Charlotte, because it's not what you make, it's what you keep.
Charlotte, that said, returns are typically stated net of internal fees and expenses. Do be sure to check on any other fees, such as commissions, and to compare your investments to others to determine if you can do better with a like-kind investment that has lower fees.
Charlotte, to clarify, that's returns on mutual funds or exchange-traded funds or closed-end funds.
Charlotte - Fees are important because of compounding. The larger your account balance, the larger the amount of interest or return you earn each and every year afterwards.
Hassan, we're delighted to have you join us!
Charlotte - Don Phillips of Morningstar has a great comment about fees: "If you pay the executives at Sara Lee more, it doesn't make the cheesecake less good. But with mutual funds, it comes directly out of the batter." In other words, fees paid to the investment firm come directly out of your pocket and that compounded number can amount to a bunch of money.
Charlotte, it is a lot easier to ignore higher fees (perhaps 1.4% or even higher for many insurance products vs .4%) in a bull market where overall gains are high even with the higher fees. But they become VERY noticeable when returns are low or negative. Example: if I invest $10K per year for 30 years and I have a return of 6.4% less .4% fees (net 6%, at the end of 30 years I will have 790,581. If I do the same savings over the same time period but pay 1.4% in fees (for a net return of 5%, I only have 664,388. That is a difference of over $125,000!!!!! Now here I am talking about management fees from the mutual fund or ETF. There can be other fees as mentioned: commissions, fees for fee only advisors etc...the first is not always transparent but the second should be.
hassan - I know very little about your situation, but it looks like you are looking in the right places. Most individuals should not be buying individual bonds (the hidden costs are too high), so conservative bond funds are probably a better choice. For your age, blended/conservative funds like the Vanguard options you have found are a good start.
Hassan, I, too, love that you are using Vanguard funds with VERY low expenses. Even if they aren't indexes in the strictest sense of the word they keep expenses low just like index funds do. You are certainly not a bother so let us know if you have a specific follow up question.
Good luck finding an advisor Maggie. Find one who is a "good fit" as you will be telling them some very personal information.
SUSHILAND - Unfortunately, I don't have any specific investment recommendation for you. But, I do have two comments: (1) select a diversified option like a mutual fund or ETF, (2) don't chase yield - high yielding investments look good, but they can be very risky.
Sushland, I agree with Mark re: the riskiness of high yield. I often use Dodge and Cox International DODFX or Vanguard International Value VTRIX. They are not specifically dividend funds but good alternatives for international holdings. Disclaimer: I do not know your specific situation and only recommend that you include these two in your research.
re: $450,000 in cash: What's your time frame for the funds? If you're in a higher tax bracket you could consider a short- or intermediate term muni fund that focuses on high-qualify bonds with a shorter duration. Duration is a measurement of fluctuation during rising interest rates, ex., if the fund has a duration of 4 then for every 1% increase in interest rates the fund would go down 4%. Of course, that's not the only think that affects bond prices.
We're in the final stretch. Thank you to all the advisors who were with us for the last couple of hours.
Joining us now are Mark Briggs, Tim Parker, Tyler Gray, Scott Draper, and John Wenzel. Welcome!
My wife and I, "how do I get returns without risk?" Good question and I wish I knew the answer. I suggest that you come up with an overall allocation for your retirement accounts and taxable accounts. Keep at least enough cash in your taxable account to fund three years of cash needs (for instance you need 25K/year but will get 5K in dividends and 6K from other sources. then you need 25-5-6 or 14K for 3 years or 52K total). At the end of the first year, sell enough to replenish the 3 year cash resource if the market is in a good place. If not, you can wait for up to 2 more years to replenish the cash and will not have to sell in a down market. I hope this helps. PS, there will certainly be some annuity salesmen out there that will tell you they can give you returns without any risk. But understand the cost of this kind of solution will probably do you more harm than accepting some of the risk and making sure you don't have to sell in a down market.
re: $450k in cash...I assume you're saying the $450k in cash is in a taxable account and is IN ADDITION to the $950k in your 401k and SEP IRA? If so, I'd personally consider paying off the mortgage on your rental property and then look into something like what Delia and/or Bobbie mentioned after that. I second the annuity salesmen comment....the only way to increase return is to increase risk (or cost).
Sushland, I've thought the market was high for several years now, If you have a long time horizon and expect to put money in your ROTH yearly, then take the plunge knowing that, if the market goes down, you will be able to take advantage with next year's contribution. I usually use the most aggressive equity investment in an overall diversified allocation in the ROTH as over time, that will provide the most tax free money....perhaps smaller companies or technology (IF they are part of a sound overall allocation). Some advisors I know use ROTH for the most aggressive fixed income investments like high yield bonds. Good luck.
@Sushiland, It's hard to beat a globally diversified mix of low cost stock and bond mutual funds over the long-term. Depending on how often you're putting money into the account (and how much) you might consider an asset allocation fund that's in line with your risk tolerance and time horizon to help save on transaction costs and take home more of your fair share of market returns. If you're really concerned about putting all of your current funds sitting in cash into the market, you might consider dollar-cost-averaging those funds monthly over the next 6-12 months where you put a little bit in each month.
Skingerkc, yes reinvested dividends and interest are definitely savings. In the old days before enhanced brokerage reporting, keeping the basis on holdings in taxable accounts where there were reinvested dividends was frankly a pain. but that shouldn't really be an issue anymore. But if you DO switch brokers be sure your basis on such purchases in a taxable account is transferred over with the assets.
Hi Skingerkc - I think including the reinvested dividends and interest is fine to include in your overall savings rate because you are not spending it. This compounding feature can be very powerful.
Sandakan, that is a very broad question with little information and I suspect none of us use Fidelity funds exclusively. So sorry not to be able to provide more help.