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Author: downisland 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 76421  
Subject: Self Directed Fidelity IRA Date: 3/30/2006 1:14 PM
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I am about to take a large IRA that I inherited from my Dad, which is in a laddered portfolio of Corporate Bonds, and put the money into a Fidelity Self Directed Inherited IRA Account where I can self direct the allocation of this money without having to pay management fees. I plan to sell many of the bonds and invest the proceeds into dividend paying stocks. My question is, does anyone here have such an account with Fidelity. I will need Fidelity's support from time to time in selling bonds, buying stock, taking out my minimum required distribution. Is Fidelity good with their "free" support? Also would people here reccomend that I go into blue chip dividend paying mutual funds or individual dividend paying stocks. Thanks
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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50789 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/30/2006 1:44 PM
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Hi downisland,

Dealing with sudden money, especially large sums of sudden money, is difficult for most of us. My first recommendation to anyone with sudden money is to let it sit for a few months: as long as it takes for it to become your investment portfolio, rather than a bunch of loot to play with. While it's sitting, spend some time reading from the following:

Fools School:
http://www.fool.com/school.htm

An interesting discussion we had on sudden money:
http://boards.fool.com/Message.asp?mid=22015091&sort=whole

Another discussion on sudden money:
http://boards.fool.com/Message.asp?mid=23845884&sort=whole

Beginning Investors FAQ:
http://boards.fool.com/Message.asp?mid=11107803

Also would people here reccomend that I go into blue chip dividend paying mutual funds or individual dividend paying stocks. Thanks

I don't like individual stocks, because of their lack of diversity, and because I'm not a stock picker. Chances are, since you're asking the question, that you recognise that you aren't, either. So, that brings us to the question of what do you mean by "blue chip dividend paying mutual funds". If you mean managed funds, then I don't like those, either. Buying a managed funds is more the case of buying the manager. I don't feel comfortable buying stocks, and for the same reason, I don't feel comfortable buying a manager.

My suggestion is always either Index Funds or Index ETFS, depending on the amount of money you have to invest, and which you feel more comfortable with. Before you start actually converting any of these bonds, be sure that you get a good understanding of the asset classes available for investment, and make a personal investment plan that includes the selection of asset classes that fit your risk tolerance and personal preferences. There are ETFS and Index Funds that cover all of the asset classes. The great thing about them is that they are comprised of a large number of stocks (or bonds), and thus are well diversified.

Good luck, whatever you do, and welcome to a new set of challenges in your life.

Hedge

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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: 50790 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/30/2006 2:05 PM
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Make sure that it titled as an inherited IRA.

The retirement folks at Fidelity are likely quite savvy, but ....

buzman

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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: 50791 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/30/2006 2:17 PM
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I recommend that you don't sell the bonds.

The bond market is generally very illiquid, and you will probably take a 5%-7% haircut (loss relative to its quoted value) on each bond you sell. And Fidelity may or may not charge a commission on top of that.

There are other brokers out there that can handle bonds.

Please visit the Bonds & Fixed Income board where we can talk about some options for getting rid of the bonds if you absolutely can't stand them.

http://boards.fool.com/Messages.asp?bid=100135

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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50793 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/30/2006 11:28 PM
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Down,

Sorry for your loss, happy for your gain.

The bonds you have are all quality rated bonds. AA range, and some can be sold for a premium. The higher the interest rate and the longer the term, the better and you have some good gains over par for those in the 8% range. You will take a hit for comissions, but if you play well in the sand box, you should be keep it under 1%. You will lose a little more on the bid ask spread as whom ever is buying these wants a good deal right now and in an interest rate increasing period that means downward pressure on bid.

The bonds are laddered as your Father had set up for the purpose of income and to minimize some types of risks that come along with bonds. You need to understand more than the price you can get, you need to understand what risks you will increase if you sell long term or short term bonds. Without knowing each bond, just the companies, it is really hard to advise what would be rational strategy and not knowing what your situation is and how,when why, you need the money - the task is impossible.

