personally buy individual stocks.

... what? I mean, Mutual Funds maybe, but you can buy Vanguard ETFs which is essentially the same thing except better in most aspects with a brokerage from any bank you want. don't need a Vanguard account.

SecretMoblin · Oct 6, 2017

Smiley90 said:
... what? I mean, Mutual Funds maybe, but you can buy Vanguard ETFs which is essentially the same thing except better in most aspects with a brokerage from any bank you want. don't need a Vanguard account.

He's suggesting that if you decide to make Vanguard ETFs a significant part of your portfolio, going through Vanguard lets you get them commission free. Not as huge a deal if you're slinging around serious money, but for the typical investor who may be regularly investing a few hundred dollars (or less) in ETFs at a time, the fees start becoming a serious drag on long-term returns quite quickly.

Vanguard has a fairly competitive fee schedule for people who want to dabble outside its ecosystem, but it only starts ratcheting down once you hit $50k in AUM with Vanguard products and goes from there. Among other big brokers with their own commission-free products, Fidelity and Schwab are a flat $4.95 for all equity trades. Etrade, Ameritrade, and Scottrade are all $6.95, roughly in line with Vanguard. Robinhood is free, but it's a barebones system with its own drawbacks that are worth researching.

Also worth noting that while ETFs are clearly the better option to hold in taxable accounts at the moment, that could very well change in the coming years. Trying to game the political/regulatory system can be as foolish as trying to game the market.

Smiley90 · Oct 6, 2017

SecretMoblin said:
He's suggesting that if you decide to make Vanguard ETFs a significant part of your portfolio, going through Vanguard lets you get them commission free. Not as huge a deal if you're slinging around serious money, but for the typical investor who may be regularly investing a few hundred dollars (or less) in ETFs at a time, the fees start becoming a serious drag on long-term returns quite quickly.

Vanguard has a fairly competitive fee schedule for people who want to dabble outside its ecosystem, but it only starts ratcheting down once you hit $50k in AUM with Vanguard products and goes from there. Among other big brokers with their own commission-free products, Fidelity and Schwab are a flat $4.95 for all equity trades. Etrade, Ameritrade, and Scottrade are all $6.95, roughly in line with Vanguard. Robinhood is free, but it's a barebones system with its own drawbacks that are worth researching.

Also worth noting that while ETFs are clearly the better option to hold in taxable accounts at the moment, that could very well change in the coming years. Trying to game the political/regulatory system can be as foolish as trying to game the market.

There's brokerages that charge 0 commission for purchasing ETFs. The one I use is one of those, questrade. I don't know Robinhood but Questrade is a fully fledged legitimate brokerage. So... Vanguard itself is the only cheapest option there.

tokkun · Oct 6, 2017

Smiley90 said:
... what? I mean, Mutual Funds maybe,

Not maybe, yes.

but you can buy Vanguard ETFs which is essentially the same thing except better in most aspects with a brokerage from any bank you want. don't need a Vanguard account.

This is why I said "cheapest" for ETFs rather than "only". You will not find a competitor that is cheaper than free.

And I would dispute the Vanguard ETFs being better than their mutual funds in "most aspects". I can only think of a single aspect: You can get the same expense ratio as their Admiral shares at a lower initial buy-in.

In most other respects, Vanguard's mutual funds are superior:
- Automatic dividend reinvestment
- Ability to buy fractional shares
- No bid-ask spread
- Easier to buy & sell

ZackieChan · Oct 7, 2017

Ugh, maybe I'll start using Vanguard instead of Schwab, at least for the new Traditional IRA I'm gonna set up. Just seems a bit annoying to have multiple providers, but I guess it's on autopilot, so it doesn't really matter that much.

Randolph Freelander · Oct 7, 2017

tokkun said:
Not maybe, yes.

This is why I said "cheapest" for ETFs rather than "only". You will not find a competitor that is cheaper than free.

And I would dispute the Vanguard ETFs being better than their mutual funds in "most aspects". I can only think of a single aspect: You can get the same expense ratio as their Admiral shares at a lower initial buy-in.

