Which portfolio is right for us?

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Topic Author
ZOOM678
Posts: 23
Joined: Thu Jan 26, 2023 2:46 pm

Which portfolio is right for us?

Post by ZOOM678 »

My wife and I are in early to mid 60’s, both retired, both on S.S. and a pension.
We have no debt. We have the usual bills like power, fuel, insurance, property taxes, etc.

I have a 401k thru work at Fidelity that we don’t touch and would be happy if it never was touched.

We have 5 accounts at Edward Jones, Roth for me, Roth for her, Individual Select, Individual Advisor and Joint WROS Select. We want to leave Edward Jones and move these accounts to Charles Schwab, Fidelity or Vanguard, depending on which of the 3 would be best for us.

Once the EJ accounts are transferred to the new company, we would be happy if we never needed to touch the money in these accounts, but, no doubt sometime in the future we might want a new car or have a medical bill or if inflation stays high, years in the future we could start using it to supplement our monthly income. If this money never needed to be touched it would be fine with us.

Currently the money at Edward Jones is invested in 35 different bonds, mutual funds etc and many individual stocks. Our percentage of stocks average between 55% to 62% and even after these past 2 years of volatility the vast majority of our profits are from the individual stocks.

After seeing how poorly the bonds (that were supposed to give security) have done these past 12 years and especially the past 3 years, I really don’t feel comfortable in having 62 to 65 percent of my money in bonds.

1) What type of portfolio do you recommend, 3 fund, 4 fund, lazy, dated or ?

2) Should we have all accounts (Roth and taxable) all set up the same way, ie same percentages of stocks, bonds etc or should we have stocks in Roth and bonds in taxable accounts?

3) will a certain company (Charles Schwab, Vanguard or Fidelity) be better for our needs than another?

Thank you for your time and consideration
Ken
Last edited by ZOOM678 on Fri Jan 27, 2023 9:14 am, edited 1 time in total.
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retired@50
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Re: Which portfolio is right for us?

Post by retired@50 »

ZOOM678 wrote: Thu Jan 26, 2023 11:06 pm
1) What type of portfolio do you recommend, 3 fund, 4 fund, lazy, dated or ?

2) Should we have all accounts (Roth and taxable) all set up the same way, ie same percentages of stocks, bonds etc or should we have stocks in Roth and bonds in taxable accounts?
Q1. See the wiki on the Three fund portfolio. It's an excellent start, and unless you have something out of the ordinary going on, it might be enough to suit your needs.

Q2. Setting up all accounts the same way is rarely the most tax efficient way to handle a portfolio. Consider all accounts as one large portfolio, then use the guidelines in the tax efficient fund placement wiki page to help you locate your assets correctly.

Regards.
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
ZOOM678
Posts: 23
Joined: Thu Jan 26, 2023 2:46 pm

Re: Which portfolio is right for us?

Post by ZOOM678 »

retired@50 wrote: Thu Jan 26, 2023 11:22 pm
ZOOM678 wrote: Thu Jan 26, 2023 11:06 pm
1) What type of portfolio do you recommend, 3 fund, 4 fund, lazy, dated or ?

2) Should we have all accounts (Roth and taxable) all set up the same way, ie same percentages of stocks, bonds etc or should we have stocks in Roth and bonds in taxable accounts?
Q1. See the wiki on the Three fund portfolio. It's an excellent start, and unless you have something out of the ordinary going on, it might be enough to suit your needs.

Q2. Setting up all accounts the same way is rarely the most tax efficient way to handle a portfolio. Consider all accounts as one large portfolio, then use the guidelines in the tax efficient fund placement wiki page to help you locate your assets correctly.

Regards.
Thank you for your help.

Considering all accounts as one large portfolio always made more sense to me, but it didn’t make sense or maybe as much money for my advisor and he always talked me out of doing it.

I eventually got tired of EJ insisting that each account should be handled as its own entity. One day I called and told him to sell every bond, mutual fund, etc in my Roth that was in the red and started buying quality stocks. I had to start signing papers because EJ didn’t agree, but my Roth started earning money.

Thanks again
Ken
southernlucky
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Re: Which portfolio is right for us?

Post by southernlucky »

There is nothing terribly wrong with a mirrored AA in all accounts as long as the chosen AA meets your risk tolerance and time frame. Plus it can make things easier for the other spouse if they are less interested in monitoring the portfolio and rebalancing but need to take on that responsibility later.

For me I use a single, low cost balanced fund for each account that matches my desired AA and I sleep like a baby knowing I never have to touch my portfolio nor see the underlying gyrations of the individual assets. Set it and forget it is bliss.

In your situation it sounds like your AA was not aligned with your risk tolerance. The performance of any one asset class in one year is meaningless in the long term (and you will hopefully have many more decades remaining). Even if you switch to a more traditional 3-fund managed across the portfolio vs per account you could still encounter regret and sleepless nights in the future if losses are larger than you can handle. I recommend you spend more time thinking on your desired AA so that you can pick one so you can rest easy regardless of what happens in the future. Then you can decide how best to implement it that works for you and your spouse. The 3-fund vs balanced fund vs something else is just the vehicle you use to drive the road you pick. Good luck!
"Rely heavily on index funds, and begin with the idea of a 50/50 bond/stock ratio, adjusting the ratio in accordance with your own financial profile"--J Bogle commentary on Pillar 2 of 12
Topic Author
ZOOM678
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Joined: Thu Jan 26, 2023 2:46 pm

Re: Which portfolio is right for us?