My suggestion is - follow the advice given. Sit on the bonds for a couple of months and get a feel for the benefit you have in the income stream. See what you needs are as you think about what to do and how, when, why you want the money. And, can you answer this?! - Why do you want the stocks over the bonds?

Fidelity will give you a lot of support, especially for that sum, but sometimes the support is only as good as the employee you get on the phone. Now, nothing against'em but you may end up with a 22 year old recent college graduate who has never lived through or been in any high inflation/deflation times and who will give you the stock portfolio designed for people your age, maybe they weill even consider your risk tolerance.

If you are hell bent on selling and selling now, OK. You can find out how to maximize some returns by reading along doing a bit of research and viewing value as a trader would. But if you want to maximize your return - personally there is no way I would trust a salesperson from fidelity, vanguard etc.

So, your first assignment would be to find out the current value for all of your bonds. Individually - make a list.

http://finance.yahoo.com/bonds

There are some calculators and you can actually search for the same bonds you have and see what the bid/ask price is. Then find out what your commision would be.

DrTarr

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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50794 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 7:08 AM
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This is a copy of a post I put on the Bond Board where I was advised to go slowly and let the Bonds Mature.
"I love this place. Thank you all for all of your help. My Dad actually died in 2002. I have been holding the status quo and trying to learn all this time. I read constantly, the Wall Street Journal,Barrons, Kiplingers,Fortune,Forbes,Money,Business Week,I have read books like The Intelligent Investor, How to Read a Financial Statement, Buffett, the Making of an American Capitalist, Poor Charlie's Almanack, Socially Responsible Investing, I subscribe to the Motley Fool's Hidden Gems Newsletter,Morningtstar Stock Investor Newsletter, American Association of Individual Investors Newsletter,Luis Rukeyser's Newsletter Etc. After all this reading about investing I have finally decided to ease my way into some dividend paying stocks.
In 2003, on Sept. 11th, on the anniversary of the attack on the World Trade Center, in order to be patriotic and because I trusted Warren Buffett, I bought one A share of Berkshire Hathaway with some of the money that I inherited. My Dad had always admired Warren Buffett and that decision just felt right for me. That one share which I bought for $75,000 is now worth about $90,000. Not a great rate of return but I think that Berkshire Hathaway is undervalued and I want to hold it for the long haul. I am a patient investor. All of my own personal IRA money is in Vanguard Index Funds.
There is no doubt that bonds are a beautiful thing. I was the executor of my Dad's estate. He died on May 19, 2002. His assetts were split in half 50% Bonds and 50% Stocks. The stock market totally tanked that summer. We were all quite concerned (five other siblings) as we watched Dad's stocks decline in value. But lo and behold, the bonds saved us. The bonds didn't decline in fact they went up. I see the value of holding bonds to offset stock losses. Now however, with myself being 54, I need to put at least half of this bond money into something that can grow. Because of the MRD and because, my research has led me to believe that over time dividend payers frequently outperform the market, I figured that dividend paying stocks wouldn't be a bad idea. It is a small world of stocks for me to research and the researching might be fun. You have all have convinced me to go slowly, and to wait till the bonds mature and then buy the stocks as I go along and to do it all in a self directed Fidelity account.
Although I am now only paying 1/2% to my Dad's old management firm as their management fee for this bond portfolio, they told me that if I bought any stock the fee would be changed to 1.35% On $400,000 that is $5,400 per year! Since I'm not interested in trading and my stock will most likely be blue chip dividend payers, just sitting there,I'm happy to try to save this money and do it myself. Thanks a lot for the encouragement and support."



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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50795 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 9:49 AM
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As crazy as this sounds, I have found there are huge differences in the big brokerage folks with regard to markets in individual bonds. Within a week's period I checked out Fidelity, Schwab and Vangard. I found more often then not only one of these people made a market in specific bonds from companies such as Coca-Cola, Bellsouth, General Motors, etc. Don't just assume because a bond maturing in 20 years is covered, that one maturing in 10 years will be. Check out each individual bond.