In most other respects, Vanguard's mutual funds are superior:
- Automatic dividend reinvestment
- Ability to buy fractional shares
- No bid-ask spread
- Easier to buy & sell

Counter, one additional advantage of the ETF: You can buy or sell it precisely when you want, as opposed to the end of the market day.

tokkun · Oct 7, 2017

Randolph Freelander said:
Counter, one additional advantage of the ETF: You can buy or sell it precisely when you want, as opposed to the end of the market day.

I am aware of that feature, but you will have to convince me that it is actually an advantage. When do you personally care about daily price fluctuations in buying or selling index funds? Are you making speculative bets on macroeconomic reports?

I have always considered this feature of ETFs to be a disadvantage. It just introduces additional cognitive noise into the process of buying and selling with no tangible benefit to me. I am not a fan of this type of market timing to begin with, but I can at least see why day traders want it for individual stocks. I have yet to hear a compelling argument about why it is useful for trading indices, especially in the context of retirement investing.

GoldenEye 007 · Oct 7, 2017

If anyone uses 403b accounts, Vanguard has converted all equivalent funds to their Admiral Shares regardless of balance. I think that's nice? They are the ones with lower expense ratios, right?

Piecake · Oct 7, 2017

GoldenEye 007 said:
If anyone uses 403b accounts, Vanguard has converted all equivalent funds to their Admiral Shares regardless of balance. I think that's nice? They are the ones with lower expense ratios, right?

Yup

entremet · Oct 7, 2017

Quick question, if a job offers 401k matching up 3 percent, should I invest 3 percent (obviously free money) in the 401k and then invest the rest of the post tax funds in a Roth IRA? Or should I go all in the 401k?

ascii42 · Oct 7, 2017

entremet said:
Quick question, if a job offers 401k matching up 3 percent, should I invest 3 percent (obviously free money) in the 401k and then invest the rest of the post tax funds in a Roth IRA? Or should I go all in the 401k?

Probably, but it depends on the expense ratios of your 401k options. The lower, the better, and 401ks often dont have as good of options available.

kukubrew · Oct 7, 2017

Does anyone let JPM Chase manage their investments? I have 50k that they are offering to manage for 1.1% (I think that's introductory, will be 1.5% in year 2). Other than 401k and HSA I don't have investments so I got some money just sitting in the bank now which is why they approached me. They are proposing 50/50 etf/bond split portfolio with us and International about 50/40 with some municipal bonds covering remaing 10%.

So this spurred me to do some research and also read this thread. It really seems like it would be wiser to invest in the index funds from Vanguard since the fee would be much less but I'm pretty green to this so I would hate to make an mistake up front. Maybe let them manage for a year or 3 while I get comfortable with the idea of having my money invested?

Any ideas of what else I should look into or quiestions I should ask them before making the decision?

jstevenson · Oct 7, 2017

ascii42 said:
Probably, but it depends on the expense ratios of your 401k options. The lower, the better, and 401ks often dont have as good of options available.

ALso depends on your federal, state and local tax rates. Live in a tax free state like Washington? Roth is good.

Make enough money where a state like California will take 9.3%? Might be good to shelter it from paying state income taxes if you don't think you'll be in that state in retirement

tokkun · Oct 7, 2017

kukubrew said:
Does anyone let JPM Chase manage their investments? I have 50k that they are offering to manage for 1.1% (I think that's introductory, will be 1.5% in year 2). Other than 401k and HSA I don't have investments so I got some money just sitting in the bank now which is why they approached me. They are proposing 50/50 etf/bond split portfolio with us and International about 50/40 with some municipal bonds covering remaing 10%.

So this spurred me to do some research and also read this thread. It really seems like it would be wiser to invest in the index funds from Vanguard since the fee would be much less but I'm pretty green to this so I would hate to make an mistake up front. Maybe let them manage for a year or 3 while I get comfortable with the idea of having my money invested?

Any ideas of what else I should look into or quiestions I should ask them before making the decision?

Some numbers will help with perspective on how much of a rip-off it is to pay a 1.5% fee.

After 30 years, $50K compounded annually at 5.0% will have earned $167K in today's dollars.
After 30 years, $50K compounded annually at 3.5% will have earned $90K in today's dollars.