Post by ZOOM678 »

southernlucky wrote: Fri Jan 27, 2023 7:23 am There is nothing terribly wrong with a mirrored AA in all accounts as long as the chosen AA meets your risk tolerance and time frame. Plus it can make things easier for the other spouse if they are less interested in monitoring the portfolio and rebalancing but need to take on that responsibility later.

For me I use a single, low cost balanced fund for each account that matches my desired AA and I sleep like a baby knowing I never have to touch my portfolio nor see the underlying gyrations of the individual assets. Set it and forget it is bliss.

In your situation it sounds like your AA was not aligned with your risk tolerance. The performance of any one asset class in one year is meaningless in the long term (and you will hopefully have many more decades remaining). Even if you switch to a more traditional 3-fund managed across the portfolio vs per account you could still encounter regret and sleepless nights in the future if losses are larger than you can handle. I recommend you spend more time thinking on your desired AA so that you can pick one so you can rest easy regardless of what happens in the future. Then you can decide how best to implement it that works for you and your spouse. The 3-fund vs balanced fund vs something else is just the vehicle you use to drive the road you pick. Good luck!
Thank you for your input.

Through the past 8+years I have been very comfortable with my stock to bond ratio being 55 -62% stocks and bonds being 45-38%, even during the past 2-3 year roller coaster. To be honest, and this may be due to a poor choice of Bonds my Advisor picked, that have been in the red for most of these past 12 years and when the bad things we have seen these past couple years happened, these Bonds lost even more value, I dread the thought of going to 50% Bonds and cannot see how I could ever keep up with inflation should I go with the recommended 62-65% bonds.

Using William Bernstein's model and considering that I have been buying stocks while others are selling, William would consider me "high risk tolerance". Case in point, against my Advisor's recommendation, I sold an annuity that was going nowhere in late spring (Covid) of 2020 and put it all in stocks that made 37%-38% profit in 7 months time. During my end of year meeting with my Advisor, he was very proud of the mid 20% increase in our portfolio for the year, but changed the subject when I asked what the portfolio would have been had I taken his advise and kept the annuity.

I have bought more and more stocks as everyone is selling and I haven't lost any sleep over my investments, even with what we have seen the past couple years.

Of course things can change, but, so far we haven't had to depend on the 401k I have from the employer I retired from when I was 55 or the investments I have at Edward Jones and I am still hoping that we will never need to touch these investments.
When I am asked how much money I will need to take from our investments and when I will need to start using the money, I cannot give an answer.
At this time, my 401k and the Edward Jones accounts could probably be considered Emergency Accounts.

My desire is to at least keep up with inflation, but would greatly prefer beating inflation.

Considering my "High Risk Tolerance", is it conceivable to beat inflation if I had Bonds in the 62%-65% range?

Thank you again for your information and advice.
Ken
P.S. I ordered The Bogleheads guide to investing and should have it sometime tomorrow.
Last edited by ZOOM678 on Sat Jan 28, 2023 8:49 am, edited 1 time in total.
southernlucky
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Re: Which portfolio is right for us?

Post by southernlucky »

All bond funds got hurt in 2022 due to rising rates that decreased prices. Cash was the only safe haven. The good news is bond fund yields going forward are much higher so it will hopefully all work out in the long run. No one really knows. But I do know that for as bad as bonds were last year stocks could be many times worse having gone thru the dot com bust and GFC with nearly back to back 50% stock declines and over a decade of being underwater. You need to pick an AA that you can live with no matter what. To me it is not a math problem to find the optimal solution but more of a behavioral problem seeking a good enough solution that can balance greed and fear and stay the course. This is why it is called personal finance. Each person has to find their own solution for themselves. For example, check out my signature below. My portfolio is admittedly sub-optimal and not tax efficient but I sleep like a baby and do not care. It is simple, low cost, well diversified, totally hands off, and good enough to accomplish my goals.

I would suggest play around with online calculators to see how various AA portfolios have performed in the past. I like engaging-data.com and wealthmeta.com portfolio allocation and retirement withdrawal calculators for history since 1928 and portfoliovisualizer.com for most asset classes since 1972 and specific funds since 1985. Take a look at how minimum and median portfolio balances change with higher and lower stock % and max drawdowns and rolling returns. You can also see real vs nominal returns. Generally AAs between 30% to 70% stocks and balance in intermediate term bonds in retirement have performed well and kept up with inflation for long periods (30+ yrs) with reasonable initial withdrawal rates (3-4%) and then that $ amount adjusted for inflation thereafter. It’s the edges of extreme AAs and/or higher initial withdrawal rates that can do worse. Reading the Bogleheads book is a good idea too. I would also recommend you check out this site’s wiki and forum posts on Risk Tolerance, Asset Allocation, and Safe Withdrawal Rates too. There is a wealth of free information available.