My reasons for checking were for purposes of purchasing. Since yours are for purposes of selling, as others have said, if the broker you choose does not make a market in that bond you will take significant hit. I have two suggestions #1 consider staying where the bonds are now (I am assuming that is were the bonds were bought) at least until you determine the lowest price place to sell all the bonds you want to sell. #2 Ask various brokerage firms for fees on liquidating what you have.

Keep in mind what is a large IRA to you may be small potatoes to the brokerage people. Find out at what size account the fees drop -- that is the size of account they really want. It varies, but I have found generally accounts under a $100K do not get good deals and generally total deposits over $1Million do. Some firms are firm on their fees, others will offer discounts for new accounts.

Also keep in mind most firms charge fees to close accounts and these are in addition to fees for transfer stocks and bonds out. These fees are listed in all the fine print.

Gordon
Atlanta

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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50796 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 9:59 AM
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Gordon, I think I have decided not to sell the bonds at all, but just to let them mature naturally and to buy stock with the bond proceeds as they come in. My only question to you would be, do you think I should do this through a Fidelity Self Directed IRA account where I was quoted a fee of less than 1%, or stay with Goldman Sachs at a fee of 1.35%. Remember, I won't be selling any of the bonds, just collecting interest, bond re-payments, and then buying stocks or mutual funds. Do you think Fidelity would be an effective vehicle for this purpose?

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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: 50798 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 10:25 AM
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"do you think I should do this through a Fidelity Self Directed IRA account where I was quoted a fee of less than 1%"

Typical fee for a Fidelity Self Directed IRA is $40/yr. If they are talking about a 1% fee, that is for a managed account, where they, not you are selecting investments.

Participants in Motley Fool can usually get enough advice here to use a self directed account. Some do prefer managed accounts, but they do cost more.

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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: 50799 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 10:37 AM
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Do you think Fidelity would be an effective vehicle for this purpose?

_____________________________________________________________________

Better choice than Fido or Goldman.

www.NAPFA.org

www.GarrettPlanningNetwork.com

buzman

Membership disclaimer

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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50800 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 11:12 AM
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Thanks for the tips. Here is one more factor, I called Fidelity yesterday at 4:00 pm and spoke to a twenty-something year old young manabout opening a self directed IRA and then left a voice message for another man who referred me to who he said would be "advising" me for free. Well, I haven't received a call back from my "free advisor" yet and this was $400,000. I was talking about giving to them.
I think I am going to push my Goldman rep on exactly what I will be getting for the 1.35% fee. My Goldman Sachs rep was talking about putting me into some no load mutual funds with what sounded like fantastic returns even considering the 1.35 fee. At least I get a call back from Goldman, I may need more hand holding then Fidelity can give me? I guess that is why it is good to go slowly here.

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Author: ptheland 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: 50801 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 11:58 AM
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Keep in mind that is it also not necessary to keep the entire IRA at a single brokerage. It is certainly possible to transfer only part of the account to another broker.

For example, if you decide to stick with your plan of letting the bonds mature and then buying stocks with the proceeds, you might keep the bonds at one brokerage, and transfer the cash to another brokerage to buy the stocks.

As long as you do the transfer (called a rollover) directly from one trustee to another, you can do as many rollovers as you like.

However, the brokerage losing the money may charge a fee for the rollover, so you probably don't want to be doing one every time you get an interest payment. Once you know their fee for processing rollovers, you can decide how often you want to do this, or if you even want to do it at all.

--Peter

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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: 50802 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 5:26 PM
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My Goldman Sachs rep was talking about putting me into some no load mutual funds with what sounded like fantastic returns even considering the 1.35 fee.

Nobody can buy the past.

Funds that did exceptionally well in the past, are actually not likely to repeat that and are much more likely to have an average return.

You hear all the time about past outperformance, but funds that underperform tend to quietly disappear.

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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50803 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 5:47 PM
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I left this on the Bond Board as well, but

You are paying 1/2% a year? for some one to hold your bonds????

AHHHHH!