If fact, you can start with $30K compounded at 5.0% and still end up with $10K more than someone starting with $50K and compounding at 3.5%. Which leads me to this amazing business offer for you:

Just pay me $20K and I'll spend 30 minutes setting up a Vanguard account for you that will earn you more in the long run than paying that 1.5% fee. Or, you know, you could spend an extra hour or two of reading and do it yourself for free.

kukubrew · Oct 7, 2017

tokkun said:
Some numbers will help with perspective on how much of a rip-off it is to pay a 1.5% fee.

After 30 years, $50K compounded annually at 5.0% will have earned $167K in today's dollars.
After 30 years, $50K compounded annually at 3.5% will have earned $90K in today's dollars.

If fact, you can start with $30K compounded at 5.0% and still end up with $10K more than someone starting with $50K and compounding at 3.5%. Which leads me to this amazing business offer for you:

Just pay me $20K and I'll spend 30 minutes setting up a Vanguard account for you that will earn you more in the long run than paying that 1.5% fee. Or, you know, you could spend an extra hour or two of reading and do it yourself for free.

Those are all fair points, I'm trying to understand if here is anything in JPM's Managment offering that warrants paying them the fee. With the way you present it their management and care would have to either prevent me from losing 77k over 30 years or manage to earn me 1.5% (or whatever their fee minus Vanguard charge is) in investment return over those index funds. Neither seems likely. Thanks.

GoldenEye 007 · Oct 7, 2017

I also wanted to see if I was on the right track with my options. I'm only 29 and wouldn't plan on retiring until mid 60s or so, so I've dumped all contributions into index funds.

I have a combined primary retirement plan. One part is a pension the employer pays ~11% (after fees) into and the other part is a defined contribution plan. With that, I pay in 10% each month.

The funds and contribution percentages are as follows:

Stock Index Fund - 45%; Expense: .03%
Large Cap Index Fund - 25%; Expense: .05%
Small Cap Index Fund - 25%; Expense: .08%
Non-US Stock Index Fund - 5%; Expense: .10%

Those are the only index fund options that are not target date funds. The other options are "stable value" and US bonds.

For the previously referenced 403b account managed by Vanguard, it is simply supplemental and for now I only throw $50 a month in there. After I get married early next year, I'll likely increase it a bit. Those funds/contributions are as follows:

Vanguard FTSE All-World ex-US Index Fund Admiral - 10%; Expense: .14%
Vanguard Total Stock Market Index Fund Admiral - 45%; Expense: .04%
Vanguard High Dividend Yield Index Fund Investor Shares - 15%; Expense: .15%
Vanguard Emerging Markets Stock Index Fund Admiral - 10%; Expense: .14%
Vanguard Small-Cap Growth Index Fund Admiral - 20%; Expense: .07%

Does this look like a solid setup regarding funds and contribution percentages? Or should I consider moving things around a bit/consolidating. I'm someone who would like to check in occasionally, but would want to park everything and keep as is until there is a good reason to start changing funds. Likely as I get closer to actual retirement.

Walter White Walker · Oct 7, 2017

kukubrew said:
Does anyone let JPM Chase manage their investments? I have 50k that they are offering to manage for 1.1% (I think that's introductory, will be 1.5% in year 2). Other than 401k and HSA I don't have investments so I got some money just sitting in the bank now which is why they approached me. They are proposing 50/50 etf/bond split portfolio with us and International about 50/40 with some municipal bonds covering remaing 10%.

So this spurred me to do some research and also read this thread. It really seems like it would be wiser to invest in the index funds from Vanguard since the fee would be much less but I'm pretty green to this so I would hate to make an mistake up front. Maybe let them manage for a year or 3 while I get comfortable with the idea of having my money invested?

Any ideas of what else I should look into or quiestions I should ask them before making the decision?

Sounds like they're about to bend you over. Personally I don't see any reason to use a financial adviser, even one that is always a Fiduciary. If you must then get one that is always a Fiduciary as they are required to put your interests first. Those that aren't Fiduciaries all the time only have to find something "suitable" which means they can and will screw you over. Also, like I said, always a Fiduciary. Some wear the Fiduciary hat at times and at other times they wear the "suitable" hat and you have no idea when they're wearing which hat. Just be aware that 1% they charge (or the exorbitant 1.5%) adds up to a ton of money over the years.
Also, why in the world are they talking about municipal bonds? If this is a tax advantaged retirement account you never include munis in those. Even in a taxable account those are really more for people who are very high income as not paying taxes on the bonds is worth getting a lower return.
Do what you're comfortable with, but if it were me I'd go to Vanguard and open an IRA (Roth if you can imho, Traditional otherwise). Put the money in VTSMX. Congratulations - you now own a piece of about 7,000 companies around the world at .15% expense.
If you're younger you can leave it at that I think. If you want to have bonds as well get VBMFX which is their total bond index that charges .15%.
That's it - two funds and you're done. How much in each depends on your risk tolerance. If you need help determining that there's any number of calculators online. Here's Vanguard's - https://personal.vanguard.com/us/FundsInvQuestionnaire

