Fidelity or Vanguard
 

About ready to roll over my 401K from JP Morgan. I am considering Fidelity, who my wife has for hers and Vanguard. Have my first meeting with Fidelity in TV office Thursday. Not sure what to expect. My research shows a slightly lower management fee structure for Vanguard. I also have a pretty good idea as to what I want to invest in.

Interested in any feedback from either. What should I expect or not expect from both. Have to start distributions in March or April.

Thanks in advance for your input.

I have been very happy with Vanguard as they are owned by thier investors, results in lower fees.

Vanguard is my set and forget index fund provider.
I use Fidelity for sector funds, ETFs, and most mutual funds other than the aforementioned index funds.
If you just want bond and index funds, Vanguard will take care of you at the lowest cost, but if you go beyond that my nod goes to FIDO.

I have not used Fidelity so cannot compare but have been very pleased with Vanguard. The customer service is excellent - prompt, courteous, and competent. I've also learned much from the Boglehead forum.

I use Fidelity to buy Vanguard funds. Morgan Stanley Smith Barney is my primary broker, but Fidelity is so good in certain areas that I cannot move their portion of business to MSSB.

I have used Fidelity, Vanguard and Schwab. They each have good things to recommend. However it really is all about fee's. And for low cost which equals higher returns, Vanguard is the best. I even own Fidelity funds in my Vanguard account. (selling them would cause capital gains I don't want right now) I like Schwab for individual stocks because of the fast settlement time, but for the majority of mutual funds, index funds, ETF's, and customer service go with Vanguard. Fidelity has a slightly better web site then Vanguard. I keep the majority of my investments in a simple global model of 6 highly diversified index funds that have proven to beat the market over time. For that type of investing low fees mean higher returns. That is where Vanguard wins every time.

If, as they say, "Costs Matter", then it is Vanguard for most funds.
The Oblivious Investor has a nice review.

Vanguard Review: Why I Invest with Vanguard

You say you "have a pretty good idea as to what I want to invest in."

I'm not sure what that means so I'll assume it means you've taken charge of your financial decisions and have done (and are doing) your homework.

That being said.....you might be better off at Fidelity because they probably have more options for you to do what you want, again, assuming you know what you want to invest in. They're both good companies and I use them both...non-IRA mutual funds and grandkids' 529s at Vanguard; IRA and non-IRAs, 529s, brokerage at Fidelity. As stated, Vanguard has lower fees because they're mostly index which is another way of saying "average" or "going with the flow". In a down market you won't get hurt as bad; in an up market you won't do as well. So, obviously, with a little homework you can find returns that more than make up for higher fees. That's why non-load funds aren't automatically better than load funds. It's all about the bottom line.

Personally, I don't bother with ETFs. They're just a bundling together of funds (translation: more fees) that you can buy yourself individually (less fees). Also, at Fidelity they'll probably try to direct you into their PAS accounts....managed accounts...which is just another way of them taking money out of your pocket and putting it in theirs. Again, check it out but I don't think you'll find PAS accounts doing any better than you can do selecting funds yourself although they (PAS) should do better in view of the extra Management Fees they charge....IMHO

Good luck. Enjoy!

Boston Celt, I strongly disagree with this statement.

As stated, Vanguard has lower fees because they're mostly index which is another way of saying "average" or "going with the flow".

A diversified portfolio of index funds covering the global markets has beaten 92% of every managed portfolio when measured over any 20 year period in the past 100 years. And "any" means take 1941 to 1961, 1942 to 1962, 1943 to 1963 etc. And if you go to 30 years the percentage is higher.

I will take that average every time and win.

Don't you agree the global market is a horse of a different color? Especially over the last 10-15 years? And that it shouldn't make up the majority of anyone's diversified portfolio under any circumstances?

Globally/internationally, I've had several of Vanguard's index funds but that's it (well, plus their Health Care fund). Like I said, a horse of a different color. Domestically, I'll go with individual funds, and diversify. And never more than about 10%-15% international but always something....

