mcnuttmath.com E-Mail Archives
Disclaimer: Please be aware that much of what is in these e-mails represents my opinion, and being that I am not a professional financial advisor, all my advice should be considered unreliable until you verify it on your own.
First: Here are two articles I have written for the people on my e-mail list:
Dividends: This article is about dividends and how they effect you the personal investor.
When The Bubble Burst : This article discusses what I learned from the "Tech Bubble" bursting in 2000
Index Investing Quotes: This is a compilation of quotes about indexing from famous people in the Finance Industry
Second: Below is an archive of e-mails I have sent out to the people on my e-mail list. You can skip to a particular e-mail by selecting a link below or just browse the e-mails by scrolling down the page.
Great Quotes on Index Investing from Famous Investors
David Swenson's Investing Advice
Will You Have Enough Money at Retirement
Comparing Active Funds to Indexed Funds
Comparing Active Funds to Indexed Funds 2
We Have a Pension, Do I Really Need a 403(b)?
Where Can I Find Out How Other People are Using Vanguard
An E-Mail about AXA and My Response
Some Classic Investing Articles
My Advice for a Wayne Teacher on How to Invest Her 403(b)
A Reader Replies About the Previous E-Mail With Respect to Moving Funds From AXA to Vanguard
A Response to an E-Mail About the $15 Per Year Fee at Vanguard
.
I wanted to follow up yesterday's presentation with some sites to check out.
I talked a lot about asset allocation and I made the claim that if you take some time to learn about investing there is no reason why you shouldn't be able to develop a sound asset allocation strategy. Below are a couple places to check out to help you learn about asset allocation.
This next one is the one at Vanguard.
You should not use one site or one person to choose an asset allocation strategy, you should use many resources to select your strategy because no one strategy fits all.
Hope you find something useful. By the way I found these sites in about 2 minutes just by googling "Asset Allocation"
Enjoy the holiday,
Bruce
.
This is another set of information about Index Funds that I found interesting. Please keep in mind as you read this stuff I AM NOT advising you to become an index investor. I personally am an index investor but that doesn't mean you should be too. What I am advising you to do is learn about Index and Active strategies and choose the one that you feel works best for you. Because I am an index investor myself, and because Vanguard is known as the index investors brokerage house, I have more info on index investing than active investing so that is what I am sharing but please investigate Active management also before you pick a strategy.
The following information comes from the http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.ifa.com/ website. They are a fee-only investment service that advises portfolios using only Index funds. I am not recommending you use them as an adviser because I'm not a finacial adviser, plus I know nothing about them except that their site has some cool stuff regarding Index Investing, plus it is my claim that you can do it yourself if you take a little time to get educated. The following quotes come from about half way down their website's intro page and they are basically quotes from famous people in the financial industry regarding indexing.
I though they were interesting, I hope you do too.
Bruce
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Final reminder that my investing presentation will be this Thursday at 4:00 pm at Wayne Hills in Room 295 which is on the second floor of the new wing. The presentation will begin promptly at 4 and will run around an hour and a half.
I also came across a good, (and simple) article about David Swenson, a renouned investor who manages Yale Universitie's Endowment Fund and has done so successfully for a number of years. At the end of the article he gives some of his advice to the personal investor. I read his book "Unconventional Success" and it was pretty intense, but his basic principals are outlined in this article and they are probably all you really need.
Enjoy, I hope you are finding the time to read some of this stuff.
Bruce
.
Hi Everyone,
Two things.
First, it is a rule of thumb in
investing that you can take out 4% of an investment every year and you will
never run out of money. Once again this is not exact, but basically if you can
accumulate $500,000 in your 403(b) and at age 65 you decide to start taking
money out, you will be able to take out 4%, in this case .04 x 500000 or
$20,000, every year and not have to worry about running out of money. It
is a good idea to calculate how much you expect to need yearly in retirement,
calculate what you pension will (should?) be, and figure out how much extra
money you will need to generate to meet your retirement needs. If
you think you will need to generate an additional $30,000 over and above your
pension you should shoot to have at least $750,000 in your retirement nest
egg.