btw if you're willing to go to three or four funds you can pay even lower fees. I pay like .03%-.07% due to that.

edit: IRA limits you to a contribution of $5500 a year until age 50, though. You could open a brokerage account for the remainder. Or another thing you could think of doing is maxing out your 401k contribution if you're not already. Any money that you need that is being deducted from your paycheck for the 401k contribution at that point you could take from the savings instead.

Walter White Walker · Oct 7, 2017

kukubrew said:
Those are all fair points, I'm trying to understand if here is anything in JPM's Managment offering that warrants paying them the fee. With the way you present it their management and care would have to either prevent me from losing 77k over 30 years or manage to earn me 1.5% (or whatever their fee minus Vanguard charge is) in investment return over those index funds. Neither seems likely. Thanks.

No, they're not going to do anything that justifies the fee. They, like every other person on this planet, cannot predict the future. They don't have any way of knowing what the markets will do even though they claim they do. They're not going to beat the market when it's going well and they're not going to limit your "losses" when it goes south.

ClosingADoor · Oct 7, 2017

kukubrew said:
Those are all fair points, I'm trying to understand if here is anything in JPM's Managment offering that warrants paying them the fee. With the way you present it their management and care would have to either prevent me from losing 77k over 30 years or manage to earn me 1.5% (or whatever their fee minus Vanguard charge is) in investment return over those index funds. Neither seems likely. Thanks.

You are right, it is highly unlikely they will bring any better returns. Do not pay those fees but just go for a cheap index fund yourself. Those can be had for like 0,10% in fees. 1.5% is throwing money away.

The 50/50 on stock and bonds is also way too conservative I think, unless you are close to retirement.

I have tried to get my parents off one of those plans last year (different bank, but also about 1% in fees) but couldn't. Bank convinced them it was good. Meanwhile, I got better returns in a simple index fund at lower costs then their managed stuff. The portfolio in that fund is also crazy, with a ton of ETFs from Vanguard, Blackrock and others that overlap everywhere. It's ripping you off.

Walter White Walker said:
btw if you're willing to go to three or four funds you can pay even lower fees. I pay like .03%-.07% due to that.

I really hate that prices in Europe are higher when I see what the US pays sometimes. It's not that much of a difference, but still, that 0,1% over time adds up anyway.

Randolph Freelander · Oct 8, 2017

GoldenEye 007 said:
Stock Index Fund - 45%; Expense: .03%
Large Cap Index Fund - 25%; Expense: .05%
Small Cap Index Fund - 25%; Expense: .08%
Non-US Stock Index Fund - 5%; Expense: .10%

------------------

Vanguard FTSE All-World ex-US Index Fund Admiral - 10%; Expense: .14%
Vanguard Total Stock Market Index Fund Admiral - 45%; Expense: .04%
Vanguard High Dividend Yield Index Fund Investor Shares - 15%; Expense: .15%
Vanguard Emerging Markets Stock Index Fund Admiral - 10%; Expense: .14%
Vanguard Small-Cap Growth Index Fund Admiral - 20%; Expense: .07%

For the top, I'd be concerned that you're creating an unnecessary split and overlap by using "Stock Index Fund" and the Large/Small index funds. If I can assume that "Stock Index Fund" is a total domestic stock market fund, then you can eliminate the other two, or maybe keep one of them (still at a lower percentage) if you wanted to tilt slightly towards one or the other. But having both in addition to the total market fund is redundant. You could also stand to increase your international percentage. 20 is usually the low end estimate, and Vanguard goes to 40.

