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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74853  
Subject: Allocating Retirement accounts Date: 12/1/1999 3:19 PM
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I am copying a part of a post I made on the Index Fund board here, since it relates to retirement accts:

As a beginning investor, one of the first things I did after studying TMF and elsewhere was to transfer my Keogh from high front-load mutual funds to the VFINX during the past year or so. I also opened a Roth IRA, which is also in that same fund. I also rolled an old 401a plan into the VFINX. I am self-employed , 43 years old and a 'late start investor'.

I have been reading more on investing now, and am wondering about several things.

1)First, if anyone cares to comment on this, is it undesirable to have all those retirement accts in the same fund? The accountant who did our taxes this year said he thought it was a bad idea. I only did it as a first move.

2)Vanguard can do free transactions between their own funds. I don't know if this all I wish to do.

I have read about the Foolish Four beating the S&P for the past 25 years, but to invest in stocks, I would have to become the trustee of my own Keogh, which sounds confusing to me at this point....or I could roll the Keogh into a traditional IRA...and open a SEP to make new contributions from now on from my self-employment income. Or I could just decide how to allocate the Keogh within Vanguard only and then freeze it, and start a SEP. I don't know if 'freeze' means stops accruing, or only that all future contributions are stopped. The SEP permits a smaller contribution than the Keogh, that's why I originally opened a Keogh a few years ago through a broker. I never knew I would become interested and capable of investing on my own.

Thanks in advance for any comments. Meowiz
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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15796 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/1/1999 3:29 PM
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IMHO there are a jumble of issues here: (1) the device, Keogh v. SEP v. IRA; (2) how to administer; (3) what to invest in.

Regards (1) there is no reason for you to be the trustee of your own plan. Almost all, if not all, brokerages will be happy to give you their regional prototype Keogh plan and transfer your assets into that plan. This really takes care of (2) as well.

Regards (3)--- this is really a personal decision. I would sooner turn in my grave than buy a mutual fund; even VFINX; but, buying the Vangaurd Index Trust 500 may be the exact right decision for you.

TheBadger


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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15797 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/1/1999 3:45 PM
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Thanks, Badger, for your reply,

there is no reason for you to be the trustee of your own plan. Almost all, if not all, brokerages will be happy to give you their regional prototype Keogh plan and transfer your assets into that plan.TheBadger

Vanguard told me on the telephone that I must become the trustee of my own Keogh in order to buy individual stocks with my Keogh contributions.

...this is really a personal decision. I would sooner turn in my grave than buy a mutual fund; even VFINX; but buying the Vanguard Index Trust 500 may be the exact right decision for you.

Yes, it seems people either love or hate the idea of the VFINX. I am neutral so far. I regarded that move as a first baby step in taking control of my own money. But if the Foolish Four is reliable and I can learn it myself, it seems to give better returns even long term. I thought that could be my second step, perhaps. I am interested in different points of view.
thanks alot. meowiz



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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15798 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/1/1999 4:14 PM
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Index fund is a good place to begin. Foolish Four is not a bad first step in stocks. There are other Foolish stock strategies. You can read about them starting in Fool School from the home page at fool.com.

Long term buy and hold is one of the most cost effective strategies. And if you have funds for investment after your tax deferred investments are fully funded, it is a tax efficient strategy. LTBH works well inside or outside a tax preference account.

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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15800 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/1/1999 4:45 PM
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Pauleckler, thanks for your reply:

"...LTBH is one of the most cost effective strategies. And if you have funds for investment after your tax deferred investments are fully funded, it is a tax efficient strategy. LTBH works well inside or outside a tax preference account.

Yes, I understand from reading that the FF method is best in a tax-deferred account, i.e., compared to a non-tax-deferred account. I will study the Fool School some more, as you suggest, too.

Does anyone have ideas about the questions about best way (i.e. roll it over, or become my own trustee--as my own trustee, Vanguard will make it a brokerage acct.. etc) to get my Vanguard Keogh into some stock investments? thanks alot! Meowiz


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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15801 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/1/1999 5:16 PM
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<<<Does anyone have ideas about the questions about best way (i.e. roll it over, or become my own trustee--as my own trustee, Vanguard will make it a brokerage acct.. etc) to get my Vanguard Keogh into some stock investments? thanks alot! Meowiz>>>

Become your own trustee and keep the Keough. Able to invest more and the only down side is that once a year you'll have to do some paper work. But that is greatly ofset by the higher contributions you can make. That's what I did and it was no big deal.