Second, in order to get an idea if you are on track to meet your
financial needs try the following online calculator.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.finance.cch.com/sohoApplets/Retire403b.asp
You will put in your current salary, rate of expected salary increase, rate of
expected growth and your expenses in your funds.
For the rate of expected
growth try using a number around 8-9%. The stock market has traditionally
done better than that but it is better to underestimate it rather than
over. Our salary increase is probably in the 3% range and for your
expenses it depends what company you are investing with. If you are with
Vanguard use .25 as the expense ratio, that is their
average expense ratio. If you are with an insurance company use about
1.75% as that is the industry average based on information found on the SEC
website.
One limitation on this calculator is you can't enter a max
salary and of course we max out so the number the program generates will
probably be higher than you would actually expect to get, but it should give you
an idea of where you stand.
Good Luck and thanks again to Doug Layman for
finding this calculator.
Bruce
..
I strongly recommend you read the
linked article below.
If you came to the presentation, or if you are
coming in February, two of the main concepts I talked about were asset allocation and indexed vs. actively managed
mutual funds.
Asset allocation refers to what percent of your money goes
into each asset your are invested in.
Indexed
vs. Active fund management refers to whether you believe in investing in indexed
funds or whether you believe in investing in actively managed funds.
An
Index fund seeks to match the performance of an index (like the S&P 500 or
Wiltshire 3000) and they typically are less expensive to invest in because you
do not have to pay a team of investors to choose your funds.
An Active
Fund seeks to beat the performance of the index funds by only choosing the
stocks that are going to do well. These funds tend to be more expensive to
invest in because you have to pay a team of investors to choose the
stocks.
Whether you are going to be an Index Investor like myself
or an Active Investor is a personal decision but you should make your decision
using as much information as possible. To that end I have been sending you
these articles including the last one which I believe is an unbiased comparison
of the performance of Active Funds vs. Index Funds.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www2.standardandpoors.com/spf/pdf/index/SPIVA_2006_Q4-sc.pdf
This next article is a great one for a couple
reasons.
First, if you are new to investing it is a good one
because it is readable and not too complicated.
Second, one of the
ways to be comfortable in your own investing stategy
is to know that other people are doing what you are doing.
The article
below sings the praises of low cost index investing by sharing the protfolios of 4 well known investment strategists. The
article shows exactly how each of these people are
investing their own money. Keep in mind as you read the article that all
the investors are not the same age so their allocation in Bonds vs. Stocks will
be different, but I am sure you will pick up on the similarities in each persons
approach.
Finally, I am not advising you to follow any of the strategies
in the article, I am simply advising you to read
it.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.marketwatch.com/news/story/paul-b-farrell-lazy-portfolios/story.aspx?guid=%257bDABA48D1-0DDA-43F7-8700-275FEF592BD1%257d%26print=true%26dist=printTop
Any questions let me know. Thanks again to Doug Layman, my
e-mail list's researcher, for finding this article.
Bruce
.
Doug Layman found this article
and it is the best one I have ever seen on the subject of actively managed funds
vs. indexed funds.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www2.standardandpoors.com/spf/pdf/index/SPIVA_2006_Q4-sc.pdf
As
you hopefully know by now, when you purchase shares of an indexed fund you are
buying into a segment of the market and the goal of the fund is to mirror the
performance of the index of that segment of the fund. For example if you
buy the S&P 500 Fund you are basically buying shares of the largest 500
companies on the stock market. Another example, when you buy shares in the
Vanguard Small Cap Index fund you are basically buying shares of the 4500
smallest companies on the stock exchange.
When you purchase a mutual fund
such as a Large Cap Active Fund you are buying shares in a fund that is trying
to beat the S&P 500 Index. There is a team of people managing your
fund and they are trying to choose from those 500 largest companies the ones
that will do the best. They may buy only 40 of those largest 500 in the
hope that those 500 companies outperform the index.
So where should you
put your money. You are going to invest a certain percentage in stock
mutual funds. Which funds should you choose? Should you choose
actively managed or indexed funds?
