How to manage investments

[Points With a Crew]

Are there forum posts or blog entries about the best way to manage investments? I have maybe $100K in various 401k / IRA accounts that are probably not very well managed. They are currently in a series of different index and mutual funds.

I recently switched jobs and as part of that, I know I can move my 401k to an IRA (and I think my pension as well?) but I'm having trouble figuring out the best way to do that.

I met with an investment firm that came recommended me and they made a presentation that basically boiled down to - they invest in index funds representing undervalued sectors and buy low, sell high, etc. They charge 1.25% to do so.

One thing that they mentioned that I hadn't thought of is that I am already paying fees that are inherent in the various funds that I am in - I just don't see them because they're only disclosed in the fine print, not specifically taken out of my account.

I've seen a few mentions on the blog of some online sites that basically do this (including one this morning on FutureAdvisor) but I thought I'd post something in the forum for some ideas.

I'm fairly savvy but just don't have a ton of time. I think I would be able to periodically manage things every few months or so which is probably all it would make sense to do to cut down on purchase fees.

Any thoughts are of course appreciated.

 

[Matt]

You can rollover the 401k to an IRA easily, I would suggest Vanguard as a receiver.

You might want to sign up for that FutureAdvisor link I posted, it will show you weaknesses in allocations for many 401k plans (not all) and will at least give you some background data.

Easiest solution- roll to a Traditional IRA (later decide if you want to Roth it) and then allocate according to risk and time horizon. You won't do too badly with an 80/20 stock to Short term treasury fund allocation. Providing you have some years to put in and don't mind a little movement of your investments.

 

[Brett Albertson]

Traditional IRAs with a stock-bond mix based on your age. For the stocks, studies have shown that index funds with low fees perform best.

 

[RRD]

Merrill Edge has excellent brokerage account with no fees if you transfer 401k worth 25k+ and have a BOA checking a/c . I transferred one of my 401ks to ME and have been individually investing in stocks. I like the control and excitement that comes with individual stock picking.

As an aside, to anyone who is interested, my favorite pick is a bio-tech stock which has tripled since I bought it but this one is a multi-bagger and therefore long - TNXP! And GILD is my next AAPL!

 

[Mountain Trader]

Merrill Edge has excellent brokerage account with no fees if you transfer 401k worth 25k+ and have a BOA checking a/c . I transferred one of my 401ks to ME and have been individually investing in stocks. I like the control and excitement that comes with individual stock picking.

As an aside, to anyone who is interested, my favorite pick is a bio-tech stock which has tripled since I bought it but this one is a multi-bagger and therefore long - TNXP! And GILD is my next AAPL!

What does Merrill charge to buy 100 shares?

 

[RRD]

Nothing if you have 25k + in your IRA a/c and a BOA checking a/c.

 

[Sunny]

http://www.merrilledge.com/pricing

$6.95 per trade plus the usual pennies in exchange fees

 

[Matt]

Merrill Edge has excellent brokerage account with no fees if you transfer 401k worth 25k+ and have a BOA checking a/c . I transferred one of my 401ks to ME and have been individually investing in stocks. I like the control and excitement that comes with individual stock picking.

As an aside, to anyone who is interested, my favorite pick is a bio-tech stock which has tripled since I bought it but this one is a multi-bagger and therefore long - TNXP! And GILD is my next AAPL!

When your individual stocks decline, how do your emotions react? If you feel excitement on the way up do you feel fear, regret, or other things when you buy a stock that drops say 20% in value?

 

[WalletSlot]

Does anyone have experience with CPC or USAA managed accounts? Chase is advertising a fee of 1.6% vs. USAA at 1.0%. The historical returns Chase is showing are higher than market; USAA won't share historical returns with me. Makes it hard to evaluate when they won't share.

 

[Matt]

Waste of money. Certainly go talk to them and get the free tickets and goodies (these are paid for by existing clients) then go find a fee only planner. NAPFA is a great place to look.

You can't really take past performance seriously:

1. They aren't allowed to sell on it without the disclaimer that it's meaningless.
2. The performance they showed you was just clever marketing- how can they say they outperformed when your asset allocation should be tailored to your age, net worth, risk profile and goals?

It's easy to find a slice that looks better than something, but it doesn't mean they will do right by you.

Don't pay fees to these guys - all they do is pump out something generic and you can do the same without losing the house cut.

 

[Matt]

When your individual stocks decline, how do your emotions react? If you feel excitement on the way up do you feel fear, regret, or other things when you buy a stock that drops say 20% in value?