JLC


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Author: KGWood One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15813 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/1/1999 10:19 PM
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I've been reading this thread and, to begin, I have to congratulate you for having the right attitude as you begin this great adventure called "investing." Wish I had the same level headed attitude when I started (but that's another story....).

I'm not surprised Vanguard wants you to be trustee in a Keough if you want to trade stocks (and I know you don't mean "day-trade" -yikes!!!). They don't want the fiduciary responsibility if you screw up your stock selections and, they may never say it, they want you in their funds. Mind you, I'm a big fan of some of their funds (as an aside, check out their Capital Opportunities Fund - same guys that manage their PRIMECAP fund).

Regardless, being fiduciary: you really already are if you are "Foolish" (you ARE responsible for your investment actions, aren't you?!!) - this shouldn't be a problem for you. Go for it!

Good luck. I look forward to reading your future investment ideas on the Fool's boards!

Ken

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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15819 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/2/1999 8:55 AM
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JLC said,

Become your own trustee and keep the Keough. Able to invest more and the only down side is that once a year you'll have to do some paper work. But that is greatly ofset by the higher contributions you can make. That's what I did and it was no big deal.

Thanks for replying. Reading this also makes me think it would be better for my husband than a SEP, since it allows a greater contribution. Will look into it.
Meowiz


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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15822 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/2/1999 9:17 AM
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Ken said,

I've been reading this thread and, to begin, I have to congratulate you for having the right attitude as you begin this great adventure called "investing." Wish I had the same level headed attitude when I started (but that's another story....).

Thank you for these kind words, and your and everyone's patience with my questions.

I'm not surprised Vanguard wants you to be trustee in a Keough if you want to trade stocks (and I know you don't mean "day-trade" -yikes!!!).

No, I mean LTBH with what I imagine are sometimes necessary adjustments.

They don't want the fiduciary responsibility if you screw up your stock selections and, they may never say it, they want you in their funds. Mind you, I'm a big fan of some of their funds (as an aside, check out their Capital Opportunities Fund - same guys that manage their PRIMECAP fund).

Thanks for the suggestions. I will take a look at those funds. When I asked Vanguard yesterday on the phone why they don't have other funds beside the VFINX that are VERY popular, the representative said they used to have a couple that were great, but daytraders were hurting them, so they had to close the funds till interest 'dies down' and then reopoen them later. They have a fund, I forget the name, that he mentioned as being very good now, but it requires $25,000.00 to get in.

Regardless, being fiduciary: you really already are if you are "Foolish" (you ARE responsible for your investment actions, aren't you?!!) - this shouldn't be a problem for you. Go for it!

Thanks for the encouragement! Yesterday I was reading an article in Kiplinger's Stocks 2000 investment guide. The article was written to encourage the beginning investor to have confidence in developing a personal approach, describes four different investment styles, each personified in the article by an actual 'professional' fund manager with alot of details, etc. The odd thing was that each of their funds has underperformed the S&P. This made the VFINX look like a very good preliminary move, and also encouraged me to keep studying.

Good luck. I look forward to reading your future investment ideas on the Fool's boards!

Thanks again to you and everyone for your patience!
Meowiz

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Author: FoolishLikeaFox Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15836 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/2/1999 12:08 PM
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When I asked Vanguard yesterday on the phone why they don't have other funds beside the VFINX that are VERY popular, the representative said they used to have a couple that were great, but daytraders were hurting them, so they had to close the funds till interest 'dies down' and then reopoen them later.

I think "trading" is becoming a major concern for Vanguard, since it can be conducted online with no resistance.

I had an IRA with Vanguard with the entire balance in the Health Care fund (VGHCX). It had a one year holding period with a 1% penalty for shorter time. They increased that to five years about the time I bailed out of it.

Likewise, the Vanguard 500 (VFINX) cannot be exchanged online at all. You have to send the paper exchange form to Vanguard.

Fox

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Author: Meowiz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15837 of 74853
Subject: Re: Allocating Retirement accounts Date: 12/2/1999 12:35 PM
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Foolish like a Fox said:
I think "trading" is becoming a major concern for Vanguard, since it can be conducted online with no resistance

I just checked their website, and the Capital Opportunities Fund requires a 25,000.00 minimum, I didn't see how to check on a holding time but am going to look for it on the different funds. Their PRIMECAP Fund is closed to new investors.

Likewise, the Vanguard 500 (VFINX) cannot be exchanged online at all. You have to send the paper exchange form to Vanguard.

I guess you probably mean for non-retirement account investors. With my Keogh, I can transfer between their own funds over the phone. Meowiz

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