In my opinion you should choose
the ones that are going to perform better! Well which ones are going to
perform better?
On an individual basis it is very hard to tell which
individual fund will outperform another individual fund, but what if you knew
that indexed funds usually outperform managed funds or vise-versa?
Take a
look at the following report from Standard and Poors. It follows every mutual fund and compares all
the active ones to their index. For example it compares all Active Large
Cap Funds to their index, the S&P 500. Then it compares all Small Cap
Funds to thier index, the S&P Small Cap
Index.
I'm not going to tell you what the report says, but I will tell
you that you only need to read the first 3 paragraphs to get the
idea.
Enjoy, it's good, and thanks to Doug for finding
it.
Bruce
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www2.standardandpoors.com/spf/pdf/index/SPIVA_2006_Q4-sc.pdf
What follows
is a question I got from a
Enjoy,
comments appreciated.
Bruce,
I will not be
able to attend the presentation on Thursday; however, I will try to make the one
in Feb.
One question I
have is, how does the fact that we have a pension play into how much we set
aside to invest in retirement and how we invest for
retirement?
Jim
WVHS
Hey
Jim,
That's a great
question.
The fact that
we have a pension should definitely play into our investing decisions and if
that pension was absolutely guaranteed, it would mean we could be very agressive with our investing strategies and if we didn't put
that much of our own money away it probably wouldn't be that big a
deal.
Obviously with
our pensions being attacked, and it being pretty unlikely that the current
system will be around forever, I think we all need to rethink our financial
retirement plan.
When John
Wasik called to interview me for the article he wrote
about the quest to get Vanguard in
The way we
look at it there are two possibilities. If we spend too much now we may
run out of money in retirement, or if we spend as little as we can now we may
have too much money in retirement. If we run out of money in retirement
we run the risk that social security and my pension will not provide
for our needs, in fact we run the risk that Soc Sec and our
pension may not be there at all and we become a burden to our kids or we
live on the street. If we die with money in the bank, we run the risk
that our kids will inherit our money and they will waste it. We have
chosen option 2, which isn't to say we don't live a good life, but we try to
keep it in balance.
Keep in mind I
am Scottish and was raised to value money in the bank more than a BMW in the
driveway. Everyone is different, and everyone has different views on
spending money. Some people believe in spending it now while you can still
enjoy it, and I am not saying they are wrong. I am just saying that that
doesn't work for me. I like knowing that I will be able to live a
comfortable retirement whether our pension and social security stay as is
or not.
To put a final
answer on your question, I would recommend to anyone that they spend only what
they need to, and save what they don't spend. As for how they invest that
money, I recommend they go to Vanguard, fill out the investor questionnaire, and
basically follow Vanguard's advice. I think that because we have a
pension, which hopefully will still be around in some form, you can
probably afford to be a little more weighted in the stock market based on you
prescribed asset allocation, but if you save what you can, follow a low cost,
indexed, age and risk based asset allocation, I think you will be very
satisfied in your golden years.
Bruce
Hi Everyone,
Doug Layman came across this article about
403(b)'s. It is more of the same, but still a satisfying read for those of
us who have left for Vanguard and maybe inspirational for those who
haven't.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.signonsandiego.com/uniontrib/20061119/news_mz1b19teache.html
Enjoy,
Bruce
Hi Everyone,
Just a couple things that I have been thinking about lately.
1. I recieved a letter from the CEO of Vanguard the other day letting me know that he had seen the article about me and wanted to thank me for "spreading the Vanguard word." He article stated that since Vanguard saves it's investors money by not spending much on advertising, they rely on their investors to spread the word about Vanguard. I thought it was pretty cool and says a lot about Vanguard.
By the way, Vanguard holds 950 billion dollars in assets among 21.5 million investors, so although you should never make a financial decision based on the fact that someone else did it, it is nice to know there are 21.5 million other people doing what you are doing.