Here's a great pic I stole from @TBB that helps my question:

 

[cocobird]

Here's a great pic I stole from @TBB that helps my question:

View attachment 156

Must be something wrong with me. I hardly go though any emotions. The only time I can recall having an emotion reaction was when my stocks and mutual funds fell 40 percent the year I retired. Instead of getting upset, I considered it the greatest buying opportunity of my lifetime and wished I had more cash to invest in the market. I believe I'm an optimist by nature and tend to see a silver lining to most any issue.

 

[Matt]

Must be something wrong with me. I hardly go though any emotions. The only time I can recall having an emotion reaction was when my stocks and mutual funds fell 40 percent the year I retired. Instead of getting upset, I considered it the greatest buying opportunity of my lifetime and wished I had more cash to invest in the market. I believe I'm an optimist by nature and tend to see a silver lining to most any issue.

It certainly was, but also, sadly it caused a lot of stress for others, especially those in your situation. Glad that you saw your way through it and are enjoying the ride back!

 

[PedroNY]

Roll it all over into Vanguard or Fidelity and buy their Admiral shares or Spartan shares in low cost index funds. I don't want to send anyone else from this board to other forums, but if you really want to learn a bit more about low cost index funds and easy allocation, you should check out boggleheads.org, there is a ton of information there.

Cheers,

PedroNY

 

[Jig]

Very much agree with Pedro's advice on indices being the way to go for almost all investors. Of course, then you have to choose which asset classes make sense to invest in, and there is far too much focus and complacency about US equities being the default setting for most of your portfolio. Splitting your portfolio between small caps and large caps, value and growth will make no difference if there is a generalized move in the overall US equity market, all of those will participate to a very large extent in that move. Make sure to learn about and gain basic understanding of other asset classes, and consider them for far more than the piddling 5-20% that most 'advisors' allocate apart from US equities and bonds. My thoughts on selection of asset classes are in the Asset Allocation thread.

A true 'global market' portfolio of financial assets is roughly something like this:
20% US equities
20% non-US equities
30% global government bonds (mostly US, Japan, UK, Europe)
20% Investment grade corporate bonds (again, mostly, US, Japan, UK, Europe)
5% High yield corporate bonds, inflation protected bonds, emerging market bonds
5% Real estate investment trusts and equivalents

Note that this does not include important categories such as commodities and physical real estate, which should be considered in your total portfolio exposures including any personally owned businesses or real estate that have high correlation to one of the other asset classes.

 

[RRD]

Here's a great pic I stole from @TBB that helps my question:

View attachment 156

Matt - Spot on! I went thru the same gamut of emotions early on in my trading days, but over the years one thing I have learned is to wait it out even if a stock goes downhill. I can now be more patient and deal with paper losses. Most stocks bounce back eventually and 90% of my investments have made profit and those that haven't, the loss hasn't been substantial.

Buying high, just because of general euphoria around a stock, is I learnt the hard way, the worst strategy ever. Bought Apple at $680 when it was supposedly going to go to a $1000 was the worst idea ever but I stuck with it even when it went to lower 400s. Finally, I am above water on that one but was also wise enough to buy a bunch when it went downhill.

 

[TBB]

Interesting to see these responses here from my perspective as a full time practicing financial planner (when I am not doing miles related activities and blogging about miles/points blogs!). So let me add in here the perspective of a comprehensive financial planner who gets paid directly by the client and certainly not based on sales of (often crappy for the buyer) financial products:

Here is what I say to prospective clients: What I do is not rocket science. It can be done if you have the time and the interest. Very few do as we are all too busy to stick with a certain asset allocation and most importantly rebalance regularly. In addition, most people fall victim to the voices in their heads to act on something. In addition, they do not coordinate decisions to take all aspects of their lives into account (tax, estate planning, employment benefits, debts, insurance, cashflow, travel rewards hehe). Frankly, most people will never see the value of a financial advisor and that's perfectly fine of course. Some will always think they can handle it all but occasionally may need some help. I don't work well with them either and there are colleagues of mine who specialize in them. I like to work with delegators who have no time and interest in dealing with this stuff and are willing to let a trusted professional handle it all and does not charge 1% or more just to push a few buttons every quarter to "rebalance". It helps if these clients had a previous relationship with a big institution. In other words, I tend to say that I specialize in clients who got burned doing business with salespeople before they decided it was time for a change. My niche is professional young couples with a kid or two and widows who are even more loyal than the couples. Finally, you would not believe what people do with their own money even ones who were assured they knew what they were doing! At the end of the day, the biggest thing we do is trying to save you from yourselves by providing that extra set of eyes and instilling discipline to keep you on track. Easier said than done, especially in a bull market as we are experiencing these days.

Most of the above here is for Matt to read to star thinking like a CFP too