Beginners Roth IRA Advice

[disneysteve]

Im telling you what I know. you can take it or go find out the truth. I want you people to go find the truth. Look past the Bull**** out there.

Target date fund = .19%

Funds in the target date = .30

Just pay .30 and do it yourself. don't pay the .19. your are paying the .19 just for someone to reallocate the funds in the fund for you.

Let me try this again. You are doing the math wrong and I'm not sure how to make that clear. The cost of owning each of these 3 funds individually is exactly the same as the cost of owning all 3 combined in the target fund. The target fund doesn't add an additional 0.19%. That expense already exists for the individual funds.

VTSMX has an ER of 0.18%
VGTSX has an ER of 0.26%
VBMFX has an ER of 0.22%

When you average that out with the allocation in the target fund, it comes out to 0.19% since the bulk of the holdings are in VTSMX.

If, as you say, each fund also has an additional 0.3% expense that is hidden (trading costs, etc.), you will be paying that either way whether you invest in the funds individually or as part of the target fund.

By the way, I tried to check the fund at personalfund.com and the Vanguard fund is not in their database so that source isn't of any value in this discussion.

[Shewillbemine]

Sounds like someone's got a case of the "conspiracies".

If you dig enough and dabble a little suspiciousness, EVERY industry has its trolls, skeletons and demons. Government, education, sports, restaurant cooking, boy scouts, religion, chocolate factory, groceries, etc...

A person who offers advice NOT to do something without offering actual advice on WHAT to do may as well have kept his mouth shut. NoBullAdvisor - if you would be so kind as to list funds the OP SHOULD invest in, we can put this puppy to rest. Otherwise, laugh your way to the bank because you've outsmarted the millions of people who invest in said funds (sarcasm).

[jpg7n16]

Source Edelman Financial.
Disclosure. I not affiliated with Edelman Financial

I do my own research but this guy puts it in plan english.

"The sad fact is that the SEC is contributing to a fraud on the American investor. As the nation’s chief securities regulator, the SEC requires each mutual fund company to issue a prospectus. This document reveals vital information about the investment that all investors should know. It’s so important that the SEC requires that all investors be given a copy of the prospectus when they invest...

It's times like these that knowing how to use Google really pays off. The 'source' for this rant against Target Date funds... can you guess the title??

Q: Can you help me understand the Statement of Additional Information for owning a mutual fund?

It's not about Target Funds. It's about Mutual funds in general.


It's also times like this when I think about how one should evaluate the source and any potential bias in the report... for instance:

This article was written by an advisory firm whose sole income is derived from convincing you that it is better to pay them a fee than have your money invested in a mutual fund.

If you don't know what you're doing, maybe it is better to pay them than to do it yourself, but can you say conflict of interest much?

From: Q: Can you help me understand the Statement of Additional Information for owning a mutual fund?

One academic study found that the average SAI costs are 1.44% — a figure that is about the same as the costs found in the average prospectus...

Now you see why people prefer to hire us instead of trying to analyze mutual funds for themselves. By hiring us, we can provide investors with investments whose total costs are far less than the investments they might choose on their own. In most cases, even after paying our fee, they’re saving money — almost as though they’re getting our services for free.

From: EMAP Fee Schedule | Ric Edelman

EMAP Fee Schedule

EMAP clients pay no commissions, trading costs, brokerage fees or other administrative charges.** Instead, EMAP features a single annual fee, calculated and debited quarterly from your EMAP account. It appears directly on your statement.

The annual fee schedule is shown below:

First $150,000
2.00%

Next $250,000
1.65%

Next $350,000
1.25%

Next $250,000
1.00%

Next $2 million
0.75%

Next $7 million
0.60%

Next $15 million
0.50%

Moral of the story? "Don't pay 1.44%! That's outrageous. Can you believe what they're charging?? You should instead invest with me... starting at 2% on a tiered schedule."

**notice how they leave "fund expense ratios" out of the list. For all that talk about hidden fees, you'd think he'd bring that up. Hmmm.

From: EMAP FAQs | Ric Edelman

The total cost of the investments used by EMAP varies based on the specific portfolio we recommend for you; typically it is less than 0.40% per year. This is low by industry standards.

This is in addition to the 2% fee...



You still have yet to provide proof that Target Date Fund fees are more than regular mutual fund fees. You also have yet to back up your claim that "several companies are discontinuing these type of funds."

[jpg7n16]

and SEC.GOV and FINRA.ORG

Very true. Please check out these websites, for instance - Finra's fund analyzer:

Fund Analyzer

Please run your test on Vanguard Target 2045 and report what expenses FINRA.ORG has to say will be charged to your investment.


Or the SEC.GOV listing here:

Investor Bulletin:* Target Date Retirement Funds

Which is very clear to say that you should determine if a target fund is right for you and your risk tolerance before investing, but definitely leaves them open as legitimate investing options for a specific purpose. You would think that if there were massive hidden fees, the SEC would include them in this alert wouldn't you? (Yes, it is an investor's alert about Target Date funds - that doesn't make mention of any massive hidden fees)

The main thing to be aware of is don't assume that because it's targeted for your retirement date that it's guaranteed to make money. It's guaranteed to be professionally allocated, but not guaranteed to make money. (Apparently, this was a common misunderstanding)

You'll notice that the SEC complaints against target funds are about investor misconceptions of the funds - not about fees.

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NoBull - just because you refer to a government website doesn't mean that you're correct. Please post direct links to information released by (not submitted to) government agencies that verify your arguments. Don't just add their names to your post as 'proof' that the government is on your side.

Otherwise your reference is just as meaningful as me saying "Target Date funds are the best investing option for every person. Don't believe me? Check out CBOE.com, NASA.gov, DOL.GOV, WhiteHouse.gov and LiveUnited.org." See I referenced a regulator's website, official government websites, and even a respectable charity! Why don't you believe me??

Links, please. Links.

[disneysteve]

A person who offers advice NOT to do something without offering actual advice on WHAT to do may as well have kept his mouth shut. NoBullAdvisor - if you would be so kind as to list funds the OP SHOULD invest in, we can put this puppy to rest.

Actually, he did say what to invest in - Vanguard's Total Stock Market index fund. (see post 4). The problem is he has yet to give any explanation of why putting 100% of assets into a domestic stock fund is better or cheaper than diversifying into domestic and international stock funds with a token exposure to bonds as well.

[hokies2688]

well that was all an interesting sunday night read. so if I wanted to get a little more aggressive, do you think it would be reasonable to switch to the 2055 fun instead of 2045 because they have more stocks/less bonds?

[Petunia 100]

well that was all an interesting sunday night read. so if I wanted to get a little more aggressive, do you think it would be reasonable to switch to the 2055 fun instead of 2045 because they have more stocks/less bonds?

TR 2055 and TR 2045 currently have the same allocation (90/10 stocks/bonds). TR 2045 will begin adding more bonds 10 years sooner than TR 2055 will. But for now, they are essentially the same fund. You can view the "glide path" at vanguard.com.

In my opinion, you should leave your money alone and just keep contributing more and learning. The time will come when your porfolio is large enough that you can consider changing your allocation if you like. For example, many people like to hold reits and/or overweight small value. Because of fund minimums, you need more money to be able to do this. Or, you may decide to just leave your portfolio as it is. You really do have a very good portfolio with a single Vanguard TR fund.