Fidelity
 

I rolled over my 401K in 1993 to Fidielity. It's a brokerage account and I have several Vanguard ETFs. I also have a non-retirement brokerage account where some of my future TV down payment resides.

I managed my father in laws accounts at Schwab, Vanguard and Citi and found that Fideity's online website to be superior.

FYI I pay $7.95 per trade and Fidelity now has no fees to purchase 30 diffferent ETFs.

On some non Fidelity mutual funds you can pay $75 per trade so you need to do your homework and decide if it's worth it.

No, I don't agree. There are issues in Europe, however unless something has changed and the market is not efficient which would be a first, that is already in the price of stocks. And a diversified portfolio that maps to the global market would include 27% of international stocks. No more then 30%.

You don't pay fees to buy ETFs but there are add'l fees within the system that affect your returns. That's also why 529s have lagged...there's a layering of fees. Nonetheless, still pretty much the best for college savings because of the tax benefits....

Why do you buy ETFs vs individual funds?

Schwab & Vanguard
 

I segregated a portion I won't need for years, hopefully ever, and put it with Vanguard. As someone said, set it and forget it. I used Fund Advice sample portfolio for get good diversification.

Then I put the rest with Schwab and concentrate on their ETFs (commission-free). Works well for me. I also use Schwab for banking, checking, bill pay etc. One nice thing is they refund all ATM charges, even traveling overseas. It makes things simple having everything consolidated in one place.

You're certainly more aggressive than I!! And I've never been called conservative, financially speaking. Globally, I'd say there are issues in more than just Europe.

One's diversification is, of course, personal and even then subject to change depending on current goals, priorities, life changes, etc. Going with the standard 1/3 in Growth, 1/3 Income, 1/3 Balanced Funds....with 20% of the Growth in International...., well, 27%-30% of the whole portfolio in International is, to me, closer to gambling than investing. Is that what you're saying? I mean, I can show you great stats on Gold too, but it's a commodity and, thus, a gamble and not for me. I'll gamble my lunch money, maybe, but not my future....

That is the fundamental difference in our investment style. I would suggest that if you are only 15% international then by default you are 85% US which to me is really the huge gamble. I try to map as close as possible to the entire market. Which for equities is about 68% US, 21% Europe and 11% Asia & Emerging markets. The only place I vary slightly from the equity map is I place about a 5% extra bet on small cap stocks. So a 5% tilt away from large cap. I do that both for US and International. Small cap stocks have outperformed Large cap stock in every 5 year window you measure. So a slight tilt improves overall performance by about 110 basis points. As for bonds I also try to map to the global mapping of that market, but that is a little more difficult so I am slightly over weighted to the US market and over weighted to short term and high yield corporate.

I set my IPS to the AA I have determined best for me, re-balance every time I have more then a 5% drift and stay the course using low cost index funds.

Keep in mind that whenever you invest in international stocks or funds, you bring currency exchange rates into play as well. You could gain 25% in your stock only to see it disappear if the countries currency drops against the dollar. There is an old saying: "When the US sneezes, the world catches a cold". Be cautious with overseas investments.

You surely do your homework and that's a good thing. Others here seem to prefer to "set it and forget it" and that works for them. I'll stick to my point: index funds to mirror the market (be it the Large Cap or Small Cap or Balanced or Whatever Market); individual funds to beat the market.

To the original posting's inquiry of Vanguard vs Fidelity, both are long-time highly professional, both will have answers to all your questions, and I bet your personal preferences will point you to the right path. And if it doesn't work for you the beauty of it all is you can change it. Kinda like living at The Villages....some of it is great for you, some of it is more great.

ETFs
 

The ETF fees are generally much lower than a mutual fund.

Again, there's a layering of fees upon fees. All the internal ETF fees, PLUS the internal fees of the mutual funds within the ETF, affect your final return.

Why do you say there are layers of internal fees. I know there are funds of funds that have fees like that. But I always think of ETFs as indexes. What am I missing?

