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Author: myrtledove Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: Roth IRA Date: 6/8/2005 3:16 PM
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I am planning on opening a Roth IRA.

Can someone explain to me the difference between going directly through Vanguard or using a broker, like Ameritrade. I am new at this.

Any help would be appreciated. Thanks.
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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46399 of 76384
Subject: Re: Roth IRA Date: 6/8/2005 3:32 PM
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When you open an IRA at a custodian, you can invest in whatever that custodian allows you to invest in, and you pay whatever fees that custodian demands, and you're subject to whatever minimums the custodian sets.

If you go directly through Vanguard you'll be able to buy most Vanguard funds without a purchase fee, but you will pay an IRA custodial fee of $10/fund each year until that fund's balance is above $5,000. If you want to buy other investments you'd have to open a Vanguard Brokerage account which has an annual fee also, and then you'd pay whatever sales commission Vanguard charges for going out and buying that investment for you.

If you open your IRA at a broker you'll be subject to whatever fees and minimums that broker sets. You'll be able to invest in just about anything but you'll pay a sales commission for each purchase (except possibly for certain no-transaction-fee mutual funds).

Also nothing stops you from opening IRAs both places -- just make sure the total of your contributions to both places is within your limits, and make sure you understand the fee structures.

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46400 of 76384
Subject: Re: Roth IRA Date: 6/8/2005 3:33 PM
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Can someone explain to me the difference between going directly through Vanguard or using a broker, like Ameritrade. I am new at this.

Typically, you would be better off going directly with the fund family (such as Vanguard) when you plan to invest specifically in their stable of funds. In the case of Vanguard, there was a time when Scottrade offered the same (if not better) cost savings on Vanguard funds but they have since started charging transaction costs.

If you plan to invest in a variety of funds and possibly a few stocks as well, it will typically be better to go with the Roth at a brokerage. While you can purchase stocks through Vanguard, their brokerage accounts have higher fees than other brokers.

FWIW, I have almost all of my IRAs (Roth, Traditional and SIMPLE) at Vanguard and one additional Roth IRA at Scottrade. The accounts at Vanguard are invested purely in Vanguard funds. The Scottrade account was opened to invest in individual stocks.

Hope that helps a litte bit.

dt

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Author: myrtledove Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46401 of 76384
Subject: Re: Roth IRA Date: 6/8/2005 3:36 PM
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Thank you for responding so quickly. That helps me quite a bit.

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Author: arizonacat56 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46402 of 76384
Subject: Re: Roth IRA Date: 6/8/2005 3:36 PM
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The big difference is that if you go directly through the mutual fund company, you avoid the fees that some brokers add on. This fee is tacked on to each buy and each sell that you do. It gives you no value, it is just pure profit for the brokerage firm. There are a few brokerage firms that don't charge the extra fee, but I believe Ameritrade is not one of them.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46408 of 76384
Subject: Re: Roth IRA Date: 6/8/2005 11:04 PM
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The big difference is that if you go directly through the mutual fund company, you avoid the fees that some brokers add on. This fee is tacked on to each buy and each sell that you do. It gives you no value, it is just pure profit for the brokerage firm. There are a few brokerage firms that don't charge the extra fee, but I believe Ameritrade is not one of them.

Not completely true, if you buy Vanguard or NTF funds then you will pay no commissions at Vanguard, however non-NTF funds are $35 per trade while at Ameritrade they are 17.99.

Vanguard funds are no-load at Vanguard but they would be subject to the 17.99 hit at Ameritrade.

Also DCA, can be done at no charge at Ameritrade(17.99 one time charge)while DCA is $3 per trade at Vanguard.

Vanguard is not always better.

buzman


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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46415 of 76384
Subject: Re: Roth IRA Date: 6/9/2005 11:10 AM
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Vanguard is not always better.

Case in point, I have 2 Vanguard funds in a Scottrade Roth account. While I bought them before Scottrade instituted transaction fees for Vanguard ($17), my total cost to buy and sell would have been $34 under the current system. Vanguard charges $30/yr per account (I think this is waived if the balance is over $10k, but since I have under $4k, it does not apply). Now if I buy and sell a lot of Vanguard, then the Vanguard is the better option. But if I do not buy/sell more than one fund a year, then the Scottrade with its zero account fees is a better deal.