This is new stuff:

Getting advice is nice and I do not having problems paying for good advice. What I do have a problem with is paying for the advice and then paying for some one to do nothing. How much have you spent to have GS hold your bonds?

If you think you are getting 1.35% better returns or if you like some one to call you back and that is worth what is probably $10,000 or more a year, let me have your number- I will call you whenever you want. Or better yet - toll-free look at the conversation you have recieved on these boards.

No membership disclaimer required - have you thought about a fee only planner like buzz mentioned? Or - Discount brokerage where you have access to thier research? From your posts, what it sounds like to me - is you would like to be able to DIY. You certainly do not need Goldman Sachs (1.35%) to do that..........

DrTarr






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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50804 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 6:00 PM
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If you think you are getting 1.35% better returns or if you like some one to call you back and that is worth what is probably $10,000 or more a year, let me have your number- I will call you whenever you want. Or better yet - toll-free look at the conversation you have recieved on these boards.

DrTarr,

My take may be completely wrong, but to me it seems like he is in the throes of going from a worker to a fairly well-heeled investor*. This transition is not an easy one to make. In a year or two, he may look back and regret the money spent for someone to simply hold the bonds for him. But, he may also understand that that spent getting acquainted with his new situation and learning about the finance world was well spent.

Hedge

*Yeah, I know one man's "well-heeled" is another man's pauper. But, I think you get my meaning.

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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50805 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 6:29 PM
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No, hedge you are totally right. Perhaps I am just cranky or perhaps I just think that he has the ability, he takes the time to do research, reads well and has a brain. The only thing he is lacking is a pulled trigger. For some reason I thought if I just said DIY, he might just do it! And what better motivator for an investor is there for realization that you are well-heeled than when you realize paying GS $10,000 per year to hold bonds is coming out of your pocket.

Sales folks use a close where they reduce to riduculous. Oh, this baby is only $2.99 a day. But in this case $27 a day. What I do is try to increase to reality. He is 54? and has umpteen? years of bonds left. Even with decreasing principal he is giving up many thousands of dollars for bond holding.

It makes me want to say AHHHHHHHHH!

DrTarr


SORRY


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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50806 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 6:44 PM
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It makes me want to say AHHHHHHHHH!

DrTarr


Me too, really. But, I remember the stress I went through when we realised about $400k from the sale of our house in LA. Nobody *really* wanted to be around me for the next few months. I was a wreck from trying to transition to "ownership" of the funds and figure out where to invest it in a way that satisfied our risk tolerance, liquidity needs, and expected returns. I will note that I had been investing small amounts over the preceeding years, so I had at least some idea of what a stock and a bond was. But, as I found out, the actual doing was much different than the planning to do or the playing with a couple thousand bucks with tech stocks. My first purchase was about $100K worth of SPY. It was very hard to pull the trigger on it. It was just as hard to realise, some months later, that it really wasn't something I was happy owning.

I even ran across the idea that some people who are the *victims* of sudden money actually invest it unwisely in the subsconcious hope that it will go away so they can get back to their real life, and realised that there was a lot of merit to that idea.

Hedge

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Author: TurkeyBreath Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50808 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 9:28 PM
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...I even ran across the idea that some people who are the *victims* of sudden money actually invest it unwisely...

I have seen the figure 80%, referred to as the failure rate of new money. That within 5-years the new money recipient not only regretted his/her action but also is worst off than before receiving this windfall.

Yet, what bugs me about fees it that, IMHO, little effort is done to earn them. Computers handle our records automatically. A computer handled by someone in India, all too often. Of course, it does allow for excessive compensations and severance agreements to CEO's. Time to outsource CEO's.

TB

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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50810 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 9:42 PM
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...I even ran across the idea that some people who are the *victims* of sudden money actually invest it unwisely...

I have seen the figure 80%, referred to as the failure rate of new money. That within 5-years the new money recipient not only regretted his/her action but also is worst off than before receiving this windfall.
TB


Ouch! 80%?!?! I can believe that figure, I guess, because there are a number of TV advertisements looking to buy up structured settlements. But still, 80%!

