The "Investors Manifesto" and a few questions

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sonowwhat?
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Joined: Sat Jan 02, 2010 10:39 am

The "Investors Manifesto" and a few questions

Post by sonowwhat? »

I am currently reading the Investors Manifesto (new book by William Bernstein in preparation for joining the passive low expense world of investing (i.e. I fired my broker). It is a great introduction to this approach but in putting together my portfolio I have a few questions I hope some of you could answer:

1) In terms of stock/bond allocation percentages Bernstein noted that the most common rule of thumb is that a bond allocation would be the same as an investors age. One would then adjust this up or down from 0% to 20% depending on ones risk tolerance. He also talks elsewhere about how a retired person has "no human capital left" and thus cannot buy more equities when stock prices fall. My question is when one retires early, should the early age and lack of human capital effect ones equity/bond allocation and if so how and why?

2) If the majority of your investments are in taxable accounts and you are early retired therefore no other current income, at what size would your portfolio need to be such that you would shift some or all of bonds toward tax free instruments (e.g. municipals)? How do you figure how much? Is there a guideline?

3) He really stresses that Vanguard is the way to go but if you stay away from the "marketed" high cost funds of Fidelity you could do OK there. Well I transferred everything to Fidelity in the last few months from UBS and would like to make it work there if I can. My question is if there is a way to cross reference funds between Fidelity and Vanguard? Also, does it costs me more to buy Vanguard funds through a Fidelity account. If I buy enough, do they waive purchase fees There just seems like so much information about Vanguard on this forum that I wonder if I am going to be at an information or fund availability disadvantage.

Any help on any one of the above questions would be greatly appreciated.
DaveS
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Post by DaveS »

1) Fidelity is OK as long as you stick to the lower cost Spartan products.
2) The point where you start putting money in municipal bonds is when your tax free is full of bonds but you still don't have enough bonds to keep up to your allocation amount. I don't have the slightest idea what Fidelity offers for munis. If you want a low cost ETF look at TFI,
3) Generally everyone on this board think Bernstein knows what he is doing. So do what he says. Dave
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daniel
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Post by daniel »

I am using Fidelity brokerage and it surely ok with great service -- just don't buy their funds [:)]

The Spartan funds are ok but have high minimum requirements.
I am personally only buying ETF's which allows you to buy Vanguard, iShares, and StateStreets' indexed ETFs in all forms and shapes.
livesoft
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Post by livesoft »

DaveS wrote:2) The point where you start putting money in municipal bonds is when your tax free is full of bonds but you still don't have enough bonds to keep up to your allocation amount. I don't have the slightest idea what Fidelity offers for munis. If you want a low cost ETF look at TFI,
Munis do not offer any advantages over taxable bonds for folks in a low tax bracket. One must compare what you get to keep after taxes are paid.

My MIL hated to pay taxes and was in the 0% tax bracket. She had tax-exempt bonds even though non-tax-exempt bonds would have given her a few thousand dollars more spending money each year.
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DaleMaley
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Post by DaleMaley »

livesoft wrote:
DaveS wrote:2) The point where you start putting money in municipal bonds is when your tax free is full of bonds but you still don't have enough bonds to keep up to your allocation amount. I don't have the slightest idea what Fidelity offers for munis. If you want a low cost ETF look at TFI,
Munis do not offer any advantages over taxable bonds for folks in a low tax bracket. One must compare what you get to keep after taxes are paid.
If you use TurboTax, it has a very nice what-if feature built into it. You can project your retirement income ......then determine if a tax free municipal bond fund is worth it or not......compared to a taxable bond fund.

To find the what-if in TurboTax, go to forms, and then to the what-if worksheet. In the 2009 version of TurboTax, I had to add this form to the View icon list, but it does still exist in the 2009 version.
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett
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