Fuskie
Who recommends determining your investment strategy before comparing discount brokers...

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46416 of 76384
Subject: Re: Roth IRA Date: 6/9/2005 11:26 AM
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Vanguard charges $30/yr per account (I think this is waived if the balance is over $10k, but since I have under $4k, it does not apply). Now if I buy and sell a lot of Vanguard, then the Vanguard is the better option. But if I do not buy/sell more than one fund a year, then the Scottrade with its zero account fees is a better deal.

Where did you get the $30/year figure?

Vanguard charges (for Vanguard funds held in an IRA at Vanguard):
-$10/year for any fund with a balance below $5000 (you can pay this with money from outside the IRA). This fee is waived if your total assets at Vanguard are above $50,000, and it's waived for money market funds.
-$2.50/quarter for an index fund with a balance below $10,000 (this is deducted from your dividends). This fee is never waived.

If you're interested in an index fund, there are usually a few "not quite index" funds that would perform almost the same as the index fund and save you the $10 fee.

But the most that you'd pay inside an IRA is $20/year.

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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46417 of 76384
Subject: Re: Roth IRA Date: 6/9/2005 1:19 PM
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But the most that you'd pay inside an IRA is $20/year.

Per fund.

dt

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Author: PanemetCircenses Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46418 of 76384
Subject: Re: Roth IRA Date: 6/9/2005 1:44 PM
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But the most that you'd pay inside an IRA is $20/year.

Per fund.

The OP might also be better off w/ indexed ETF's through Ameritrade depending on the circumstances.

--B+C

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Author: jimclark77 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46421 of 76384
Subject: Re: Roth IRA Date: 6/9/2005 9:00 PM
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I have my ROTH through Vanguard. I cost average...I invest $4000/12 each month. I found for me it is more convenient to contribute each month than to save over the year (plus I get the benefit of averaging...and hoping the price rises during a year, can buy some at lower prices). If I did this through an online broker, I would get charged each deposit. Vanguard makes the automatic payments quite easy. The big advantage I see in going through an online broker is to invest the ROTH in specific companies, not in index/mutual funds.

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Author: kfidei101 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46429 of 76384
Subject: Re: Roth IRA Date: 6/11/2005 9:46 AM
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Thank you. This thread is really helpful. Question - I have a 4k custodial ROTH IRA for my daughter (age 17) through my broker, who is using AIG, and I just found out they want to charge me $35/year. Isn't that kind of high? What are my options? Does some of that go to my broker? If so, I have an issue to resolve w/ him because he didn't tell me that in advance. If I sell it and buy another, won't I have taxes and penalties?

Thanks for your thoughts,
Kelly

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46430 of 76384
Subject: Re: Roth IRA Date: 6/11/2005 10:02 AM
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Question - I have a 4k custodial ROTH IRA for my daughter (age 17) through my broker, who is using AIG, and I just found out they want to charge me $35/year. Isn't that kind of high?

I have had custodial Roths for kids through Janus and Scottrade but most recently Scottrade. Scott was easy to deal with and charges no annual fee. There's a $500 minimum and that account is in individual stocks. There are trading fees for many mutual funds but EFTs can serve the same purpose with a lower commission.

rad

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46443 of 76384
Subject: Re: Roth IRA Date: 6/13/2005 11:30 AM
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I have a 4k custodial ROTH IRA for my daughter (age 17) through my broker, who is using AIG, and I just found out they want to charge me $35/year. Isn't that kind of high? What are my options? Does some of that go to my broker? If so, I have an issue to resolve w/ him because he didn't tell me that in advance. If I sell it and buy another, won't I have taxes and penalties?

My best guess...

- All IRAs are "custodial". The custodian in this case is not you, it's AIG. IRAs can only be individually owned; the guardian has no legal say over them.
- An IRA can only be funded with the individual's earnings. If your daughter doesn't have earnings, she can't legally have an IRA.
- The $35/year is AIG's cost for doing the tax bookkeeping for her account. Your broker doesn't get any. Many IRA custodians charge similar fees -- you'd do well to find one without the fees.
- However, all the investments in the IRA have annual fees also (a percentage of your assets is deducted continually), of which probably 1% goes to the broker. If you're in annuities the percentage is higher.
- If you sell your investments and withdraw there will be IRS taxes and penalties, but only on the gains. But I have no idea what you are invested in and if there are withdrawal penalties charged by AIG.
- You can avoid the IRS taxes and penalties if you roll over the IRA to another IRA custodian. But AIG probably has fees and penalties for rolling over the IRA to another custodian.