Similar advice on your bottom section. I would frankly consolidate your domestic holdings into the total stock market fund, maybe again keeping a smaller percentage in one of the others if you'd like to tilt. I think you're too heavy on emerging markets. Your combined international is at 20, but the 10 in emerging is too much and should probably go away. It's already in your other international fund, and it accounts for 20% of it, which is the general split. If it's me, I'd say fold that 10% into the main international fund and don't look back.

Canklestank · Oct 10, 2017

Investment GAF, what's your stance on rebalancing every year? That seems to be the general advice on investing sites, but there's nothing in the OP and a lot of people neglect mentioning it with regards to index funds.

GoldenEye 007 · Oct 10, 2017

Randolph Freelander said:
For the top, I'd be concerned that you're creating an unnecessary split and overlap by using "Stock Index Fund" and the Large/Small index funds. If I can assume that "Stock Index Fund" is a total domestic stock market fund, then you can eliminate the other two, or maybe keep one of them (still at a lower percentage) if you wanted to tilt slightly towards one or the other. But having both in addition to the total market fund is redundant. You could also stand to increase your international percentage. 20 is usually the low end estimate, and Vanguard goes to 40.

Similar advice on your bottom section. I would frankly consolidate your domestic holdings into the total stock market fund, maybe again keeping a smaller percentage in one of the others if you'd like to tilt. I think you're too heavy on emerging markets. Your combined international is at 20, but the 10 in emerging is too much and should probably go away. It's already in your other international fund, and it accounts for 20% of it, which is the general split. If it's me, I'd say fold that 10% into the main international fund and don't look back.

Awesome thanks. Yeah I had a feeling but that makes sense.

Looks like I have some rearranging to do!

tokkun · Oct 10, 2017

Canklestank said:
Investment GAF, what's your stance on rebalancing every year? That seems to be the general advice on investing sites, but there's nothing in the OP and a lot of people neglect mentioning it with regards to index funds.

Well, my advice for most investors (which Piecake was kind enough to link in the OP) is to use Target Date funds, provided you have access to ones with reasonable fees. Target Date funds will automatically rebalance for you, and they will do it much more frequently than once a year. It also solves the problem of rebalancing in taxable accounts without worrying about capital gains tax.

Randolph Freelander · Oct 10, 2017

Canklestank said:
Investment GAF, what's your stance on rebalancing every year? That seems to be the general advice on investing sites, but there's nothing in the OP and a lot of people neglect mentioning it with regards to index funds.

To somewhat echo tokkun, rebalance certainly when it fits your risk strategy, not necessarily for chasing returns. A good way to do that is to just be in target funds.

My employer's 401K can do auto-rebalancing to match your desired allocations, and it does it once quarterly, but only if the net change is 3%. If it's something less than that, it won't touch it. (Say you have two funds, allocated 50/50, and it moves to 51/49. No rebalance. If it moves to 52/48, it will.) No need to shift something that hasn't moved all that much, as it might just correct itself in the natural course of time.

That said, I do rebalance at the end of the year, and I do so manually. I use that as an opportunity to decide if I like my allocations (in real terms, I cajole myself into increasing my international exposure, since I'm lower than usual recommendations), rebalance, and then keep my hands off of it.

GoldenEye 007 · Oct 10, 2017

Hm, the defined contribution account offers target dates. Looking at the investment information, it has slightly under performed benchmarks, but has an expense of .06. Is that then just a better option than going into the total stock funds, etc., as I was asking before?

I guess same for Vanguard assuming they have target date accounts?

Randolph Freelander · Oct 10, 2017

GoldenEye 007 said:
Hm, the defined contribution account offers target dates. Looking at the investment information, it has slightly under performed benchmarks, but has an expense of .06. Is that then just a better option than going into the total stock funds, etc., as I was asking before?

I guess same for Vanguard assuming they have target date accounts?

Target dates aren't generally going to perform as well as, say, a portfolio that is 100% stock. In good years. In bad years, it won't perform as badly as stocks, either. The bond component is generally going to lessen gains and losses. Target funds generally won't have less than 10% bonds even if you're 40 years out from retirement. Frankly, I think that's kind of ridiculous. But on the other hand, at some point, you'll want bonds, and target funds help regulate that transition from stocks to bonds gradually over time, without you having to think about it and having the opportunity to mismanage it.