If you are about 60/40 then you should expect 30% portfolio declines from time to time. They are not unusual and the cause of the decline being bad years in stocks or bonds does not really matter. Your AA is the roller coaster you are choosing to ride forever. If a 30% portfolio decline is too much to stomach it is totally fine to get off the ride and pick a less scary roller coaster going forward. But, you don’t want to keep changing rides often. Do your homework, talk with your spouse, reflect on how you felt last year and at other dire times and then make your new informed AA choice.

Best wishes!
Last edited by southernlucky on Sat Jan 28, 2023 10:42 am, edited 1 time in total.
"Rely heavily on index funds, and begin with the idea of a 50/50 bond/stock ratio, adjusting the ratio in accordance with your own financial profile"--J Bogle commentary on Pillar 2 of 12
Prudence
Posts: 909
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Re: Which portfolio is right for us?

Post by Prudence »

1. Three fund.
2. Bonds/fixed in tax advantaged. Stocks in taxable.
3. Fidelity.
4. Based on your risk tolerance, 60/40 allocation.
Topic Author
ZOOM678
Posts: 23
Joined: Thu Jan 26, 2023 2:46 pm

Re: Which portfolio is right for us?

Post by ZOOM678 »

southernlucky wrote: Sat Jan 28, 2023 8:26 am All bond funds got hurt in 2022 due to rising rates that decreased prices. Cash was the only safe haven. The good news is bond fund yields going forward are much higher so it will hopefully all work out in the long run. No one really knows. But I do know that for as bad as bonds were last year stocks could be many times worse having gone thru the dot com bust and GFC with nearly back to back 50% stock declines and over a decade of being underwater. You need to pick an AA that you can live with no matter what. To me it is not a math problem to find the optimal solution but more of a behavioral problem seeking a good enough solution that can balance greed and fear. This is why it is called personal finance. Each person has to find their own solution for themselves. For example, check out my signature below. My portfolio is admittedly sub-optimal and not tax efficient but I sleep like a baby and do not care. It is simple, low cost, well diversified, totally hands off, and good enough to accomplish my goals.

I would suggest play around with online calculators to see how various AA portfolios have performed in the past. I like wealthmeta.com portfolio allocation and retirement withdrawal calculators for history since 1928 and portfoliovisualizer.com for most asset classes since 1972 and specific funds since 1985. Take a look at how minimum and median portfolio balances change with higher and lower stock % and max drawdowns and rolling returns. You can also see real vs nominal returns. Generally AAs between 30% to 70% stocks and balance in intermediate term bonds in retirement have performed well and kept up with inflation for long periods (30+ yrs) with reasonable initial withdrawal rates (3-4%) and then that $ amount adjusted for inflation thereafter. It’s the edges of extreme AAs that can do worse. Reading the Bogleheads book is a good idea too. I would also recommend you check out this site’s wiki and forum posts on Risk Tolerance, Asset Allocation, and Safe Withdrawal Rates too. There is a wealth of free information available.

If you are about 60/40 then you should expect 30% portfolio declines from time to time. They are not unusual and the cause of the decline being bad years in stocks or bonds does not really matter. Your AA is the roller coaster you are choosing to ride forever. If a 30% portfolio decline is too much to stomach it is totally fine to get off the ride and pick a less scary roller coaster going forward. But, you don’t want to keep changing rides often. Do your homework, talk with your spouse, reflect on how you felt last year and at other dire times and then make your new informed AA choice.

Best wishes!
Very good information here.
Thank you.

Your information at the top about bonds really hits home.
12 years ago when interest rates were near 0% and I was investing a large chunk of money at Edward Jones, the advisor was insisting that I get 50%-60% bonds. I kept telling him that interest rates were near 0% and there was much more chance of interest rates going up, which would hurt all of the bonds he wanted me to buy. He kept telling me I needed it for security if the market dropped. 10 years later the market dropped and the bonds dropped and the stock dropped and today, with very few exceptions, the only investments I have that are in the green are the stocks.
The stocks of course have lost value, especially the techs, but on the other hand, they made me so much money in 12 years they are still in the green and the bonds are deeper in the red than they wer 2 years after buying them.

12 years ago when interest rates were near 0%, had I gone 10% bonds 90% stocks today there would be a whole lot more money and 2 years ago would have been a perfect time to start selling some of the stocks and to start buying bonds to get the ratio closer 50%-60% bonds where they could be earning money.

Today is an entirely different investment picture when compared to 12 years ago and it makes perfect sense to buy a much more balanced stock to bond ratio, which, when I leave Edward Jones I will be doing and without all of the high fees and this time I want to focus more on a tax friendly portfolio.

I have been reading the wiki and there is a whole lot of great information in there, but my head does start to spin with the acronyms and financial terms, so I have to take it in chunks, I’m a Machinist not a financial wizard :P

It is ironic that now when I am planning to leave Edward Jones, yesterday I received a card and letter from my advisor saying that he has just received his CERTIFIED FINANCIAL PLANNER certificate.
I am happy for him, but, unfortunately all of the Edward Jones fees will still be there.

QUESTION
If I leave my current advisor in the next week or two and change to a recommended (for my age) 60+% bonds-40-% stocks, is it possible or likely to keep up with or exceed the rate of inflation ?

For me, it makes no sense to invest in a way that due to inflation, even if my portfolio value goes up, my buying power goes down.

Thanks again for your help and information
Ken
dbr
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Re: Which portfolio is right for us?