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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46444 of 76384
Subject: Re: Roth IRA Date: 6/13/2005 11:41 AM
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Let me correct myself. I incorrectly assumed that the parent/guardian has no control over the IRA; that was wrong.

If a child has earned income, and an IRA is opened, the guardian has control over the IRA until the child reaches the age of majority.

http://www.fool.com/money/investingforkids/investingforkids03.htm

However I still think everything else was accurate.

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Author: arizonacat56 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46456 of 76384
Subject: Re: Roth IRA Date: 6/13/2005 9:37 PM
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I have had custodial Roths for kids through Janus and Scottrade but most recently Scottrade. Scott was easy to deal with and charges no annual fee.

Most mutual funds have no annual fee. If you buy the funds through Scottrade though, you are going to get hit with a fee every time you buy and every time you sell. This $17 charge is added to most of the popular no load funds they carry, and gives you no value. In my case, I wanted to put in money every month for my 3 kids in 3 different mutual funds. If I used Scottrade, the fees would be $1836 a year! (3 mutual funds, times 3 kids, times 12 months a year, times $17 a trade). By going directly through the mutual fund company, I buy the exact same mutual funds for free.


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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46457 of 76384
Subject: Re: Roth IRA Date: 6/13/2005 9:42 PM
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By going directly through the mutual fund company, I buy the exact same mutual funds for free.

One of the issues for custodial Roths for minors may be a balance that requires an annual fee(say at Vanguard). Kids don't necessarily even earn enough to fully fund a Roth. Vanguard has a minimum of $1000 to open a Roth and a $10 for each fund with less than a $5000 balance. My younger son made $2500 last year and although we match what he contributes - $2500 was the maximum contribution.

rad

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46508 of 76384
Subject: Re: Roth IRA Date: 6/15/2005 10:11 PM
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(Note: I am a financial advisor so my opinion may be biased)

I don't agree with the 90%+ recommendations at this and other sites that tell people to simply go directly to vanguard or other online sites; ESPECIALLY for folks that are new to this as you state.

People with little experience typically don't perform their own surgery.

When making significant retirement decisions (and that lack a moderate amount of investment experience), consult a professional.

All the rage of the 90's were index funds. Everyone thought they could do it themselves, with no experience, by simply picking an index fund. All it took was a significant downturn in the market to prove them wrong. Index funds are great when the market is going up. Index funds are lousy when the market is going down or sideways - as it is generally considered doing today.

Additionally, a financial advisor can sell you the same vanguard funds, if that is what you want, at no additional cost. A financial advisor can also help you stay the course when you get cold feet and want to sell out of the account when it goes down. And lastly, you can hold an advisor responsible (civil and criminal) if they give bad advice. If you go it alone and you make bad decisions, you have no one to blame but yourself.

You can find an advisor that charges nothing for their advice and only makes money from 12b-1 fees (tiny amount) if you want a no-load fund. Simply tell them that is what you want and don't take no for an answer.

I usually sell loaded funds because I think there are better funds out there but if a client wants no-load, that is what I give them.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46514 of 76384
Subject: Re: Roth IRA Date: 6/16/2005 1:33 AM
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People with little experience typically don't perform their own surgery.

Which is why we're not advising them to jump into stock picking. Buying an index fund is more like getting exercise and eating healthy -- it's something you can understand and is not too complicated, and gives decent results over the long-term.

When making significant retirement decisions (and that lack a moderate amount of investment experience), consult a professional.

That's great advice if someone wants personalized advice and handholding and is willing to pay for it, however not everyone needs the advice and handholding. You can get just as good advice out of a book for much lower cost, and you can also get advice (worth slightly less than what you pay for it) and handholding right here.

All the rage of the 90's were index funds.

