Anybody wanna review some mutual funds T.D. Ameritrade's trying to sell dad???

[redgtxdi]

So as I'd put in an earlier thread regarding a horrible motorcycle accident my in-laws suffered back in September, here's the current state of financial affairs since my FIL signed off to this T.D. Ameritrade financial planner dude. (My FIL's mental capacity is limited these days & he's asking me to look over this stuff).

The TD dude sends:

* PRMSX --- T Rowe Price Emerging Markets Stock Fund (My Opinion is it's too expensive for what it is)
* VWNDX --- Vanguard Windsor Fund (Love this fund. Hard to believe a TD guy even offered this but, of course you don't need a TD guy to get this fund)
* Artisan Funds --- No single fund, just an annual report. Dunno which fund he'd propose but maybe you have an opinion on the company itself?
* MetWest --- Again, no one fund, just a semi-annual report. This Metropolitan West Funds book is all bond funds so no stocks here.
* Buffalo Funds --- Again, no single fund just a report. In this case, all expense ratios are over 1% w/ some funds doing better than index & some worse. (nothing special)
* Northern Equity Funds --- Ditto here but yet again.......all expense ratios near or above 1%. (me no like)

Now, as a Boglehead I'm not a fan of funds that sometimes do better, sometimes do worse, but always charge a crap-load more. Plus I really don't know why this guy feels the need to use 6 different funds companies, but whatever.....I know that's what they get paid to do.

(cough) coffeehouse (cough)

 

[FelixDeCat]

I like Vanguard Windsor. But if you ax me, stocks and especially bonds are over priced right now.

It would have also been nice to get the ticker on the other choices. Otherwise a blend of the above will probably be the best choice.

 

[Tequila]

If you claim to be a boglehead then why are you not asking this question at http://www.bogleheads.org/forum/index.php?

At the very least do your own research at morningstar.com. Hint: There's also a boglehead forum at morningstar(http://socialize.morningstar.com/NewSocialize/forums/100000015.aspx) and two very sharp guys named r48 and Mel Lindauer who love to review people's portfolios.

 

[redgtxdi]

If you claim to be a boglehead then why are you not asking this question at http://www.bogleheads.org/forum/index.php?

At the very least do your own research at morningstar.com. Hint: There's also a boglehead forum at morningstar(http://socialize.morningstar.com/NewSocialize/forums/100000015.aspx) and two very sharp guys named r48 and Mel Lindauer who love to review people's portfolios.

I know them well. (and others you missed)

Trust me, I could make a coffeehouse portfolio for my FIL & be done with it, but it's not my money, it's his.

And I ask regarding the other brands here because the bogleheads don't often venture into odd brands & I was hoping some folks here would.

 

[kranky]

Well, since it's his money, and his planner, I would not stick my nose in very far. Are they all no-loads? Did the planner show the proposed asset allocation? Does it make sense? Are the investment options logical given your FIL's investment goals and timeline? As long as nothing looks to be clearly out of whack, I'd leave it be.

I don't think there's much to be learned from looking at mutual fund COMPANIES, as long as the manager(s) of the proposed funds have been successful.

 

[alrocky]

E.R. = 0.18% - VTSMX - Vanguard Total Stock Market Index
E.R. = 0.22% - VBMFX - Vanguard Total Bond Market Index
E.R. = 0.40% - VFWIX - FTSE All-World ex-US Index

Since he asked you to look it over why now suggest the above and demonstrate the E.R. cost difference?

E.R. - 1.32% - PRMSX

E.R. = 0.40% - VEIEX - Vanguard Emerging Markets Stock Index
I have the admiral of above @ 0.27% E.R.

 

[redgtxdi]

Thanks alrocky!

That's exactly what I did for an example.('til I get more specifics from the FIL) I think T. Rowe Price is a great company but that fund is definitely expensive & its performance has only been average......well, less than actually......over the last decade. Obviously, there's no guarantee of future performance so it makes me wonder why this "wealth advisor" picked this fund for him.