2. I e-mailed Valic, Equitable and Met Life in order to get current prospectuses and only Equitable would send me one. Valic and MetLife would only get me a prospectus by way of a sales representative. I wonder why that is? Vanguard by the way offers all of their prospectuses online and you can look at any one you want any time.
In case you don't know, a prospecus provides all the details about a mutual fund or other investment. It includes things like fees, expenses, the strategy of the fund etc. The law says that a financial company must provide a prospectus when offering Mutual Funds. The goal of this law is to provide full disclosure to the investor. In other words, the investor must be made fully aware of any and all rules and regulations regarding an investment. What the law doesn't say is that financial representatives must be completely forthright when discussing a particular program. In other words, it is completely acceptable and legal for an insurance salesman to come into a school and try to sell a program by only giving the "good side" of the investment, and not talking about any of the bad things. So long as the salesman gives the prospective client a copy of the prospectus, he has fully disclosed the investment. Any of you guys ever read a prospectus. I have, it's not pretty. Now I can't imagine a salesman only giving the good points of an investment, that just seems unethical, but just the fact that it could happen means you should be on your toes when it comes to who you invest with.
3. Since I unveiled my website to the public a short while ago, I have had more people join this e-mail list so I want to repeat some of what I think is the most important stuff. On the website, I have gone through great pains (actually it was kind-of fun) surfing the net bringing you all that is out there about 403(b)'s. All the good stuff I can find is located on the Related Web Links page. On that page are links to about 10 articles that have appeared in legitimate periodicals including Money Magazine and Forbes regarding what's bad about 403(b)'s. (I would put the articles about what is good about them but I can't find any. If you know of some pass them along.) If you are still learning about this stuff, or if you just want some fun reads, I recommend you go to http://www.mcnuttmath.com/403b/contents/index.htm and take a look at some of the articles. As always www.403bwise .com is a great resource as well.
Enjoy,
Bruce
.
One of the people on our e-mail list turned me on to a discussion board at Morningstar.com that I thought might be of interest.
As you may know by now, John Bogel is the guy who started Vanguard. He started the company because he believes in what is called indexed investing, which means that your mutual fund does not buy and sell stocks all the time but rather holds all the stocks of a particular type. (They do offer active funds as well which means that someone is actively buyind and selling the stocks in your fund.) Some common index funds are the S&P 500 fund and the Total Stock Market Index Fund. As it was explained to me, why search for a needle in a haystack (trying to find that one great stock) when you can buy the whole haystack (the entire index).
There are two advantages of indexing according to index investors (of which I am one by the way). First, it has been shown that actively managed mutual funds do not do better than index funds over time. Timing the market is extremely difficult for even the most experienced stock pickers. Secondly, it is much less expensive to invest in index funds over time. Consider this, a difference of .5% in expense ratio over the course of 20 years is an 18% difference in total assets. That means that if you invested in Fund A at 1% over 20 years and in Fund B at 1.5% over 20 years and the funds both did equally well over those 20 years, you would have 18% more in Fund A than Fund B.
People who follow John Bogel's investing strategy, which is to invest in low cost index funds and ride the market over long periods of time, are often called Bogelheads. On the Morningstar web site, which is the site for rating Mutual funds, there is a discussion group called Vanguard Diehards where people discuss how they allocate their investments and other investing topics. While you shouldn't trust any of them on an individual basis, if you read their postings you will get a pretty good feel for what other people are doing and I found it to be pretty interesting. There are literally over 50,000 postings so choose a topic and start slow. Some of the postings were too technical for me but I think it is worth a look. The site is
and choose Vanguard Diehards.
Also, I have sent this one out before but the SEC has a really good site for teachers. http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.sec.gov/investor/teachers.shtml You pay your taxes so you might as well get something out of it.
As always, it is worth your time to go back to http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.403bwise.com and see what they have new.
Bruce
.
I think this is a good read.
What follows is an e-mail Bob LaGrutta sent me and he has been asking me some questions about his 403(b). He has done some investigating into his 403(b) at AXA and I think the information he found out may be useful to many of you. He has also started a 403(b)(7) at Vanguard as well. I am also adding my reply to him because I think it also has some information that you may find interesting.