Hedge

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Author: TurkeyBreath Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50811 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 3/31/2006 10:09 PM
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...I have seen the figure 80%, referred to as the failure rate of new money. That within 5-years the new money recipient not only regretted his/her action but also is worst off than before receiving this windfall.
TB

Ouch! 80%?!?! I can believe that figure, I guess, because there are a number of TV advertisements looking to buy up structured settlements. But still, 80%!


At first, I didn't believe it either. One article was written by some young MBA student that tracked lottery winners of >$500k. Another article I read was very specific, admittely it was only about five who either won a lottery or inherited it. I remember it well because 3 of the 5 had an interesting story. One of five, built a bowling alley that failed, then he wrote a book on what not to do in starting bowling alles. Since no publisher would accept it, he financed the book. It failed too. One of the 5, was an old lady who used her money to retire in Las Vagus and surrounded herself with young men. She may have well died with a smile. The successful one was a real estate salesman. He bought into and became a partner in the RE firm he was working on, he bought a new car, gave the old one to his son. Set up an education trust for his 2-children; this was before the advent of Educational IRA's, paid of is mortgage, and added another room to his house. I do not recall the details of the other two. Just that they failed too.

May be it's difficult to believe because we of Fooldom are populated with folks that care more about finances than non-Fooldom citizens?

TB

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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50814 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/1/2006 12:11 AM
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I am older and more cynical than I ever thought I would be!

From OP:

I read constantly, the Wall Street Journal,Barrons, Kiplingers,Fortune,Forbes,Money,Business Week,I have read books like The Intelligent Investor, How to Read a Financial Statement, Buffett, the Making of an American Capitalist, Poor Charlie's Almanack, Socially Responsible Investing, I subscribe to the Motley Fool's Hidden Gems Newsletter,Morningtstar Stock Investor Newsletter, American Association of Individual Investors Newsletter,Luis Rukeyser's Newsletter Etc. <<snip>>

I bought one A share of Berkshire Hathaway with some of the money that I inherited.

I want to hold it for the long haul.

I am a patient investor.

He died on May 19, 2002. His assetts were split in half 50% Bonds and 50% Stocks.

There is no doubt that bonds are a beautiful thing.


The only thing I see missing in his desire to move toward dividend paying stocks is motion. The other part of Inertia is that objects at rest tend to stay at rest. I can see where new money falters and have read about lottery winners living on the street. I will even admit my first "money" is in some one elses pocket. I guess my SPY senses were just rubbing the wrong nerve. It is an overwhelming task and maybe I am throwing him out of the nest a little early. We do care about finances more than the un-Foolish - I just see in OP - he gets it!

DrTarr
(especially if he can see beauty in bonds!)







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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50816 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/1/2006 7:30 AM
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OK, Ok, Ok, First of all, I am a female. Secondly, Goldman Sachs only charges me $2,000.00 per year to manage $400,000 worth of AA Bonds, Buys them, ladders them, manages the cash flow, sends me my monthly MRD checks, sends me my statements, tax reports, etc. This is an inherited IRA so there are rules to follow to keep it tax free.
Fidelity finally did call me back yesterday and I'll talk to them again on Monday. I am leaning towards doing this myself with Fidelity and I feel like the girl at the end of the diving board, and you guys are all yelling jump!!
How hard can it be to hold stocks, bonds and a cash account?
Jump!! OK I'm holding my nose and I'm right at the edge.
Try not to laugh but I really don't trust/like brokers. I have my Berkshire A Certificate in my safe deposit box!? Nobody normal does that? So I think I will actually enjoy the illusion of control that I will have with a self directed account. And just think of all the extra time I will be able to spend on the Motley Fool gloating about the management fees I'm not paying. Thanks fellow investors!
As to the comment about past performance not being important,meaningful, or predictive when choosing mutual funds, what is important? I've got a few funds that Goldman mentioned that I'm going to be looking up.
I think part of my fear of doing this myself is not being computer savy vis a vis spreadsheets, Ameritrade type accounts, how I would actually buy or sell stocks and bonds, but I think that working with Fidelity and their website, it will be a manageable thing for me. I hope their fee ends up being less than 1%.
Dr. Tarr This is an inherited IRA so it must stay in my Dad's name with me as beneficiary and every year I must take out a minimum required distribution, refigured each year based on my life expectancy. All this is to keep the money growing tax free, maybe I will pass this on to my kids. My Dad just loved the idea of postponing taxes. So I must have a trustee of some sort. Do you think that my cheapest way out is with a Fidelity self directed? Now that I'm going to try to do this on my own, and considering how much help I may need buying and selling securites? I think it sounds perfect. I understand that for a taxable private account, like a Jim Cramer's Mad Money account, Ameritrade and Scotttrade are suitable but for an IRA? Once I master the IRA account, I may try to open my own Amertrade account and do some pickin'. Thanks for your support.

