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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75642  
Subject: Re: trad IRA vs rollover IRA for 401 k consolida Date: 11/24/2003 6:52 PM
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Dan...

1. I'm looking at BrownCo (and Scottrade) for the 401k rollover account because I am at the same time selecting a place to have a post-tax account. My reasoning is that it would be convenient to have both accts at the same location.
On the other hand, if having the rollover account at BrownCo is going to increase my ownership costs then it worth considering going directly to Vanguard. To think further on your point I don't plan to be an active trader with my post-tax money either, and perhaps I might as well do all my business at Vanguard. (?)


Brown or Scott would probably be an acceptable alternative to Vanguard for your rollover account. I just don't have any personal experience with either. I got my daughter started with Vanguard and she is very satisfied with them. Also, there is nothing wrong with shopping around a bit for the best discount broker for investments other than your core account. Nothing says that everything has to be consolidated with one company. As a matter of fact, if you don't mind the weekly trading policy of ShareBuilder ($4.00 buys), you can save a bunch.

2. The coffeehouse portfolio you link to is the seven-fund version of the portfolio. The book discusses the simplest version being a single "total market index" fund. Between the one-fund and seven-fund is the three-fund which was my original intention. I plan to start with a three-fund portfolio. However looking at the seven-fund portfolio, it doesn't look intimidating, but don't have a set of target balace ratios yet for a seven-fund portfolio so I'm not ready to go there. In fact I don't think the book prescribes a balance for the seven-fund portfolio. I'd have to do more research on a proper balance before going to seven funds.

The Coffeehouse portfolio is fine in most of it's iterations, but I have never heard of one with less than 6-7 funds. Also, it favors more of a "Slice & Dice" type of investing technique - which I don't care too much for. It's kinda like trying to cover ALL the bases (Over diversification in my mind). Have you looked at the "Couch Potato" Portfolio? That one is only two funds and includes either the "S&P 500" Index Fund or the newer "Total Stock Market" Index Fund and the "Total Bond Market" Index Fund in varying proportions. The variance depends on either an investor's tolerance to risk or the number of years left to retirement.

http://www.investopedia.com/articles/mutualfund/03/043003.asp

Again...if you don't want to be bothered with rebalancing periodically - as with the Couch Potato or Coffee House portfolios, Vanguard has a number of possibilities to choose from. My daughter didn't want anything more then the very least amount of involvement with her Roth IRA and she didn't want much of any risk, so I got her started with the Vanguard "Balanced Index Fund" (VBINX) which is a 60/40 split between the Total Stock Market Index Fund (VTSMX) and the Total Bond Market Index Fund (VBMFX). It automatically rebalances itself. So...since putting a name on everything has been very popular...I call this the "Feed it and Forget it" approach.

Lastly, I'm 33 and have three kids, a wife, a house, and a single income. I don't know how one measures investment experience. Number of trades? Money gained? Money lost? I've been thinking about investing since I got my first job with a 401k fund and stock options about ten years ago. However I have not dived into the equities market and been an active trader, I've been looking for a strategy that I can be confident in. So at this point I think I have found a sound strategy for at least my retirement money, but as always I'm open to debate and opinions and I really appreciate your questions.

How do you measure investment experience? Great question, however, I don't really have a definitive answer. You probably already have more experience then most. Does jumping into the market with both feet equate to experience? Absolutely! Does participating in your company's 401k equate to experience? Again...absolutely! Does reading all of the appropriate books about investment techniques/options equate to experience? I think so. How about spending an appropriate amount of time learning how to research a company to determine it's investment possibilities? Yup!

All of these experiences...and time...must determine how capable an investor we are - I think. There are many variables that will make us doubt just how experienced we think we are, but...there are no guarantees!

Best regards,
Bill


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