Post by dbr »

ZOOM678 wrote: Fri Jan 27, 2023 3:30 pm
Through the past 8+years I have been very comfortable with my stock to bond ratio being 55 -62% stocks and bonds being 45-38%, even during the past 2-3 year roller coaster. To be honest, and this may be due to a poor choice of Bonds my Advisor picked, that have been in the red for most of these past 12 years and when the bad things we have seen these past couple years happened, these Bonds lost even more value, I dread the thought of going to 50% Bonds and cannot see how I could ever keep up with inflation should I go with the recommended 62-65% bonds.

From 2010 to today a total bond index fund returned +2% annually and an intermediate TIPS fund almost 3% annually. That includes the large negative returns in 2022. It simply makes no sense that a person can be at a net loss in bonds.

Is it possible you are confusing bond prices with returns by not counting the dividends that were paid to you? But even then the share price of something like a total bond fund averaged around constant until a large drop in 2022.

The current real yield on TIPS across durations is about +1.5%, so the direction of the trend would be that bonds invested in TIPS would keep up with inflation with the superimposed volatility of interest rate risk. A long term TIPS ladder bought today and the rungs liquidated over time would exceed inflation. That is an example to prove the observation and not suggestion you have to run out and buy such a ladder. It is true that a year and more ago real yields were negative and a ladder bought then would not keep up with inflation completely. This is why increased interest rates even depressing bond prices for now are a good thing.
Topic Author
ZOOM678
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Re: Which portfolio is right for us?

Post by ZOOM678 »

Prudence wrote: Sat Jan 28, 2023 9:00 am 1. Three fund.
2. Bonds/fixed in tax advantaged. Stocks in taxable.
3. Fidelity.
4. Based on your risk tolerance, 60/40 allocation.
Thank you for your help.

Question about 2
Tax Strategies are new to me, other than general put money in 401k and Roth I really haven’t given much thought to tax advantaged/taxable until very recently. I wish I would have paid more attention decades ago.

As I’ve mentioned I will be leaving Edward Jones that has 2 Roth accounts and 3 taxable accounts. When I get to my next Brokerage I will have 2 Roth and 1 Taxable account.

I should put Bonds/fixed in the 2 Roth accounts and stocks in the 1 taxable account?

Would you please give me the reasoning behind this? As I’ve said, I really know almost nothing about tax strategies and I really want to know more. I was thinking that it would be opposite, because nearly all of the money I have made in the last 12 years came from individual stocks, whereas when I transfer my accounts to the new brokerage, all of my bonds and nearly every mutual fund etc at this time is in the red.

Question about 3
What do you like most about Fidelity?

Question about 4
60/40 is the 60% stocks or bonds?

Thank you again for your information
Ken
southernlucky
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Re: Which portfolio is right for us?

Post by southernlucky »

OP,
To your question will 40/60 stock/bond portfolio keep up with inflation? Nobody knows for certain. Everyone’s crystal ball is cloudy. Like I suggested go to this website and look at various decades and stressful time periods and see how 40/60 and other adjacent AAs have faired in the past. History may not repeat but it can rhyme. Having said all that I think the odds are in your favor but there have been periods where every AA has fallen short of inflation for 10 years or more (i.e., 1966-1981). If staying above inflation is your primary goal then perhaps consider a healthy allocation to TIPS as suggested above.

https://www.wealthmeta.com/calculator/p ... calculator
Last edited by southernlucky on Sat Jan 28, 2023 10:25 am, edited 2 times in total.
"Rely heavily on index funds, and begin with the idea of a 50/50 bond/stock ratio, adjusting the ratio in accordance with your own financial profile"--J Bogle commentary on Pillar 2 of 12
dbr
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Re: Which portfolio is right for us?

Post by dbr »

southernlucky wrote: Sat Jan 28, 2023 10:18 am Will 40/60 stock/bond portfolio keep up with inflation? Nobody knows for certain. Everyone’s crystal ball is cloudy. Like I suggested go to this website and look at various decades and stressful time periods and see how 40/60 and other adjacent AAs have faired. I think the odds are in your favor but there have been periods where every AA has fallen short of inflation for 10 years or more (i.e., 1966-1981). If staying above inflation is your primary goal then perhaps consider a healthy allocation to TIPS as suggested above.

https://www.wealthmeta.com/calculator/p ... calculator
Yes, it is possible that inflation can undermine a person's retirement and there is nothing one can do about it except to realize that you can be retired during a bad time to be retired and you just can't spend as much money or end up as wealthy as you would if you are born, work, retire, and die during better periods of time to do those things. There are no promises.
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WoodSpinner
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Re: Which portfolio is right for us?

Post by WoodSpinner »

ZOOM678 wrote: Sat Jan 28, 2023 10:14 am
Prudence wrote: Sat Jan 28, 2023 9:00 am 1. Three fund.
2. Bonds/fixed in tax advantaged. Stocks in taxable.
3. Fidelity.
4. Based on your risk tolerance, 60/40 allocation.
Thank you for your help.

Question about 2
Tax Strategies are new to me, other than general put money in 401k and Roth I really haven’t given much thought to tax advantaged/taxable until very recently. I wish I would have paid more attention decades ago.

As I’ve mentioned I will be leaving Edward Jones that has 2 Roth accounts and 3 taxable accounts. When I get to my next Brokerage I will have 2 Roth and 1 Taxable account.