-Because it's fallen short of the indexes it's gonna beat 'em the next decade based on the law of averages??

-Some new fund manager is gonna make all the right moves??

-This fund has some inside scoop on an emerging country that nobody knew about before & nobody else has access to??

Any or all of the above scenarios just sounds like somebody trying to beat the market & as us true Bogleheads know.......that's a tall order. Being that FIL's in his golden years, he doesn't have the luxury of time to find out.

 

[mshan]

Get a premium membership to Morningstar and read their detailed analyst reports.

You can sign up for a 14 day free trial, just make sure you cancel before the trial ends if you don't want to pay for the premium membership.

Plus, what is the management fee that T. D. Ameritrade advisor charge? http://www.mutualfundstore.com charges from 1.5% - 0.75% ($50,000 minimum, management fee decreases as total assets increase). Extra layer of fees may be worth it to some who don't have the time to study or temperament to not get shaken out of market, plus he has radio show each Saturday that streams over internet too. May have a Mutual Fund Store in your area where you can take FIL and see their presentation. I think they tend to switch mutual funds at a decent pace, depending upon who they think will outperform the market, so probably best for tax deferred accounts.

High quality index fund, such as Vanguard Index Total Stock Market (VTSMX), especially in taxable accounts, will probably outperform vast majority of other funds if time horizon is at least 20 - 30 years. But if FIL doesn't have investor mentality for staying the course when this fund seems temporarily underperforming market because of broad diversification, the point may be mute. He has to be comfortable with his investments and have studied enough about basics of mutual investing and the powerful combination of time and compound interest to stay the course when next hot sector vastly outperforms broad index for a few years. Plus, if he is close to retirement, he may want a less volatile mutual fund that focuses more on capital preservation or conservative growth and income (something like T. Rowe Price Capital Appreciation and Oakmark Equity Income come to mind).

If he isn't already aware, you probably need to teach him about strategic asset allocation and the benefits of real portfolio diversification before diving into more specific investments. Otherwise he may just get shaken out of market when next severe correction occurs...

 

[alrocky]

management fee ... charges from 1.5% - 0.75% Extra layer of fees may be worth it.

underperforming market because of broad diversification, the point may be mute.

If he isn't already aware, you probably need to teach him about strategic asset allocation and the benefits of real portfolio diversification before diving into more specific investments. Otherwise he may just get shaken out of market when next severe correction occurs...

Ha! Boss said mute when she meant moot during an office talk a few days ago. At the bogle site, I wrote principle when I meant principal.

The above underlined and the suggestion of paying an additional 0.75% - 1.50% in extra fees on top of the Expense Ratios is a head scratcher. Given the OP's FIL's mental capacity I doubt he's fit to understand it all.

 

[JEDI]

So as I'd put in an earlier thread regarding a horrible motorcycle accident my in-laws suffered back in September, here's the current state of financial affairs since my FIL signed off to this T.D. Ameritrade financial planner dude. (My FIL's mental capacity is limited these days & he's asking me to look over this stuff).

The TD dude sends:

* PRMSX --- T Rowe Price Emerging Markets Stock Fund (My Opinion is it's too expensive for what it is)
* VWNDX --- Vanguard Windsor Fund (Love this fund. Hard to believe a TD guy even offered this but, of course you don't need a TD guy to get this fund)
* Artisan Funds --- No single fund, just an annual report. Dunno which fund he'd propose but maybe you have an opinion on the company itself?
* MetWest --- Again, no one fund, just a semi-annual report. This Metropolitan West Funds book is all bond funds so no stocks here.
* Buffalo Funds --- Again, no single fund just a report. In this case, all expense ratios are over 1% w/ some funds doing better than index & some worse. (nothing special)
* Northern Equity Funds --- Ditto here but yet again.......all expense ratios near or above 1%. (me no like)

Now, as a Boglehead I'm not a fan of funds that sometimes do better, sometimes do worse, but always charge a crap-load more. Plus I really don't know why this guy feels the need to use 6 different funds companies, but whatever.....I know that's what they get paid to do.