Bruce,
The author that I referred to
the other day is Robert T. Kiyosaki. If you
google his name all of his books will come up. Most are
available on Ebay
for under $10. All relate to
money and investing for both adults and teens.
I finally called AXA to
inquire about moving money and found some
interesting facts. I was unable to
find "fees" on my statements although
there was a line for them which always
had "zero". Zero is accurate for
administrative fees because I have more than
$25k invested. The transaction
expenses are built into the NAV and are not
broken out anywhere.
There is no surrender fee on any of my monies since
I have been in more than
twelve years. My death benefit is calculated on my
account value as of
12/31/00 and is currently about $30k greater than my
account value.
Although I have opened a Vanguard account and it is being
funded, I was
wondering if there would be any advantage in my case to rolling
over my
investments in toto from AXA. What are your
thoughts on this?
Thanks again; have a good day!
Bob
Great e-mail, good information that I didn't know. One of the ways that all companies get away with charging such high fees is because the fees are not shown on monthly statements and that includes Vanguard(although Vanguard has the lowest fees available), but trust me they are in there. When they report your account balance they just report it after the fees and expenses have been taken out, pretty sneaky. Even if you are not paying an administrative fee, you are still probably paying current pay fees of around 2% on your investments at AXA which include the expense ratio(s) of the fund(s) you are in as well as the death benefit fee. If you move that money in total over to Vanguard, you will pay fees of around .5%. Which sounds better to you? An informed investor would never invest any money with AXA if they had Vanguard as a choice. There is just no reason to. Why in the world would you want to continue paying higher fees when you don't need to.
As for the death benefit, what they do is bump up your death benefit over time to make it look attractive because the standard death benefit only guarantees your principal. Because you have been with AXA for a number of years, your account balance is significantly greater than your principal. DUH? Like I have said in my presentations, the chance that your account balance is less than your principal over long periods of time is about ZERO. So how can AXA continue to charge you for a death benefit when your account is never going to drop below your principal? They do it by saying that you are such a great customer that we are increasing your death benefit! Yipee! Call them back and ask them exactly what percent of your fees go to the death benefit and then decide if it is such a good deal. If you die, your beneficiary gets your full account balance anyway, so basically you are buying a $30,000 life insurance policy. If you have the need to protect your family in the case of your death, I hope you are going to get them more than $30,000 in life insurance, and if you do need to protect your family in the event of your death, buy a term life insurance policy, not a variable annuity.
By the way, we talked about what funds you should be in at Vanguard and I suggested the Total Stock Market Index as your major stock holding because that is what Vanguard recommended that my father do when they analyzed his holdings. You really should go to the Vanguard planning and education site and research what they recommend based on your age and risk tolerance. Because I do not know what other investments you have, I can't say for sure how you should invest your money, BUT, if this acount is your only investment and since you are close to retirement, you probably will want to invest a decent percentage of your money in a safer investment like a bond index fund. Check out Vanguard and then we can discuss it further.
I will check out Kiyosaki, thanks.
Hope that helps,
Bruce
Hi Everyone,
Hopefully
I transferred everyones address correctly but if I didn't, I guess you would
never find out anyway.
I have a few articles that I think are worth your
time to take a look at.
The first one is from Money magazine back in
2001. When I was getting myself educated about investing I subscribed to
Money and I really learned a lot. One of the best articles I read was 101
Things Every Investor Should Know.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://money.cnn.com/magazines/moneymag/moneymag_archive/2004/03/01/362343/index.htm
If you know all 101 of these things you are ahead of me and
way ahead of the game. This is a real good article to copy and keep around
and re-read once in a while. Depending where you are on the investing
learning curve, much of this article will make sense or much of it won't, but
the title of this article is 100% correct. These are things every investor
should know. If you don't understand any of them, it would serve as a
great guideline to guide your education. Try to understand one more each
day or each week.