I should put Bonds/fixed in the 2 Roth accounts and stocks in the 1 taxable account?

Would you please give me the reasoning behind this? As I’ve said, I really know almost nothing about tax strategies and I really want to know more. I was thinking that it would be opposite, because nearly all of the money I have made in the last 12 years came from individual stocks, whereas when I transfer my accounts to the new brokerage, all of my bonds and nearly every mutual fund etc at this time is in the red.

Question about 3
What do you like most about Fidelity?

Question about 4
60/40 is the 60% stocks or bonds?

Thank you again for your information
Ken
Have you read the Wiki on Tax Efficient Asset Location? If not, it will be of tremendous help…
https://www.bogleheads.org/wiki/Tax-eff ... _placement

In general, I would put:

Bonds in a Traditional IRA (if available) and then in Taxable (use Munis if your tax rate is high)
Stocks in Roth.

I am a happy Fidelity customer and found their Web Interface and Customer Service to be excellent. You can find more details in our WIKi:
https://www.bogleheads.org/wiki/Fidelity:_one_stop_shop

Typically when we say 60/40 we mean 60% Stocks, 40% Bonds. That said, I would encourage you to do some homework here and find an AA that you can implement in Good Times and Bad! The plain truth is, your behavior is a much more important factor than the AA — so pick one you can believe in.

As a suggestion, start writing your decisions down — along with your reasoning and build out an Investment Policy Statement, see WIKI:
https://www.bogleheads.org/wiki/Investm ... _statement

Another suggestion is to take a look at your retirement plans and put together a Retirement Policy Statement to document your decisions and how your Retirement should work, see WIKI:
https://www.bogleheads.org/wiki/Retirem ... _statement

Hope some of this helps ….

WoodSpinner
WoodSpinner
backpacker61
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Re: Which portfolio is right for us?

Post by backpacker61 »

ZOOM678 wrote: Sat Jan 28, 2023 10:14 am Question about 2
Tax Strategies are new to me, other than general put money in 401k and Roth I really haven’t given much thought to tax advantaged/taxable until very recently. I wish I would have paid more attention decades ago.

As I’ve mentioned I will be leaving Edward Jones that has 2 Roth accounts and 3 taxable accounts. When I get to my next Brokerage I will have 2 Roth and 1 Taxable account.

I should put Bonds/fixed in the 2 Roth accounts and stocks in the 1 taxable account?
It was suggested up-thread, but bears repeating. Spend a little time reading the wiki about 'Tax-efficient fund placement'.
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Interest on taxable bonds are taxed at your marginal rate, so it's advantageous to hold them behind a tax advantaged "wall". Most would begin with filling the tax-deferred account with tax inefficient investments (like taxable bonds). For you, this would suggest putting your taxable bonds into the Fidelity 401(K). Put the assets with highest expected growth (equities) into your Roth accounts.
ZOOM678 wrote: Sat Jan 28, 2023 10:14 am Question about 3
What do you like most about Fidelity?
Fidelity is fine as a "one stop shop". Your 401(K) is already there; no reason to move it. You could also do very well at Vanguard or Schwab. If you have a local office for either Fidelity or Schwab, that could tip the balance. I have a slight preference for Vanguard (I prefer their municipal bond fund choices over those at Fidelity or Schwab). If you have heirs that have an account at any of the three, that could steer you toward that one, too (my heir has a Vanguard account, and I gift them some cash yearly up to the gift tax limit, which is very easy if both accounts are at Vanguard). As you get older, who would most likely help you with your finances, and where do they have a brokerage account?

With Fidelity, you may have to be firm with their representatives that you want to hold very low cost index fund choices, as Fidelity (and Schwab, to some extent) do have a minefield of some higher cost funds and managed accounts that they try to steer clients toward (though not nearly as bad as Edward Jones).

Nothing at Vanguard is high in cost, so I consider it "safer" from that perspective.

But you'll derive 99% of the benefit here simply getting away from Edward Jones with their poor advice and AUM fees, and you can have investment success at any of the three mentioned low cost brokerages.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
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ruralavalon
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Re: Which portfolio is right for us?

Post by ruralavalon »

ZOOM678 wrote: Thu Jan 26, 2023 11:06 pm My wife and I are in early to mid 60’s, both retired, both on S.S. and a pension.
We have no debt. We have the usual bills like power, fuel, insurance, property taxes, etc.

I have a 401k thru work at Fidelity that we don’t touch and would be happy if it never was touched.

We have 5 accounts at Edward Jones, Roth for me, Roth for her, Individual Select, Individual Advisor and Joint WROS Select. We want to leave Edward Jones and move these accounts to Charles Schwab, Fidelity or Vanguard, depending on which of the 3 would be best for us.

Once the EJ accounts are transferred to the new company, we would be happy if we never needed to touch the money in these accounts, but, no doubt sometime in the future we might want a new car or have a medical bill or if inflation stays high, years in the future we could start using it to supplement our monthly income. If this money never needed to be touched it would be fine with us.

Currently the money at Edward Jones is invested in 35 different bonds, mutual funds etc and many individual stocks. Our percentage of stocks average between 55% to 62% and even after these past 2 years of volatility the vast majority of our profits are from the individual stocks.