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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: 50824 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/1/2006 2:13 PM
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Downisland, Fidelity is the largest discount broker. So if you get your self directed IRA in a brokerage account, you will be able to do with Fidelity all you do with Ameritrade.

And Fidelity does have offices in most major cities. You can sit down with them for discussions of details if you need to. Especially for accounts of your size, they are excellent.

Check out their brokerage commissions. Gold scale requires $1MM or certain number of trades per year, is $8/stock trade. I think you qualify for Silver scale, but if you can negotiate gold scale, go for it.

Gold accounts pay no annual fees at Fidelity.

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Author: vickifool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50826 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/1/2006 2:47 PM
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Ok, First of all, I am a female.
I knew that. I was saving the information to spring on the next person who gave you a hard time for not doing your homework.

Goldman Sachs only charges me $2,000.00 per year to manage $400,000 worth of AA Bonds

I have a friend whose ambition was to have enough money to be a Goldman Sachs client. If you leave them, that isn't enough money to go back from what I've heard. Depends on who you are trying to impress, I guess. I'd never heard of them, so I wasn't impressed.

Try not to laugh but I really don't trust/like brokers. I have my Berkshire A Certificate in my safe deposit box!? Nobody normal does that?

We have stock certificates, too. VickiSpouse thought it would be easier to track the basis if you had the physical certificates. The problem is that when the stock splits, they send one certificate for all the split shares. Besides, some certificates are really pretty. I was fantasizing about framing a set of I-bond certificates. I don't think burglars would be smart enough to steal them.

As to the comment about past performance not being important,meaningful, or predictive when choosing mutual funds, what is important?

1.) Expense ratio and loads. The more of your money they siphon off, the less you have working for you and the less you get. Typically, Index funds have much lower fees than actively-managed funds. Index funds also consistently do better over time.

2.)Tracking error. When investing in an Index Fund, you want to capture the entire return. Mutual funds have to keep some money not invested so they can pay dividends and redeem shares for people selling. To make up for this drag on returns, most of them do a little fancy stuff. I look for a fund that doesn't do a lot of fancy stuff--I don't really want to invest in things I don't understand. This is hard to check though, so you might want to skip it.

Here are some links to the Retire Early Home Page that I like:
http://retireearlyhomepage.com/iplan.html
http://retireearlyhomepage.com/feeadv.html

How hard can it be to hold stocks, bonds and a cash account?

That's the spirit! The financial industry thrives on fear. It's not that hard.

I think part of my fear of doing this myself is not being computer savy vis a vis spreadsheets

You don't actually need to use a spreadsheet. Pencil and paper works for most of it. I learned how to calculate interest and rate of return before the spreadsheet program was invented by Dan Bricklin, so it's possible. Excel's financial formulas still confuse me because they ought to be the same but they aren't--quite. (I'm going to get a tutoring session to fix that.)

You can do this.

Vickifool




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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50839 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/1/2006 7:23 PM
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Off hand I can not see a reason to pay and extra 35% in fees for Goldman. But the question I have for you is why go either place? I and many other Fool handle their own funds with no fees beyond commissions. I am not saying go to the lowest fees, I don't do that. I am with Schwab and I do appreciate the phone help when I need it. When I start to add bonds to my portfolio I will probably switch to Vangard -- they have a better bond system in my opinion then Schwab.