(cough) coffeehouse (cough)

um.. switch to vanguard?
then ask their advisors what they think?

or just use amerittrades commision free trades for select EFTs. (biggest list among the brokrages that offer free EFTs)

 

[JEDI]

E.R. = 0.18% - VTSMX - Vanguard Total Stock Market Index
E.R. = 0.22% - VBMFX - Vanguard Total Bond Market Index
E.R. = 0.40% - VFWIX - FTSE All-World ex-US Index

Since he asked you to look it over why now suggest the above and demonstrate the E.R. cost difference?

E.R. - 1.32% - PRMSX

E.R. = 0.40% - VEIEX - Vanguard Emerging Markets Stock Index
I have the admiral of above @ 0.27% E.R.

VFWIX? why not total international? lower E.R.
Is Canada worth the higher ER?

also, total international should start holding some small cap international 'soon'

 

[alrocky]

http://www.bogleheads.org/forum/viewtopic.php?t=61720
StoneReader: In summary, a new investor would definitely want to buy VGTSX over VFWIX to get a broader diversification (98% vs 85% of the investable international market) at a lower expense ratio (0.2% vs 0.4% ER). An existing investor in VFWIX with a tax loss would also probably want to exchange VFWIX for VGTSX. On the other hand, an investor with a tax gain in VFWIX has a much more difficult choice.

Consequently, the most likely probability is that VFWIX will have a higher return over the coming years than VGTSX from this point of time. There are no guarantees but current holders of VFWIX, especially those with capital gains, may want to retain VFWIX despite the lower ER and wider diversification of VGTSX and wait for a time of more propitious valuation rankings to switch.

http://www.bogleheads.org/forum/viewtopic.php?p=1926
Was relying on memory but things have changed -
PiperWarrior's post: VGTSX - Not as tax efficient as VFWIX. Its dividends are about 70% qualified. It is not eligible for foreign tax credit because IRS says that a fund of funds is not eligible.

http://www.bogleheads.org/forum/viewtopic.php?p=917140
changes a coming?
---

Drop $10,000 in Total International and qualify for Admiral shares and a .20% ER !!!

So yes Total International may be the way to go.

 

[redgtxdi]

Well, I was hoping to have more details on what this guy is proposing (in specific) but I don't have an answer yet.....however......

Not only is this not *just* a TD Ameritrade guy, he's a *wealth advisor* for a firm that works *with* TDAmeritrade. So on top of all the fund's fees he gets a full 1% of the whole game.

Now, the idea is that his firm gets access to *INSTITUTIONAL* funds that you couldn't otherwise touch with less than a few mil. (My Morgan Stanley Portfolio Architect IRA at work does this...and yes, I only do it cuz of matching, otherwise I'm all Bogle)

I get the idea....BUT....I still don't like it. My FIL is 65years old & this guy's gonna chase up-trends for the last 20 or 30 years of my FIL's life?? And all on the premise that the managers of these *INSTITUTIONAL* funds have ways to make even more money than the *non-instituional* fund managers??

It's just hard for me to swallow "market timing" (I think most here share that sentiment).

 

[Fritzo]

I like Vanguard Windsor. But if you ax me, stocks and especially bonds are over priced right now.

It would have also been nice to get the ticker on the other choices. Otherwise a blend of the above will probably be the best choice.

On the contrary--most funds are now gaining strength, and the economy is improving. I think it's a great time to get in on the ground floor of the stock market.

The funds listed there are actually pretty decent. There's a mixure of stable, low risk and a dash of medium risk/high payoff. I have 3 of those in my portfolio myself.