I thought that tech stocks, IPOs, and Fidelity Magellan were the rage of the '90s. Most 401(k) plans didn't even offer index funds throughout the '90s.

Everyone thought they could do it themselves, with no experience, by simply picking an index fund.

Umm...what is your source for this statement? I believe that is far from the case.

All it took was a significant downturn in the market to prove them wrong.

My investments are (and have been) mostly in index funds, and despite the downturn I am still on track. How exactly was I "proven wrong"?

Index funds are lousy when the market is going down or sideways - as it is generally considered doing today.

Most investments are lousy when the market is going down or sideways. As far as I know, nobody has yet found a way to predict with good accuracy when the market is heading up again. So I'm remaining fully invested in my index funds so I can capture the gains when they come back.

Additionally, a financial advisor can sell you the same vanguard funds, if that is what you want, at no additional cost.

Why would he? He wouldn't get paid for it. It's my opinion that those who do work should get paid for the work.

A financial advisor can also help you stay the course when you get cold feet and want to sell out of the account when it goes down.

If someone gets cold feet when their investments go down, they have no business being in that investment, and *should* sell and move into something more conservative. No amount of potential gains can make up for lying awake at night worrying.

And lastly, you can hold an advisor responsible (civil and criminal) if they give bad advice.

Are there any instances you can point to of an advisor giving bad advice and being held responsible for it? Most of the time the advisor goes bankrupt right alongside his clients and has no money to pay the civil claims.

Also how can you hold an advisor responsible for the normal fluctuations of the markets?

I'm not of the opinion that I need to pay someone so that they can take the blame if things go wrong ("nobody ever got fired for buying Microsoft"). I'm perfectly willing to accept responsibility for my own poor decisions.

You like to sell load funds because you believe they are superior. In my opinion all load funds out there have inferior performance to the right mix of index funds. Can you provide an example of a load fund that is or has been superior to all no-load funds?

Say you have two clients with similar needs, one has $100,000 to invest and one has $1,000,000. You advise them to buy the same fund. But you collect a much smaller commission from the first client than from the second, even though you did the same amount of work. How is that fair?

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46525 of 76384
Subject: Re: Roth IRA Date: 6/16/2005 1:06 PM
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(I am not a fan of parsing every sentence made by a person; and that is one reason why I don't tend to quote other people's specific replies -- but since your reply suggests I was talking to you directly, I will do so in this one case.)

<<People with little experience typically don't perform their own surgery.

Which is why we're not advising them to jump into stock picking. Buying an index fund is more like getting exercise and eating healthy -- it's something you can understand and is not too complicated, and gives decent results over the long-term.>>

How you define long term and how someone else defines long term may be different. Your tolerance to volalitiy may be much higher than someone else with the same timeline. Folks that invested in the S&P Index five years ago can and often are still negative. I can't see the correlation between exercising and eating healthy for five years and being worse off to show for it.

<<When making significant retirement decisions (and that lack a moderate amount of investment experience), consult a professional.

That's great advice if someone wants personalized advice and handholding and is willing to pay for it, however not everyone needs the advice and handholding. You can get just as good advice out of a book for much lower cost, and you can also get advice (worth slightly less than what you pay for it) and handholding right here.>>

You don't have to pay any more for it, is my point. As a FA, I don't charge for my advice. If someone wants to buy a no-load, no 12b-1 fee fund, I sell to them. I don't add a sales charge for doing so. I also don't believe I am the exception to the rule. Additionally, no one here is responsible or accountable for the advice they give. You can't walk into their office and chew their ear if you don't like the recommendation.

<<All the rage of the 90's were index funds.

I thought that tech stocks, IPOs, and Fidelity Magellan were the rage of the '90s. Most 401(k) plans didn't even offer index funds throughout the '90s.>>

OK, late 90s then. They were certainly very popular as I see dozens of clients ever month that bought them in the 90s.

<<Everyone thought they could do it themselves, with no experience, by simply picking an index fund.

Umm...what is your source for this statement? I believe that is far from the case.>>

It was a generalization. Geesh *rolls eyes*. And it isn't far from the case. There was a large move away from working with a financial advisor to simply doing on your own. There was a belief (rightly or wrongly) that people could simply buy and index and beat any managed account most of the time. As a FA, I saw this, and I am now seeing the same type of client come back to get advice.