After seeing how poorly the bonds (that were supposed to give security) have done these past 12 years and especially the past 3 years, I really don’t feel comfortable in having 62 to 65 percent of my money in bonds.

1) What type of portfolio do you recommend, 3 fund, 4 fund, lazy, dated or ?

2) Should we have all accounts (Roth and taxable) all set up the same way, ie same percentages of stocks, bonds etc or should we have stocks in Roth and bonds in taxable accounts?

3) will a certain company (Charles Schwab, Vanguard or Fidelity) be better for our needs than another?

Thank you for your time and consideration
Ken
1) Any of the Lazy portfolios will do in my opinion. For simplicity I prefer a three-fund portfolio, or a one-fund portfolio using a good balanced fund.

2) No. It's usually better to have bonds in a tax-advantaged account, preferably traditional tax-deferred accounts like a traditional IRA or traditional 401k account. In a taxable brokerage account stick to very tax-efficient stock index funds. Stock index funds are suitable for any type of account.

Wiki article Tax-efficient fund placement.

3) My personal preference is Vanguard for the very large array of low cost funds and ETFs to use including 1,800 ETFs of other companies, their very good money market funds link, and their low cost Personal Advisor Services.

Both Fidelity and Schwab have local customer service offices in some cities. Does either have a customer service office near you?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Prudence
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Re: Which portfolio is right for us?

Post by Prudence »

ZOOM678 wrote: Sat Jan 28, 2023 10:14 am
Prudence wrote: Sat Jan 28, 2023 9:00 am 1. Three fund.
2. Bonds/fixed in tax advantaged. Stocks in taxable.
3. Fidelity.
4. Based on your risk tolerance, 60/40 allocation.
Thank you for your help.

Question about 2
Tax Strategies are new to me, other than general put money in 401k and Roth I really haven’t given much thought to tax advantaged/taxable until very recently. I wish I would have paid more attention decades ago.

As I’ve mentioned I will be leaving Edward Jones that has 2 Roth accounts and 3 taxable accounts. When I get to my next Brokerage I will have 2 Roth and 1 Taxable account.

I should put Bonds/fixed in the 2 Roth accounts and stocks in the 1 taxable account?

Would you please give me the reasoning behind this? As I’ve said, I really know almost nothing about tax strategies and I really want to know more. I was thinking that it would be opposite, because nearly all of the money I have made in the last 12 years came from individual stocks, whereas when I transfer my accounts to the new brokerage, all of my bonds and nearly every mutual fund etc at this time is in the red.

Question about 3
What do you like most about Fidelity?

Question about 4
60/40 is the 60% stocks or bonds?

Thank you again for your information
Ken
I had Fidelity for many years while working due to 401K. It worked fine and the web site and customer service were very good. I opened a Vanguard account many years ago for my personal use. I subsequently moved all of my brokerage business to Vanguard. The mutual funds and etfs are fine. The web site and customer service are average. Recently, Fidelity and Schwab opened local offices near our residence, and I plan to transfer our Vanguard accounts to one of them in the next year. If you will rarely use the web site or the customer service going forward, then Vanguard should be fine. Whatever, I would encourage you to consolidate all of your accounts into as few as necessary, consistent with efficient tax strategy. I have done a lot of consolidating over the last few years, and it saves me a lot of time that I can use at the golf course or gym.
pkcrafter
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Re: Which portfolio is right for us?

Post by pkcrafter »

ZOOM, 60/40 means 60% stock (the first number is always stock). Here is some performance information on a 60/40 portfolio--

http://www.lazyportfolioetf.com/allocat ... nds-40-60/

Roth advantages

https://www.nerdwallet.com/article/inve ... a-roth-ira

It's best to put assets with higher expected returns (stocks) in a Roth (when possible).

Your transfer needs to be initiated by the receiving company. You can keep EJ out of it.

Here's a nice tax-managed balanced fund from Vanguard that might be helpful for your taxable account-- It is 47% stock. You can adjust the remainder of your portfolio to get the overall stock/bond allocation you want.

https://personal.vanguard.com/us/funds/ ... =INT#tab=2


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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ZOOM678
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Re: Which portfolio is right for us?

Post by ZOOM678 »

I want to thank everyone for their advice, information and links.
You all are amazing!

I spent hours today downloading every document I could find on Edward Jones.
After seeing some of the fees, I'm a little sick.
Some of my Buy/Sell came with a $60 to $120 dollar price tag.
A Managed account was in the mid $600's a year.
Wife's Roth was as high as $377 a year.
:oops: :oops: :oops: :oops: :oops:

I have a whole lot of reading to do.
I have been reading the wiki until my eyes glaze over and the I need to take a break for a while.

My Financial advisor just got his CFP certification. Wish he had it 12 years ago, now it would be a hefty price tag to have him revamp my accounts before I leave.

I got a lot of reading to do.

Thanks again
Ken
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dogagility
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Re: Which portfolio is right for us?

Post by dogagility »

ZOOM678 wrote: Sat Jan 28, 2023 6:10 pm I spent hours today downloading every document I could find on Edward Jones.
After seeing some of the fees, I'm a little sick.
Some of my Buy/Sell came with a $60 to $120 dollar price tag.
A Managed account was in the mid $600's a year.
Wife's Roth was as high as $377 a year.
:oops: :oops: :oops: :oops: :oops:

My Financial advisor just got his CFP certification. Wish he had it 12 years ago, now it would be a hefty price tag to have him revamp my accounts before I leave.
It's good you've realized the effect of EJ fees on your personal wealth.