The second article is the one about our quest to get
Vanguard in as a provider in
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.northjersey.com/page.php?qstr=eXJpcnk3ZjcxN2Y3dnFlZUVFeXkyJmZnYmVsN2Y3dnFlZUVFeXk2OTU4MzU3
The
last article comes courtesy of Doug Layman. This article is an interview
with the man who started Vanguard, John Bogel, and he
talks about the future of defined benefit plans like our pension. If you
recall, assuming you came to one of my presentations, the reason I contribute as
much to my 403(b) as I can is because I am not relying on our current pension
system still being in place when I get to retirement. Read what John Bogel thinks.
http://mail.wayneschools.com/exchweb/bin/redir.asp?URL=http://www.pbs.org/wgbh/pages/frontline/retirement/interviews/bogle.html
As always, any questions just ask. If you find
something you think is worth sharing let me know and we will send it
our.
Bruce
........................................................................................................................................................
This is an e-mail I received from a Wayne Teacher recently followed by my reply. Hopefully you find it interesting. Also, I would like to welcome to some new members to the e-mail list. I am working on a website to allow everyone to search an e-mail archive and when it is ready I will let you all know.
Enjoy,
Bruce
--------
Bruce,
I have filled out New Account Application for Vanguard, choosing the Total Stock Market Index Fund, Small-Cap Growth Index, 500 Index Fund, and Target Retirement 2035 Fund. Do you think I should select all of these or would you suggest fewer? After I complete the application I plan on hand delivering it to Gary O at the Board office, right? I understand that I can fill out the Transfer of Funds Form and Vanguard will contact AXA?
Please advise...thanks for your help.
Jen
BEFORE YOU READ MY REPLY LET ME CHALLENGE YOU TO THINK ABOUT WHAT YOUR REPLY WOULD BE, ESPECIALLY REGARDING HER CHOICES OF FUNDS. DO YOU THINK HER FUND CHOICES MAKE SENSE OR WOULD YOU SUGGEST SOMETHING ELSE. ONCE YOU HAVE THOUGHT ABOUT IT, READ MY REPLY. MY ANSWER ISN'T RIGHT BY THE WAY, IT'S MY OPINION. THE ONLY WAY TO FIND OUT WHAT THE RIGHT ANSWER IS IS TO LOOK BACK IN 20 YEARS AND SEE WHAT PLAN WOULD HAVE WORKED OUT BEST. WITHOUT THE GIFT OF FORESIGHT WE ARE LEFT TO CHOOSE WHAT WE THINK IS AN APPROPRIATE ASSET ALLOCATION BASED ON WHAT WE THINK WE UNDERSTAND ABOUT INVESTING AND HOW WE THINK THE MARKET WILL PERFORM. ANYWAY, THINK ABOUT IT, READ MY SUGGESTION, AND LET ME KNOW WHAT YOU THINK.
Jen,
The application for the new account goes to Vanguard, not Gary O. Only the salary reduction agreement goes to the Board and that form goes to Kathy Digglio in the Business Office.
Did you read the directions on my website like I told you (said with a smile). Go to http://www.mcnuttmath.com/403b/contents/index.htm and select the "How to Sign Up" link from the left menu bar and download the directions for How to Sign Up with Vanguard. Be sure to read the whole thing.
As for choosing you funds, I think there is some unnecessary redundancy
in your funds and please allow me to explain.
The Target 2035 Fund puts your money in the following five funds using
the five percentages listed.
1 Vanguard Total Stock Market Index Fund 72.1%
2 Vanguard European Stock
Index Fund 10.4%
3 Vanguard Total Bond Market Index Fund 10.0%
4 Vanguard
Pacific Stock Index Fund 4.7%
5 Vanguard Emerging Markets Stock Index Fund
2.8%
Total 100.0%
go to https://flagship.vanguard.com/VGApp/hnw/FundsHoldings?FundId=0305&FundIntExt=INT to research this or other funds at Vanguard.