Not all target date funds are created equal, either. Vanguard is good about making it a blend of their index funds, which keeps expenses low. Fidelity offers target date funds that are blend of their indexed and managed funds, which carries higher expenses than desired. Some funds will go higher on international than others. Vanguard maintains a 3:2 ratio of domestic to international on their stock, for example, while Fidelity is closer to a 2:1 split. That ratio is also going to drive subtle performance differences over time.

So anyway. If you have a target date that has low expenses and gives you peace of mind in having less to think about, go with it. If it's expensive and/or there's just something about its allocation that's not to your liking, you can go with other funds in the ratios to your liking. For myself, I favor selecting the funds to my fitting, but I keep my allocations (sans bonds, because I don't want them this far out) roughly in line with what target dates might do other than being more tilted towards domestic. And when I recommend allocations, I do the same, without the tilt to domestic.

GoldenEye 007 · Oct 10, 2017

Ah I see. Yeah I'm at 0% bonds/cash at this point. And the funds I am seeing are generally around 10% bonds/cash, then equal US/International stocks. So I'll keep out of them for now. I don't mind checking in a few times a year, if that, to make manual changes. Much of this movement now is just to set a good foundation then leave alone for the foreseeable future. Years even if at all possible.

tokkun · Oct 10, 2017

Scary times when a 90/10 split is considered ridiculously conservative. Doubly so when CAPE10 is > 30.

anonymous_abc · Oct 11, 2017

PflargBlarg · Oct 12, 2017

FliXFantatier said:
I rebalance once or twice a year when I have a largish lump sum to invest. I only rebalance by buying what I am low on. I do not sell what I am high on. Thereby avoiding capital gains.

This is what I do as well. Of course, eventually the swings will be too much for new deposits to make up the difference but I've seen some stuff saying that rebalancing can actually be detrimental to returns.

Mr.Mike · Oct 12, 2017

Wormdundee said:
This is what I do as well. Of course, eventually the swings will be too much for new deposits to make up the difference but I've seen some stuff saying that rebalancing can actually be detrimental to returns.

The point of re-balancing isn't to improve returns though, it's to maintain an appropriate allocation for whatever reason you chose that allocation to begin with.

ZackieChan · Oct 12, 2017

Just when I was about to exit Schwab to go with Vanguard, Schwab now has an index ETF with super low fee: https://www.schwab.com/public/schwab/nn/Schwab_1000_Index_ETF.html

Should I split between something like this and an international fund? Looking to keep things simple, but would like to go as low on the fees as possible!

Walter White Walker · Oct 12, 2017

ZackieChan said:
Just when I was about to exit Schwab to go with Vanguard, Schwab now has an index ETF with super low fee: https://www.schwab.com/public/schwab/nn/Schwab_1000_Index_ETF.html

Should I split between something like this and an international fund? Looking to keep things simple, but would like to go as low on the fees as possible!

I'd do SCHB instead - more diversity (the entire US stock market except for micro caps) and at a lower expense of .03%. For international developed SCHF (large and mid caps) which is .06% and international developing SCHE which is .13%.
edit: also I haven't looked at this new one yet but I suspect the bid-ask spread might be large given it's a new ETF and so likely not traded all that much. The three I mentioned the bid-ask is always within a penny of the NAV either way from what I've seen since they've been around for awhile and are heavily traded.

GhaleonEB · Oct 12, 2017

Canklestank said:
Investment GAF, what's your stance on rebalancing every year? That seems to be the general advice on investing sites, but there's nothing in the OP and a lot of people neglect mentioning it with regards to index funds.

To add to what has already been said, I wanted to note there's no conflict with the idea of index funds - passive investing - and rebalancing your portfolio. The idea is to maintain an allocation target, which you'll need to do in anything outside of target date funds. I review my allocations each January, and if they are within ~5% of my goals, I'll leave it alone.

In recent years I've actually done my re-balancing by shifting future contributions rather than re-allocating investments. Two years ago I decided I was too heavy in international funds. I didn't rebalance. Rather, I shifted my contributions to 100% domestic. I'm now roughly in line with my goals, so when I evaluate in January I might split my contributions again. (I was paranoid about moving money out ahead of a market swing, so that was my compromise to restore the right mix.)

ZackieChan · Oct 12, 2017

Walter White Walker said:
I'd do SCHB instead - more diversity (the entire US stock market except for micro caps) and at a lower expense of .03%. For international developed SCHF (large and mid caps) which is .06% and international developing SCHE which is .13%.