Even with a CFP, your EJ advisor is a salesman through to the core.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
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Re: Which portfolio is right for us?

Post by GMCZ71 »

ZOOM678 wrote: Thu Jan 26, 2023 11:06 pm
I have a 401k thru work at Fidelity that we don’t touch and would be happy if it never was touched.

Thank you for your time and consideration
Ken
This stands out to me and I don't think it was addressed in the thread. Won't there be an rmd forcing you to pull from the 401?
John | * Friends and family and money | * What you recommend will have periods of underperformance. You will be blamed. | * You avoid the suspicion of "self-serving." by Taylor Larimore
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ZOOM678
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Re: Which portfolio is right for us?

Post by ZOOM678 »

GMCZ71 wrote: Sun Jan 29, 2023 7:39 am
ZOOM678 wrote: Thu Jan 26, 2023 11:06 pm
I have a 401k thru work at Fidelity that we don’t touch and would be happy if it never was touched.

Thank you for your time and consideration
Ken
This stands out to me and I don't think it was addressed in the thread. Won't there be an rmd forcing you to pull from the 401?
I am sorry for the VERY late reply. My focus since I was last on site has been to transfer all accounts from Edward Jones to Charles Schwab and then to get familiar with the Schwab website and software.

For me, the forced withdrawal from my 401k is a decade away and I will deal with that when the time comes. I'm pretty sure by that time I'll have worse problems than needing to take money out of the 401k :wink:
Last edited by ZOOM678 on Mon Apr 03, 2023 9:28 pm, edited 1 time in total.
Katietsu
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Re: Which portfolio is right for us?

Post by Katietsu »

I understand your desire to save the Edward Jones fees.

I do feel I need to say that your posts include several concerning statements. Please do not confuse luck with skill. I am glad your stock gamble paid off in 2020 but that was luck not skill. Go to YouTube and search for John Bogle Nobody Knows Nothing. This is why trying to market time where you guess if it is a good time for stocks or for bonds in a year is not a good strategy.

FYI, if you would have put $10,000 in Vanguard Total Stock in 2000, then ten years later, you would have had about $14,400. If you would have put $10,000 in Vanguard Total Bond in 2000, then ten years later, you would have had about $16,000.

Asset location is not as important as asset allocation. There are many smart people that put a similar asset allocation in each account like your Edward Jones accounts. You can read the opinions and decide what is best for you.

I will reiterate that it is best to pick an allocation and stick with it. It might even be best to pick a single mutual fund like a Life Strategy Fund and stick with it.

Get your wife involved.
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ZOOM678
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Re: Which portfolio is right for us?

Post by ZOOM678 »

Update:
A couple weeks ago I finished transferring all accounts from E.J. to Schwab. WooHoo :sharebeer

With the exception of my stocks, most everything else is in the red so I can start selling the funds (at a loss) and begin to whittle down the stocks that are in the green and then start funding 3 ETF Funds.

I need to admit that I am still gun shy of having a lot of Bonds in the Portfolio and the recommended Bond Percentage = My Age is out of the question. Had I gone against what the Financial Advisor recommended 10-12 years ago, today I would have a much larger, but more enjoyable problem of slowly selling off Stocks to avoid Capital Gains putting me in High Tax Brackets.

On this site there is a 3 Fund Thread showing close to 50 years of Bond, S&P and MSCI returns and I took the time to see what average yearly returns were for the past 20 years broken into 10 year segments and these were the results.

2003 - 2012 yearly average
Bonds 4.87%
S&P 11.85%
MSCI 11.93%

2013 - 2022 yearly average
Bonds 0.40%
S&P 13.31%
MSCI 5.87%

Of course past results are no guaranty of future results, but the S&P doubled in value a few times in 20 years whereas the Bonds still haven't doubled.

Of course my financial condition, someday, can and likely will change, but considering that, for me, taking money from my Portfolios is rare and minor in amount, at this time in life, I am more interested in Wealth Accumulation (rate of inflation++) than hanging onto every dollar and then watching the buying power vanish before my eyes.

Since I have been retired a few years, I will not be adding any more money to my Portfolios.

Would I be way out of line going with an ETF portfolio of 65% US Stocks, 15% International Stocks & 20% US Bonds?


Thank you in advance for any input.
Ken
Last edited by ZOOM678 on Mon Apr 03, 2023 9:29 pm, edited 1 time in total.
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Veiled
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Re: Which portfolio is right for us?

Post by Veiled »

ZOOM678 wrote: Mon Apr 03, 2023 8:29 pm Update:
A couple weeks ago I finished transferring all accounts from E.J. to Schwab. WooHoo :sharebeer

With the exception of my stocks, most everything else is in the red to I can start selling the funds (at a loss) and begin to whittle down the stocks that are in the green and then start funding 3 ETF Funds.

I need to admit that I am still gun shy of having a lot of Bonds in the Portfolio and the recommended Bond Percentage = My Age is out of the question. Had I gone against what the Financial Advisor recommended 10-12 years ago, today I would have a much larger, but more enjoyable problem of slowly selling off Stocks to avoid Capital Gains putting me in High Tax Brackets.