 

[mshan]

You need to ask your FIL how much he needs to have for retirement, make a conservative estimate of number of years money has to last, and see what minimum rate of return required to achieve that. That would seem to be a basic question a wealth advisor interested in customer's needs would ask first, then questions about risk tolerance; specific mutual fund recommendations should be last piece of puzzle, but I suspect a lot of advisors realize they will have lost attention of potential customers long before that. Plus, is the advisor going to continually monitor and adjust portfolio over time, or is it set it and forget it, especially if you are not a truly high asset individual where 1% management fee is a good deal of money for him?

If you have Mutual Fund Store in area, that is another option to at least go talk to.

High quality index funds (it is not just low expense ratio, it matters what you index against; and really you should be thinking Vanguard Index Total Stock Market (VTSMX) in a taxable account - e. g. could be growth component for your FIL that he doesn't have to tap until he has taken all required distributions from retirement funds - could be 20+ years of essentially tax deferred compounding).

On previous episode of Consuelo Mack Wealth Track, there was discussion of an fixed immediate annuity, not variable annuity. I think you put in lump sum at age 65 and if you don't die before age 80 or something you starting getting income after age 80 or something like that. Obviously shouldn't depend upon that completely after age 80, but can provide predicable income stream in terms of more long term retirement finance planning. You have to do own research because I just remember hearing that on some episode of Wealth Track last year (I think it is on PBS on Sundays and old episodes can be seen on website).


The Successful Investor

http://selectedfunds.com/pdf/SFSuccInv4Q09.pdf

http://selectedfunds.com/pdf/SFWGI1209.pdf


Bogle talks about the benefits of a low expense ratio, but he also talks about benefits of low portfolio turnover, because of the additional headwind an active manager has because of hidden transaction costs. Low portfolio turnover hopefully also means very high tax efficiency and greater after tax results. Broadly diversified stock index such as VTMSX is also 99% stock / <1% cash, while many active mutual fund managers typically have 5 - 10% cash position. So, over extended periods of time, VTSMX may actually end up being more aggressive, in a good way (stocks > bonds > cash) if you have that 20+ year time horizon, and especially in a taxable account (you have to choose a good fund steward such as Vanguard because you don't want to have to sell and reinvest elsewhere if company becomes shareholder unfriendly down the road).

 

[JEDI]

in a taxable acct, pick an index fund with low yields.

dividends are no longer capped at 15&#37;.
they are now taxed at your regular income rate.

small cap growth index fund has a .5% yield compared to 1.8% for total market

 

[Tech-Head]

this T.D. Ameritrade financial planner dude

The TD dude sends:

* PRMSX --- T Rowe Price Emerging Markets Stock Fund (My Opinion is it's too expensive for what it is)
* VWNDX --- Vanguard Windsor Fund (Love this fund. Hard to believe a TD guy even offered this but, of course you don't need a TD guy to get this fund)
* Artisan Funds --- No single fund, just an annual report. Dunno which fund he'd propose but maybe you have an opinion on the company itself?
* MetWest --- Again, no one fund, just a semi-annual report. This Metropolitan West Funds book is all bond funds so no stocks here.
* Buffalo Funds --- Again, no single fund just a report. In this case, all expense ratios are over 1% w/ some funds doing better than index & some worse. (nothing special)
* Northern Equity Funds --- Ditto here but yet again.......all expense ratios near or above 1%. (me no like)

(cough) coffeehouse (cough)

PRMSX is actively managed. Bad.
VWNDX is also actively managed. Bad.
You want "passively managed" mutual funds, AKA "index funds" AKA "ETF's" AKA "Exchange Traded Funds".

And that "financial planner dude" is a non-fiduciary who does not legally work for you. He's a salesman who selects investments for you that pay himself the best commissions but are expensive for you. You need a fee-ONLY Registered Investment Adviser. Or better yet DIY. Just invest in an age appropriate mix of stock and bond ETF's.

Please don't bump old threads
-ViRGE