Awesome, thanks for that. When I do my 401(k) buy in at the beginning of the year, I'll look into these. I auto-invest with my Roth, so that only works with mutual funds, apparently. I guess I could just do it manually every month...

SecretMoblin · Oct 12, 2017

ZackieChan said:
Just when I was about to exit Schwab to go with Vanguard, Schwab now has an index ETF with super low fee: https://www.schwab.com/public/schwab/nn/Schwab_1000_Index_ETF.html

Should I split between something like this and an international fund? Looking to keep things simple, but would like to go as low on the fees as possible!

It's just their version of a Russell 1000 index ETF using their own proprietary indexing method. Ultimately it will track very closely to R1000 ETFs (like Vanguard's VONE) and broad market ETFs (like Vanguard's VTI or Schwab's own SCHB), and somewhat closely to S&P 500 ETFs (like Vanguard's VOO or SPDR's SPY). You can backtest the performance of R1000 ETFs vs. broad market or S&P 500 ones if you want an idea of how small the differences are.

It's a product for people who want a broad market ETF without the very bottom end.

Schwab's other ETFs have low expense ratios:
SCHB (Broad/total market): 0.03%
SCHX (Large cap, follows the Dow Jones large-cap index but hews closely to the S&P 500): 0.03%
SCHF (Foreign, follows the FTSE ex-US index): 0.06%

These are competitive with similar offerings at Fidelity/Vanguard/etc. If you're looking to get away from Schwab, this ETF shouldn't be the thing that would make you reconsider.

tokkun · Oct 12, 2017

ZackieChan said:
Just when I was about to exit Schwab to go with Vanguard, Schwab now has an index ETF with super low fee: https://www.schwab.com/public/schwab/nn/Schwab_1000_Index_ETF.html

Should I split between something like this and an international fund? Looking to keep things simple, but would like to go as low on the fees as possible!

The question is whether you trust Schwab to keep the rates low for the long-run. Expense ratios are generally backward-looking metrics; i.e. they are not promises about what the expenses will be in the future. It is entirely possible for providers to offer low initial fees to act as a loss leader, then raise them later. I wouldn't want to be stuck in the position of having a fund I own raise its fees but be unable to leave due to a large tax liability.

This is why I still see Vanguard as the best provider, even if they are occasionally slightly undercut by Fidelity or others. Their business structure and track record give me greater trust that they will continue to act in my best interest in the future.

It's also worth mentioning that when we get down to a difference of a few basis points in fees the difference in performance starts to become dominated by tracking error instead. In the past I have seen a few cases where Fidelity fees where cheaper than the corresponding Vanguard funds but offered a slightly lower return due to negative tracking error.

ZackieChan · Oct 12, 2017

Okay, okay. I guess I'll still move over to Vanguard!

anonymous_abc · Oct 12, 2017

Husker86 · Oct 12, 2017

FliXFantatier said:
Something I was wondering recently
at Fidelity they have two variants for many ETF's investor class and premium class.
The fees differ significantly x2 but you have to have at least 10k invested to get premium class.

Now lets say in the course of a couple of years I buy investor class and now end up with investments >10$.
Should I sell the investor class and buy the premium class?
I'm just curious what the general rule of thumb is, as I cannot be arsed to actually run the numbers on capital gains tax and long term depreciation.

They automatically convert (if you're referring to mutual funds. I don't think they have 2 ETFs, and min amount wouldn't make sense for ETFs).

longdi · Oct 14, 2017

TBH i am LTTP, i randomly browsed investGAF for ~4 year, and even then ETF was already recommended.

InvestGAF ahead of the curve

It was unit trusts and reits for newbies, today i see more people jumping onto ETFs. If i went in years ago, my retirement fund will have gone up 50%!

I just wonder how does ETF works, i mean they look so good, and with so low TER, how do other types of fund managers compete with ETF for money?

Every house have their own ETF version and tracking similarly, it is down to things like dividend reinvestment, withholding taxes etc.

Are ETFs here to stay? Will we see new variants of ETF? Do i continue investing the late bandwagon, or some smarty will come up with a new hotness?

tokkun · Oct 14, 2017

longdi said:
TBH i am LTTP, i randomly browsed investGAF for ~4 year, and even then ETF was already recommended.