I use both. No problem with either. I think Fidelity offers more tools on there site but Vanguard runs at a lower costs. Depends on what your needs are. I would consider splitting the funds if you do not have other accounts. If you have a problem with identify theft etc having two accounts instead of one might be of help while you sort out the problem with one account.

As always, I2ridehd, has a wealth, of excellent information on how to have a diversified portfolio and everything else concerning the villages.

With all of my retirement savings with Vanguard, for the last 30 years, they have always been great to deal with. For every dollar, I invest the railroad gives me an extra 40 cents to put with it. Vanguard also has very low fees, which will, also help your account grow.

ETFs
 

Nothing!

An ETF replicates an index. Therefore it purchases stocks and other instruments that make up the index. Therefore the fees/costs that they incur are minimal ie the buying and selling of stocks. They recoup thier costs and charge a feed to replicate an index. They are not managing what stocks to buy because they are following the index. Very cool and provides a very good service. I presume if you have a Vanguard account the cost to buy the ETF should be free. Is that true?

If you invest in S&P500 companies, you are already exposed to the international market. A lot of these companies get a significant part of their earnings and sales in other countries. Think Philip Morris, Apple, etc.

That does not solve why you invest in international markets. I agree the US market large cap has exposure do to the fact many of those companies have a global business. However the real reason to spread you equity exposure across the globe is to protect the impact of any single event causing losses. The international market also has companies that have US exposure. Think what happens when a 911 event hit the US, or the tsunami hit Japan, or any of 100 other financial impacts. I personally would like to be as diversified as possible. So having an exposure to all global markets at an amount equal to their % of the total market maintains the least exposure to any single market going down. Just as a split between stocks and bonds flattens the volatility of the markets, global balance does the same for your equity portfolio.

Just go to morningstar and back test each scenario for 10, 20, and 30 years and you will become a believer. Everyone who invests in the market needs to have an IPS, an AA that fits there willingness to accept risk, and a strategy to re-balance when required. Doing anything else is pure guess work and you will lose at some point.

Currency risk
 

When investing in international remember you are assuming currency risk. That is why a smaller portion of you portfolio (20% to 30% of equities) is usually recommended for international exposure.

That's what I thought. But BostonCelt said there's layer on layer of fees and I wonderd if he knew something I didn't.

I do have Vanguard but that's my excess and I feel I can leave it untouched for a long time. In that case I've used Vanguard Index funds to fully diversify. The Vanguard Admiral funds have about the lowest expenses available. For everything else I use Schwab ETFs. They're commission-free so it cost nothing to rebalance and the expenses are even lower than the Vanguard ETFs.

Vanguard Asset Management Services?
 

Any Bogleheads out there ever use Vanguard Asset Management Services? Essentially you hire a Vanguard Certified Financial Adviser to set up a diversified asset allocation plan based on goals, risk tolerance and the time frame as to when you will begin your drawdown.
The fee is $4500 a year or .7% of assets under management per year...which ever is higher. A minimum of $500,000 to be put under management is required to qualify.
My feelings are that yes, it is a relatively high fee, but, that fee coupled with the fact that you are buying Admiral Shares @ .21%, and together add up to .9%, as opposed to many funds that charge 1.2% right from the get go.
Another consideration is that good advise is well worth it's cost when you consider what a mistake might cost.
Any comments or experiences with VAMS?

A true booglehead would never pay for that service when it is so easy to do yourself. Vanguard will do a free plan for you if you have 500K with them and then you can follow that plan. Why pay them .7% of assets when you can everything they will do in about 1 hour a month. Fee's kill returns. Adding the .7% to the .2% brings you to .9%, almost 1% in fee's.

A lower cost alternative would be Rick Ferri who does it for .5% and he uses all Vanguard and DFA index funds which are all very low cost. And you need 500K with him as well. Rick Ferri He has written several books on passive investing, follows the boglehead principals, and runs his own investment management company, Portfolio Solutions.