...

Would I be way out of line going with an ETF portfolio of 65% US Stocks, 15% International Stocks & 20% US Bonds?


Thank you in advance for any input.
Ken
Congratulations! This AA is relatively aggressive for your stage, but given that you have no plan to make withdrawals from these accounts (i.e. a near-infinite time horizon), it might be reasonable to have a relatively aggressive AA. As I understand you, this isn't your retirement fund, you hope not to need it.

I don't know how much is in it or how much longer you expect to live, but this AA seems at the edge of reasonable for money for which you don't have an expected withdrawal date but are in retirement. Logical next step is to think of how to efficiently pass it on if you plan never to touch it.
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ZOOM678
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Re: Which portfolio is right for us?

Post by ZOOM678 »

Katietsu wrote: Mon Apr 03, 2023 8:19 pm I understand your desire to save the Edward Jones fees.

I do feel I need to say that your posts include several concerning statements. Please do not confuse luck with skill. I am glad your stock gamble paid off in 2020 but that was luck not skill. Go to YouTube and search for John Bogle Nobody Knows Nothing. This is why trying to market time where you guess if it is a good time for stocks or for bonds in a year is not a good strategy.

FYI, if you would have put $10,000 in Vanguard Total Stock in 2000, then ten years later, you would have had about $14,400. If you would have put $10,000 in Vanguard Total Bond in 2000, then ten years later, you would have had about $16,000.

Asset location is not as important as asset allocation. There are many smart people that put a similar asset allocation in each account like your Edward Jones accounts. You can read the opinions and decide what is best for you.

I will reiterate that it is best to pick an allocation and stick with it. It might even be best to pick a single mutual fund like a Life Strategy Fund and stick with it.

Get your wife involved.
Thank you very much for your response.
I do understand what you are saying and it can be very dangerous to try and catch a falling knife.

I have tended to follow the Warren Buffett model of Buying Stocks when everyone else is panicking and selling. For me, more often than not, it has worked, but I tended to buy very good quality stocks at bargain prices.

When the Advisor was getting me into 40% Bonds, interest rates were very low and they stayed that way most of the time I had the Bonds and their value could only increase if they were paying people to take money.
Every time we met for our conference I would ask him to remind me why we were so heavy into Bonds. The last time we met he said that we needed to be into so many Bonds so we could sell the Bonds that were losing money in order to buy Stocks at low prices.

I have tried to get my wife involved and I had her pick all of the stock's, (with some recommendations) when we sold the annuity and nearly every stock is still in the green, while on the other hand, the Advisor chose the vast majority of the other investments and with a very few funds, every one is and has been in the red.

My Wife let the Advisor choose all of the funds ( He is the expert) for her Roth and it was a rare occasion in the past 10-12 years that it showed a profit and has been in the Red for way too long.

My Wife is the reason for me looking into simplifying our Portfolios. I will continue with some individual stocks, but vast majority of investments will be invested into 3 Funds.

Thank you again for you input
Ken
Last edited by ZOOM678 on Tue Apr 04, 2023 10:13 am, edited 2 times in total.
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ZOOM678
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Re: Which portfolio is right for us?

Post by ZOOM678 »

Veiled wrote: Mon Apr 03, 2023 8:44 pm
ZOOM678 wrote: Mon Apr 03, 2023 8:29 pm Update:
A couple weeks ago I finished transferring all accounts from E.J. to Schwab. WooHoo :sharebeer

With the exception of my stocks, most everything else is in the red to I can start selling the funds (at a loss) and begin to whittle down the stocks that are in the green and then start funding 3 ETF Funds.

I need to admit that I am still gun shy of having a lot of Bonds in the Portfolio and the recommended Bond Percentage = My Age is out of the question. Had I gone against what the Financial Advisor recommended 10-12 years ago, today I would have a much larger, but more enjoyable problem of slowly selling off Stocks to avoid Capital Gains putting me in High Tax Brackets.

...

Would I be way out of line going with an ETF portfolio of 65% US Stocks, 15% International Stocks & 20% US Bonds?


Thank you in advance for any input.
Ken
Congratulations! This AA is relatively aggressive for your stage, but given that you have no plan to make withdrawals from these accounts (i.e. a near-infinite time horizon), it might be reasonable to have a relatively aggressive AA. As I understand you, this isn't your retirement fund, you hope not to need it.

I don't know how much is in it or how much longer you expect to live, but this AA seems at the edge of reasonable for money for which you don't have an expected withdrawal date but are in retirement. Logical next step is to think of how to efficiently pass it on if you plan never to touch it.
God willing, we are hoping to leave most, if not all to our Kids and Grand Kids, but we also realize that life can and does happen and things can go sideways and we may need to start dipping into it. Honestly, my greatest concern at this time is this high inflation we are seeing and wanting to earn higher than inflation + some.

Based on my family history, God willing I can have another 18 - 20 years and Wife 20 -25 years.

While no one enjoys seeing their investment values go down, I really don't seem to panic when the prices drop, I tend to start looking for what I might be willing to sell in order to buy High quality bargains, only now I can sell and buy for free.

Have a great evening
Ken
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