If you are going to invest in the 2035 fund, there is probably no need to further diversify in those other funds you listed. That is the nice thing about the Target Funds. I would recommend that you go 100% the 2035 Fund if it seems to suit your goals, and then take some time to learn more about investing. If at that point you decide you want to further manage your account you can adjust by adding other funds, but there was a lot of redundancy in the ones you sent me and there are asset classes that you left out. Remember, there is a $15 yearly fee for each fund you invest in and there is no need to be in 4 different funds paying $60 per year when you could do what you want to do with just one fund.
For example, if you used the portfolio you suggested, the Total Stock Market Index Fund, Small-Cap Growth Index Fund, 500 Index Fund, and Target Retirement 2035, thin about the following redundancy.
The 2035 Fund already has 72% of it's assets invested in the Total Stock
Market Fund so there is no reason to also invest in the Total Stock Market Index
Fund.
Furthermore, the Total Stock Market Index Fund has a majority of it's
assets in the S&P 500 Fund so there is no real reason to also invest in the
S&P 500 Fund.
One other thing about your suggested portfolio is that you wouldn't have any money in Bonds. I don't know what other investments you have but assuming your 403(b) is your major investment, it is probably a good idea to at least be exposed to the Bond Market. As you get older and closer to needing the money, you will probably want to increase your exposure to Bond Funds to reduce your Market Risk.
There is nothing wrong with doing it any way you want, but if you are asking me for my advice, I would go with the 2035 Fund alone. Then take some time to learn about that Fund and exactly what it holds and then tweak it if you see reason to do so. My guess is you will decide to just leave it in the 2035 Fund alone. Remember, one nice thing about the 2035 Fund is that it will automatically adjust your asset allocation to a greater weighting in Bonds as you get older so that you don't have to.
By the way, there is no way to know which portfolio will be the great performer over the next 25 years. That is why our goal is to be in a well diversified, low cost portfolio and let time do the rest.
Let me know if that makes sense and let me know if you need any more help.
Bruce
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Just something for you to pass onto Jen about transfering out of AXA (I'm
going through that process right now). First, you fill out the Vanguard form
and send it to Vanguard. Second, Vanguard will send that form to AXA. Third,
AXA will then send you a form to fill out. One of the parts on the AXA form
must be filled out by Vanguard. Fourth, send the AXA form to Vanguard. Fifth,
Vanguard will complete the AXA form and send it to AXA. Sixth, (fingers crossed)
AXA transfers the money from your AXA 403b to you Vanguard 403b. I'm at step
five at this moment.
Jim
Greetings. I am the spouse of xxx xxxxx who is a physical education
teacher at WVHS. She has been forwarding me your emails regarding the
403b plans.
I am interested in the vanguard funds, but also realize that if you
diversify into more funds the $15 fee will quickly add up. I work
during the hours you are giving the presentations, but would like to
obtain more information about starting with Vanguard, switching monies
from current annuities to vanguard, etc. I have read the presentations
and can do some more things via the internet.
Mike
Hi Mike,
You will have to do your own math on this but let me give you an idea of what the $15 means at Vanguard.
I will assume you wife's 403(b) is with Equitable but the others are basically
the same.
Assume you have $50,000 in your 403(b) and you have 4 funds.
At Equitable you will pay about 1% in M&E fees = $500
At Equitable you will pay about 1.5% in expense ratios = $750
Total Fees and Expenses, approximately $1250.
At Vanguard you will pay no M&E fees = $0.
At Vanguard you will pay expenses of around .3% = $150
At Vanguard you will pay a $15 per fund admistrative fee = $60
Total Fees and Expenses, approximately $210.
Like I said, you can do your own math but the numbers above are certainly
in the ballpark of completely accurate.
Obviously there are other differences between Vanguard and an Insurance company and that is what I go over at the meeting and it is also hopefully pretty well covered on my website at www.mcnuttmath.com.
I would recommend you do your own research into the differences b/w Vanguard and an Insurance Company so you can make your own best decision.
Please feel free to e-mail me any other questions you have or let me know if you want me to give you a call.
I think you are going to find that unless you have an obscene number of funds or a very small balance, the $15 per fund at Vanguard is almost negligable.
Bruce