Particularly if you are going to let the bonds run, I would say go to a discount broker.

Gordon
Atlanta

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50869 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/3/2006 9:22 AM
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island

In no particular order ....

That 1% fee you're talking about for the inherited IRA - are you under the impression that a 1% fee will be necessary anywhere that you go to keep the deferred tax status of the account in tact? I don't think so. Should be no different than other IRAs where the charge is more likely just an annual $30 - $40 fee. You'd still get all the services that you listed including I believe the RMD. (I thought that this is a new requirement for the holding institutions. Maybe not. Anyone know???)

I also have BRK certificates in a safety deposit box.

I've been using an online discount brokerage for about 5 years for a taxable account. There's nothing to it. I print the order and confirmation. They send me hard copy of confirmation. I file the buy confirmations alphabetically. Or if it's a SELL confirmation, I pull the corresponding buy confirm and staple the SELL confirm to it and put in the current year tax folder. Voila.

It took an expensive lesson learned at a full service brokerage to give me the incentive to move online. To wit - the full service outfit entered a BUY for QCOM instead of a sale. There was no cash in the account so they put me on margin. I didn't open the statements for a couple of months (my bad), and so I wasn't aware of what had happened. They all but called me a liar. Ugh. I was sooo disappointed in the broker. Once I saw the mistake I immediately put in a market sell order with the broker before the market opened. Luckily, the sell price was apprx the same as it would have been a couple months earlier. But, I had to pay appx $2K in margin interest and $200+ commission each way. I figured I could make my own mistakes online rather than have a broker make them for me. Ugh.

I have no bonds in that discount account, but I have called them to get pricing a couple of times. Since they were OTC bonds they put out calls and then called me back within an hour to give me the pricing.

I also self direct a Keogh through a trust dept. That will be moved to a VanGuard self directed IRA soon. I have some bonds in that account as well as BRK, a few other stocks, and a few funds.

Years ago I spent some time with hard copy Morningstar (trial subscription). Poured over the #s and compared funds for a long time. Bottom line, Morningstar rates the shareholder letters of each fund down at the bottome of their reports. If you look for A rated shareholder letters, that will point you to some pretty good funds. That was true several years ago anyway. I keep my funds just to get those letters. I sometimes use them to get ideas for stock or bond purchases. Have to be careful doing that, though. But the A rated letters are a great education.

Best .... Lethean

ps You can do the online discount buying/selling.

pss I have been told that the bonds in my Keogh will transfer in kind to VanGuard. So, I'm thinking that you could if you wanted to - just transfer that whole bond port in kind. Ask what the fee would be to close your account. It's probably way less than $2K.

And I suspect a 1% fee at Fidelity for the inherited IRA is unnecessary. Check into what the fee would be for self directed IRA and if they will notify you of RMD each year.











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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50876 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/3/2006 8:01 PM
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Just opened a Self Directed Inherited IRA account with Fidelity. The annual fee is ZERO. $8.00 if I buy a stock and $20-30 if I buy a bond. Wow that is a far cry from the $5,625.00 Goldman Sachs wanted for "managing" what will turn out to be a very simple inherited IRA account. The account now consists of 15 Laddered Corporate Bonds which I will simply let mature and then purchase stock mutual funds or individual stocks with the interest and proceeds from those bonds. Fidelity will help me figure out my MRD each year and I will simply take out that minimum amount and reinvest the rest. I have a buy and hold approach so the only hard part will be deciding which stocks or funds to choose. Thanks for all the encourgement that I received here. I now have $5,000.00 extra dollars to buy stocks with!

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50883 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/4/2006 12:01 AM
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island

Good girl. You'll find that doing it yourself a snap. And I've heard very good things about Fidelity.

You probably know that Fairholme is a well run fund with apprx 20% BRK holding. I don't own it, but it is still open to new investors. Many of the good value funds are closed to new investors: Longleaf, Third Ave, Tweedy, and Weitz (I believe) are closed.

