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Need help with deciding on mutual funds package for IRA

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seanwilson769
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Need help with deciding on mutual funds package for IRA  Reply with quote  

I am new to investing and know very little so bear with me.

I recently put my IRAs, as well as some other investments, in Edward Jones accounts. My advisor is pressuring me to make a decision fast on whether I want a "mutual funds package" that includes ATFs or a "Flex" which is stocks and bonds. Right now it's just in a basic "brokerage" account. I really don't know the best course of action. Individual stocks seem risky to me. But I've heard the mutual funds have loading fees, like 1.35%. If I had millions, I wouldn't worry about that fee, but I don't.
Post Sun May 14, 2017 1:46 pm
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oldguy
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quote:
fees, like 1.35%. If I had millions, I wouldn't worry about that fee, but I don't.


Well, as an old wealthy retiree, I can tell you that we also worry about fees - eg, a 1.35% fee costs $13,500 per year for each million in our fund.

EF Jones is a full-service company - they provide advice at a cost. But there sales model comes some conflict-of-interest, they push you to buy their package of products (commission) and they encourage you to hurry, trade often (more commissions).

Long term fees are a major headwind. Say that you invest $500/m during your 30 yr work-career. If you get the average return of the generic US Market, the SP500 11%/yr return, that $500/m will be $1,325,000. However if you pay 1.5%/yr commissions and expenses, that gets reduced to $983,000, ie, a $342,000 loss.

John Bogel (founder of Vanguard) wrote a book about this subject a few years ago - he summarizes and simplifies why and how the SP500 Index Funds are the best approach for most people, the title is 'The Little Book of Common Sense Investing', it cost about $15.

Here is a site that gives the history of the SP500 returns for over 100 years. Check a few 30-year blocks of time, the average return is usually close to 11%/yr.
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.WRiPFMYjWUl


quote:
Individual stocks seem risky to me.


Yes. The SP500 Index carries the risk of the US Stock Market Average, it is essentially the measure of how the entire business/economy is performing. When you narrow that index down to one segment (with an ETF), you basically superimpose the risk of the segment on top of the risk of the SP index. And when you further narrow down to an individual company within a segment, you add that company risk on top of the ETF plus the SP index. A total of 3 risk levels. Most of us feel that it is uncompensated risk - you could pick either a homerun, or a bankruptcy - you don't need that double-or-nothing risk level, better to simply accept the 11%/yr that the generic market gives you.
Post Sun May 14, 2017 5:24 pm
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Glori Yoo
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Interesting blog.  Reply with quote  

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Post Sun May 14, 2017 6:14 pm
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seanwilson769
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quote:
Originally posted by oldguy

Yes. The SP500 Index carries the risk of the US Stock Market Average, it is essentially the measure of how the entire business/economy is performing. When you narrow that index down to one segment (with an ETF), you basically superimpose the risk of the segment on top of the risk of the SP index. And when you further narrow down to an individual company within a segment, you add that company risk on top of the ETF plus the SP index. A total of 3 risk levels. Most of us feel that it is uncompensated risk - you could pick either a homerun, or a bankruptcy - you don't need that double-or-nothing risk level, better to simply accept the 11%/yr that the generic market gives you.


So, should I ask them just to leave the IRA in a brokerage account? Because after reading this, I am not interested in the mutual funds or the flex option (stocks). It doesn't seem that profitable. I don't want to lose a chunk of my IRA. I tried self-investing but I lacked any knowledge to do much of anything. I had S&P 500 Index with vanguard but didn't know much about it, until now.
Post Sun May 14, 2017 7:18 pm
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oldguy
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quote:
I had S&P 500 Index with vanguard but didn't know much about it, until now.


IMO, would be best to go back to that position - an SP500 Index Fund with Vanguard (or Fidelity) has very low costs, close to 1/10 of a percent. Very Happy
Post Sun May 14, 2017 11:14 pm
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seanwilson769
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I don't think I'm allowed to transfer my IRA more than once a year, or I would transfer back to Vanguard.
Post Mon May 15, 2017 1:45 am
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oldguy
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bocrangsuthammy, you are copy/pasting my posts and imbeding your spam. Is that really all you have to contribute??
Post Thu Jun 15, 2017 2:18 pm
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