InvestGAF ahead of the curve

It was unit trusts and reits for newbies, today i see more people jumping onto ETFs. If i went in years ago, my retirement fund will have gone up 50%!

ETFs as a financial instrument are not really that big of an innovation. The innovation was passive indexing, and it started in Vanguard mutual funds long before ETFs were invented.

If you look at SPDR, the biggest ETF, it is actually internally structured as a unit trust instead of using a typical ETF structure.

I just wonder how does ETF works, i mean they look so good, and with so low TER,

It's the passive indexing. The fund simply follows the index, so there is no reason to pay huge salaries to fund managers, researchers, etc. to help pick the stocks. And if the fund is cap-weighted, the only time you need to sell the internal assets is when a company exits the index or when you have a net outflow of capital from fund investors. This keeps trading costs and tax liability very low.

There are some facets of the ETF structure that help lower expenses a small amount, but they are much less significant than the passive indexing strategy.

how do other types of fund managers compete with ETF for money?

-Marketing
-Ignorance
-Kickbacks to companies for 401K programs that don't give their employees better options.
-People who see a fund that has outperformed the market for the last few years and think it was due to skill rather than luck.

Are ETFs here to stay? Will we see new variants of ETF? Do i continue investing the late bandwagon, or some smarty will come up with a new hotness?

Maybe, but it doesn't really matter that much. If you can already get an ETF today with an ER of less than 10 basis points, there is not much room for improvement.

Widdle Puppy · Oct 15, 2017

Should I focus on my roth ira? I have the ability to max it every year. If I can save more than 5k a year should the rest just go into general index funds?

longdi · Oct 19, 2017

Thanks for the details tokkun. I am thinking how sound are passive etfs in times of crash. The current run seems to make etf looks real stable. Do we have results of etfs during the bad times?

There is a fear of doing DCA at the tail end of this run.
I guesw i should cut back on my monthly amounts for now?

Randolph Freelander · Oct 19, 2017

Widdle Puppy said:
Should I focus on my roth ira? I have the ability to max it every year. If I can save more than 5k a year should the rest just go into general index funds?

What's your employer plan situation? Are you participating and securing the full match? Do that, do Roth, and then do outside investing after your tax-advantaged accounts are maxed.

tokkun · Oct 19, 2017

longdi said:
Thanks for the details tokkun. I am thinking how sound are passive etfs in times of crash. The current run seems to make etf looks real stable. Do we have results of etfs during the bad times?

Warren Buffett's famous bet against the hedge fund industry may serve as an instructive example, since it includes the 2008 market crash:
http://www.investopedia.com/article...etts-bet-hedge-funds-year-eight-brka-brkb.asp

In brief, the hedge funds did better in the year of the crash, but the index fund did better every other year, and therefore did better overall (a lot better, almost 4X the return).

The lesson I take away from this is to just stick with indices. Big crashes are rare, and it is hard to predict when they will occur, so you are better off just sticking with the thing that gives you a better return in normal year. You may do worse with an index than a hedge fund during a crash, but in aggregate you will do better.

There is a fear of doing DCA at the tail end of this run.
I guesw i should cut back on my monthly amounts for now?

People have been saying that we are at the tail end of the run for several years now. Eventually they will be right, but the ones who pulled out early will have missed out on a lot of gains in those years. The question you should ask in these cases is "what if I'm wrong?"

Personally, I thought the market would tank for sure if Trump were elected. And since being elected, he has been even for erratic that I expected. Yet the market is up a lot since the election. Thankfully, I left my money invested and continued making new investments, despite my doubts. However, it's helped to reinforce my humility about my ability to time the market.

Randolph Freelander · Oct 19, 2017

https://www.google.com/amp/s/amp.cn.../401k-ira-contribution-limits-2018/index.html

The personal contribution limit on the 401k is going up to 18,500 in 2018 (+6000 for those above 50). The IRA limit remains unchanged, at 5,500 (+1000).

longdi · Oct 20, 2017

Should we have an exit strategy for passive etf? Probably being asked b4.

Say i have 100 unrealised profit now, then shit seems to start, do i set an exit point like say 75? Or do i continue to add positions on the downtrend?

Will like to know if there's some formula to obtain that '75' exit figure.

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