I know that most feel that you shouldn't try to time your way into a fund. But I did just that when the market opened after 9/11. Buying a fund when the market is low does make a difference in future performance. Just something to think about.

Anyway .... nice going. You are going to love it.

Another thing - since you have your BRK in certificate form, I figure you might be apprehensive about the markets? If so, you might consider having a cash account rather than a margin account when it comes time to open a taxable account. Munger is the one who suggested that a cash account is safer than a margin account. (The broker can borrow your stocks without your knowledge or permission in a margin account even if you don't utilize margin. How's that? They can't do that if the account is a cash account.)

Also, if you ask Fidelity I think that they would register BRK or other stock purchases in your name rather than street name in a taxable account (not an IRA account though.) That's an alternative to taking possession of the certificates. I've not done that yet, but I understand that it can be done. It puts you highest in the pecking order if disaster should strike Fidelity. Probably not going to happen anyway...

Just fwiw .... Lethean

ps Did you find that you could transfer the bonds in kind to Fidelity?

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50885 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/4/2006 8:51 AM
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MRD is determined by the life expectancy tables the IRS uses. The best "Trick" is to get the table. Take the value of the fund on 12/31/XY, divide by the value in the table and that is the MRD for the following year. You can take it anytime. Many people schedule the withdraw -- January (get the money & run or maybe holiday bills), vacation time, etc.

Gordon
Atlanta

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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50886 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/4/2006 8:52 AM
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Yes Lethean I am transferring all the corporate bonds "in kind" to Fidelity. Fidelity will hold them till they mature for no fee and will collect the interest and figure my MRD each year. I may put my BRKA into a seperate Fidelity taxable account, thanks for telling me about registering it in my name, and then, with the minimum required distribution money coming out of the Inherited IRA account ($13,000 per year), I will buy some stocks in my taxable account.
Three of my siblings have their inheritance money in actively managed stock portfolios. They all seem to have between 80-100 stocks, frequent trades, etc. It will be fun to compare performance and fees.
I will probably stick to index funds and TIPS in the Inherited IRA account and get a little bolder with individual stock picking in my taxable account. I have a love/hate relationship with WMT right now and two mutual funds that I think I like right now are FBALX and CAAPX. I will also look into Fairholme. 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: 50891 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/4/2006 3:28 PM
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I was fantasizing about framing a set of I-bond certificates. I don't think burglars would be smart enough to steal them.

I-bonds are not bearer instruments; you have to prove you are the owner of the bonds in order to cash them.

If your I-bonds are stolen you can call up the Treasury to get them cancelled and reissued.

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Author: vickifool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50892 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/4/2006 4:08 PM
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I was fantasizing about framing a set of I-bond certificates. I don't think burglars would be smart enough to steal them.

I-bonds are not bearer instruments; you have to prove you are the owner of the bonds in order to cash them.

If your I-bonds are stolen you can call up the Treasury to get them cancelled and reissued.


Cool.

Then I can hit VickiSpouse with that classic line:

You want to come see my etchings?

Vickifool

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Author: TurkeyBreath Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50896 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/4/2006 8:55 PM
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...I was fantasizing about framing a set of I-bond certificates. I don't think burglars would be smart enough to steal them...

A good color scanner will copy just about anything worth hanging. I've done it to a few share certificates. Looking good in there hanging frames.

TB


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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: 50906 of 76421
Subject: Re: Self Directed Fidelity IRA Date: 4/5/2006 10:11 AM
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The broker can borrow your stocks without your knowledge or permission in a margin account even if you don't utilize margin. How's that?

Because when you sign the agreement to open the margin account, one of the statements is like "I understand and agree that the broker may lend out my stocks for his own profit at any time without notifying me." If you signed it, you agreed to it.

The other two main issues are:
- if your stocks get lent out you don't get to vote in shareholder polls (like for board of directors)
- if your stocks get lent out, you don't get dividends; instead you get PILODs (payments in lieu of dividends) which do not get the special lower tax rate

I don't like margin accounts.

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