Personally I would do it myself using my own vs Vanguards plan. I had Vanguard do a plan for me and it was fine, they do the plan for free, but I like others better. I basically use the lazytraders.com 6 fund slice and dice with me own AA. Cheaper, easier, and better back tested results then the Vanguard plan proved to be.

I agree with that approach. Paul Farrell at Marketwatch does a good job tracking lazy portfolios.

How much are you willing to pay for a plan? 1% of a $500,000 is 5 grand each year. I don't choose to give 5 grand for someone elses guess, I can do that by myself for free. The downside is you can't blame anyone else if you do it yourself.

I would pay zero for a plan. I only had Vanguard do one because it was free. I also pay as little as possible for mutual fund expenses. Keep your investment expenses as low as possible to maximize returns. I even go so far as to look at the stocks held by my dividend mutual fund and calculating would it cost me less to buy the individual stocks. It actually was very close

Setting Up My Vanguard Asset Allocation
 

I am in the process of setting up my asset allocation for my IRA. Will be 61, just retired, not planning to draw on my IRA until 70. Vanguard advised a 50/50 distribution of assets spread equally between equity and bond funds. Having been burnt several times in the past, I suppose I am over cautious... perhaps too cautious. I was considering a distribution consisting of 1/3 equity funds and 2/3 bond funds.
I'm in this for the long haul, am I being too conservative?

I dont think so, I just went with vanguard. and pillow time was most important to me

I have retired after 20 years in Financial Services - specializing in retirement planning, estate planning and and servicing the elderly.

Generally, at your age a mix of 60% fixed income (bonds) and 40% equity is recommended for your TOTAL portfolio with the bond portion increasing as you get older. However, the true answer of what to do with your IRA lies in how your non-qualified portfolio is invested. If your non-IRA accounts are more aggressive then balance it with less risky investments.

Also, remember that interest rates are very low right now and they may (probably will) rise in the future. When they do rise, the resale value of your bond funds will decrease. While you will be earning a fixed rate of interest you may find that when you sell your fund, you have made very little profit.

I urge you to consult with a FINRA registered broker or representative and discuss your total financial situation.

How about annuity's

Annuities only benefit the person selling the annuity.

allus70, I personally would not be that conservative right now. As the next post pointed out, bonds are going to go down in value when interest rates rise. I would adjust your AA to something closer to 50/50 or even 55/45 right now. Especially if you do not need the funds for 9 or 10 years. I personal like age minus 15 for bonds vs the age in bonds common practice. But as suggested your AA should look at your total investments not just your IRA. Place most of your bond allocation in your IRA and your stocks in your non IRA accounts. Use 80% index funds for all your investments and maybe add a decent dividend fund to the equities to lower the risk you add by lowering the bond percentage. But pick an asset allocation your comfortable with while being a little aggressive and re-balance with a 5% drift. Re-balancing forces you to buy low and sell high.

A second option would be to select a target retirement fund that is about a 50/50 mix and let them manage it for the next 10 years. They will re-balance to move your AA every year to move you from 50/50 to 40/60 over the next ten years.

A third even simpler option, however not diversified enough for me, put 50% into Vanguard Wellsely (35/65 AA) and 50% into Vanguard Wellington (65/35 AA) and then each year move 10% of Wellington to Wellsely.

Thanks The Wellsely fund is the one I chose. I feel comfortable with the short term bond index fund by vanguard [vbirx] for the next year or so, I also put 5% with vanguards reit [vgslx] Lets hope we have a change in 2013

Fidelity is Better
 

Fidelity overall has MUCH better performance. See for yourself. I'm a financial analyst. Not to sound like I know everything, but I do this for a living. Vanguard does a great job of marketing themselves as the dirt cheap alternative. Both Fidelity and Vanguard are cheap.

Cheap is not everything. It's worth paying a few nickels for better performance over the long run. Fidelity has much better research, performance, and a great website. Not to mention, Fidelity customer service is outstanding. From personal experiences, I know that their back office is fully licensed, so they can talk shop with you.

I've used both. Fidelity is better.

Side note: You can buy Vanguard funds through Fidelity. :smiley: