Vanguard/Index Fund Newbie

**Broken Arrow** · 03-20-2008, 10:44 AM

Ooh, let me put on my flame-retardant pants on for this one.

Who is this 'high priced brokerage firm' by the way? Not all managed fund brokerages are all that bad....

Truth is, you'll find a lot of Vanguard advocates (some say, cultists) here.

But you'll also hear from some who advocate managed funds. My personal opinion is that it is best to start out with index funds and build from there.

Again, it all really depends on which brokerage it is, and more importantly, what funds you are in, what percentages, its tickers, retirement horizon, and if you can, the loads, fees, and expense ratios. I think we would need that first before we can fight it out about which course of action is best for you.

**Merch** · 03-20-2008, 10:57 AM

I use index funds for my general retirement for US equity, international, and bond. I use managed funds for more specific allocations like REITs and micro cap.

Vanguard also sells managed funds from Wellington which is a very respected invesment shop in Boston. (I don't nor have worked for them.)

But I agree with BA - look at the loads, fees, expenses and record of the portfoli omanager for managed funds.

**Spud** · 03-20-2008, 12:31 PM

Our account is with UBS. We pay them 1% to manage it. Our personal financial planner is nice, good w/ the customer service end, but we have not been with him personally long enough to say what his track record is. Our account is allocated like this:

Large Cap Stocks - 53%
Domestic Bonds - 16%
MMF - 15% (this is probably too much but we just sent some $ over last month because I didn't want it hanging out in our regular savings account)
Small Cap Stocks - 10%
International Stocks - 5%
Other - 1%

My husband would like to phase out full time work in 20 years, and be completely done in 25. Our taxable accounts are for retirement, and could perhaps help buy us a home if/when we decide to move. Our current home is paid for, but it will not fulfill our future needs.

Does that help?

**meaghanchan** · 03-22-2008, 05:58 AM

One of the best things about index funds is that they're very tax-efficient. Since you already seem to have your target allocation worked out, I would take the 'large-cap US stock' portion of the money and put it into VTSMX, Vanguard's Total Stock Market Index. While I believe that one can make a case for managed funds for tax-advantaged accounts like IRAs and 401(k)s, outside of those accounts, index funds have a huge advantage. They are very low-turnover, very low-fee, and over long periods of time especially, their after-tax returns are much better than most managed funds when you compare apples to apples.

It sounds from your question that you aren't ready to move from your full-service brokerage firm yet, just that you aren't going to be sending them any more money. If you get more comfortable in the future with doing it yourself, and decide to move your entire taxable account to index funds with Vanguard, you can move them over to an allocation that matches what you have now, just with index funds:

53% VTSMX (Vanguard Total Stock Market)
16% Total Bond Market and/or Intermediate term bond market
15% Vanguard Prime Money Market
10% small-cap index or tax-managed small cap fund
5% FTSE ex-US index (foreign stock, very tax-efficient, but there is a purchase fee)

And yes, I like Vanguard. I have only been investing with them for a short time (just over 2 years) but I really think that their unique structure makes them uniquely investor-friendly.

**disneysteve** · 03-22-2008, 05:24 PM

I've always been happy with Vanguard. I have index and managed funds with them. Correspondence is good. Website is easy to navigate. Phone support is very good. Really no complaints.

Not part of your original question but just some unsolicited advice. I'd recommend more than 5% in internationals. When you invest that 15% sitting in the MMF, that might be where you want to direct it.

**jc3900** · 03-22-2008, 05:40 PM

The only experience I have had in my short lifetime is with the vanguard s&p 500 index fund, which by the way has been very fun to watch as the market has been very crazy the last couple months. I just got started a couple of months ago and found it very easy to check the acount online and get help from their telephone support. However, this is the only company I have experienced, but it has been a good one.

**ThriftoRama** · 03-22-2008, 06:24 PM

I have to say Vanguard is the way to go. There is a reason brokers hate them-- because their fees are so low, it's not profitable to tell people about them. Of course, that means more money in your pocket and less to the broker, and that really adds up over time.

If you need some more ideas or some sample investment portfolios using Vanguard funds, the book The Lazy Person's Guide to Investing by Paul Farrell is invaluable. I have read thousands of PF books and this is one of the few I keep on hand for reference. I am in the process of transferring my portfolio to one of those outlined in this book.

Good luck!

**Ima saver** · 03-23-2008, 10:19 AM

I have had Vanguard Index 500 for over 18 years and have been very impressed with them.

**Spud** · 03-28-2008, 03:24 PM

I wanted to thank you all for your responses in this thread. I really appreciate them. I am not ignoring; I am mulling, mulling, mulling ... hemming and hawing.

**LuxLiving** · 03-28-2008, 03:43 PM

I would be remiss as a Fidelity cultist if I failed to mention their four-in-one index fund FFNOX!

shhhh, don't tell the regulars but I also own a bit of the ol'Vanguard!

**sweeps** · 03-28-2008, 04:26 PM

75% VTSMX
25% VGTSX

...Engage.

**Broken Arrow** · 03-29-2008, 09:35 PM

Originally posted by Spud View Post

I wanted to thank you all for your responses in this thread. I really appreciate them. I am not ignoring; I am mulling, mulling, mulling ... hemming and hawing.

That's not a bad thing.

Unless you're an active day trader or something, to me, investing seems to be more like classic chess: You want to study all your options and consider every possibility before you make that one good move. You wouldn't want to take forever, but there's no need to rush either.

Vanguard/Index Fund Newbie