<<All it took was a significant downturn in the market to prove them wrong.

My investments are (and have been) mostly in index funds, and despite the downturn I am still on track. How exactly was I "proven wrong"?>>

Don't know why you thought I was talking to you. I wasn't. While your anecdotal situtation may be "on track", it does not apply for everyone. In a down market, index funds are often lousy performers. Managed accounts can and often significantly outperform during those times. I teach many of my clients not to be concerned with making only 10% when the market (index) is making 12%. We want to make sure you are only losing 10% when the market is losing 20%.

<<Index funds are lousy when the market is going down or sideways - as it is generally considered doing today.

Most investments are lousy when the market is going down or sideways. As far as I know, nobody has yet found a way to predict with good accuracy when the market is heading up again. So I'm remaining fully invested in my index funds so I can capture the gains when they come back.>>

Good for you but what if you can't wait for them to come back? What if you have a change in your financial situation that does not allow you to wait for them to come back? Perhaps you have a long enough timeline to wait for the Dow (for example) to go from 12000, down to 7000, and back up to 10500, and still wait for it to get back to 12000 to break even (not counting dividends; or inflation). But, not everyone can.

<<Additionally, a financial advisor can sell you the same vanguard funds, if that is what you want, at no additional cost.

Why would he? He wouldn't get paid for it. It's my opinion that those who do work should get paid for the work.>>

Why would he/she? Because the client asks for it. I am not going to refuse a client if that is what they want. That would be stupid and short-sighted. I don't have to make money from every appointment I make. I often give free advice to clients that simply want to make sure their 401K is invested appropriately. I don't make ANY money from that appointment but I provide a good customer/community service. I teach a quarterly class at a local library on saving for retirement. I pay my money to rent the room and provide the food. I will eventually be compensated for my charity, either in this life or the next.

<<financial advisor can also help you stay the course when you get cold feet and want to sell out of the account when it goes down.

If someone gets cold feet when their investments go down, they have no business being in that investment, and *should* sell and move into something more conservative. No amount of potential gains can make up for lying awake at night worrying.>>

And there is the rub. Index funds are not a good recommendation for everyone as they can be volatile. That was much of my original point. I am glad we can find agreement.

<<d lastly, you can hold an advisor responsible (civil and criminal) if they give bad advice.

Are there any instances you can point to of an advisor giving bad advice and being held responsible for it? Most of the time the advisor goes bankrupt right alongside his clients and has no money to pay the civil claims.

Also how can you hold an advisor responsible for the normal fluctuations of the markets?>>

Absolutely. I have seen it in the company I work for. If an advisor in my firm recommends an investment that is too agressive and we don't have proper documentation for the reason for that investment (risk tolerance assessment), the client can file a complaint. I have seen where a client that has a moderate to conservative risk tolerance has won their complaint due to the advisor placing them in a fund that is too risk and outside of the client's risk tolerance. Broker does not go bankrupt, the client simply gets their money back and perhaps the growth they would have received if they would have been in the appropriate fund. The Advisor gets a charge-back for the loss. This is not about normal fluctuations of the market, this is about determining tolerance to risk, timeline, age, goals (income vs. growth) and picking an appropriate investment. With over 9000 funds out there, it can be helpful to get some assistance with it if you are brand new.

<<I'm not of the opinion that I need to pay someone so that they can take the blame if things go wrong ("nobody ever got fired for buying Microsoft"). I'm perfectly willing to accept responsibility for my own poor decisions.>>

Good for you. Not every is as willing to go it alone on a financial decision that could be the most important one they make in their lifetime. To each their own.

<<You like to sell load funds because you believe they are superior. In my opinion all load funds out there have inferior performance to the right mix of index funds. Can you provide an example of a load fund that is or has been superior to all no-load funds?>>

All no-load funds? I have no idea as I don't keep up with every single fund in existance. Can I point to a mix of funds with less volatility than the S&P and with superior performance? Absolutely. Allow me to direct the question back to you. Can you provide an example of a no-load fund that is superior to all loaded funds? I don't have anything against no-load funds. That would be silly. I am a big fan of the Dodge & Cox funds. But again, they are not for everyone.

I have consistently beat the market with a mix of 1/3 Franklin Income Fund (FKINX), 1/3 Templeton Growth Fund (TEPLX), and 1/3 Mutual Shares Fund (TESIX) (though TESIX just lost their manager so I am cautious about it for the next year or so). To give you an example, This combo would have produced a 17.7% annual return from 1970-1979 while the S&P produced only 6%. From 1990 to 1999, it would have produced 15.4% compared to 20.8% for the S&P, (again, I am more concerned with participation in the up and protection from the down), and from 1999-3/03, this fund would have produced a return of 1.2% annually while the S&P was -14%. Going back to 1972, $100,000 in the S&P would be worth 2.7 million. With the above strategy, it would be worth 6.3 million and it never would lost 10% in one year (worst down year was 1990 with -9.58%) and also only five down years in the 30 year plus history. This is just one example. Total average rate of return is 15.2% compared to 13.8% for S&P with a lot less volatility. I could do the same with a mix of American Funds.

<<Say you have two clients with similar needs, one has $100,000 to invest and one has $1,000,000. You advise them to buy the same fund. But you collect a much smaller commission from the first client than from the second, even though you did the same amount of work. How is that fair?>>

Fair to whom? Me? As a FA, I am concerned about what is fair to the client, not to me. They don't exist to make me money. I exist to make them money. Whether my clients invest $500 or 1 million, I don't give them any less service. To do so would be unethical. I manage over $50 million and I am currently ranked #2 in sales for my region. I did not get there by worrying about my compensation for each client.

(not previewed for spelling or gramatical errors)

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Author: ToddW217 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46569 of 76384
Subject: Re: Roth IRA Date: 6/20/2005 11:06 PM
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Hawkwin,
I certainly agree in not parsing every sentence - however, as you may have noticed, you bring a different point of view than many on these boards. I am curious about one particular piece in your response -

The returns you quoted - do those include the effect of the sales charge?

I am not terribly familiar with loaded funds as I am a no-load believer. However, I would imagine it would depend somewhat on the class of shares sold. I am thinking of a front-end loaded fund when posing this question. Do your returns look at a situation and say, 'this investor brought $10,000 to the table, and earned 10% in one year and so he now has $11,000'? Or do they look look at the situation and say 'this investor brought $10,000 to the table, but only invested $9650 (after 3.5% load), earned 10% in the first year and so he now has $10,615'?

Hopefully that is clear. 10% is better in the first instance than 10% in the other!

Thanks!

Todd



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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46720 of 76384
Subject: Re: Roth IRA Date: 6/29/2005 5:15 PM
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(sorry it took me so long to reply - vacation and then illness)

<<Hawkwin,
I certainly agree in not parsing every sentence - however, as you may have noticed, you bring a different point of view than many on these boards. I am curious about one particular piece in your response -

The returns you quoted - do those include the effect of the sales charge?>>

The above example DOES NOT include the sale charge. Thanks for asking. It would depend on how much you buy, how often, and how long you intend to hold the shares (A, B or C shares). It would be rather difficult to figure the return with, for example, of a monthly systematic purchase for 30 years as all breakpoints (and monthly market performance) would need to be considered in the assessment.

<<I am not terribly familiar with loaded funds as I am a no-load believer. However, I would imagine it would depend somewhat on the class of shares sold. I am thinking of a front-end loaded fund when posing this question. Do your returns look at a situation and say, 'this investor brought $10,000 to the table, and earned 10% in one year and so he now has $11,000'? Or do they look look at the situation and say 'this investor brought $10,000 to the table, but only invested $9650 (after 3.5% load), earned 10% in the first year and so he now has $10,615'?

Hopefully that is clear. 10% is better in the first instance than 10% in the other!>>

Exactly right. It is all depends on class of share. The example I reference uses A shares bought at NAV. Depending on the load, the performance will be slightly less. A shares are most expensive in the first 25-50K (depending on the company). If you stay with the same investment company, you can eventually buy A shares at NAV (usually when your total fund family holdings are worth 500k-1mil or more(Rights of Accumulation); or with a Letter of Intent). Also worth note is the reference return is net of all other fees.

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