Without going into too many details, I opened a Roth IRA years ago with the help of a financial advisor whom I still use today. He was independent, but has since joined a small-ish investing firm.
I'm still quite young (32) and I've finally got a large-ish sum of money in the account. Since I've been invested in this account I've only purchased shares of VTI (Vanguard Total Stock Market ETF). It's a great fund with a low expense ratio of .04% and excellent diversification in the US market. It currently has a lifetime return of 6.62%.
I emailed him recently to up my monthly contribution to take advantage of the 2019 contribution limit increase. The response I received was not what I expected at all. Normally, I get a response akin to "Sure thing!"
Today, however, he came back with this.
"With investing more per month I recommend that we diversify into more sectors. I am recommending the following growth model."
LargeCap Growth: 40% (MSEQX)
International: 20% (EFAV)
SmallCap Growth:10% (SLYG)
MidCap Growth: 10% (CMGIX)
Technology: 20% (GBSIX)
Now, I'm not opposed to a little diversification and branching out. It might even be a good thing in my case. However, I wasn't about to just say, "Sure thing, sounds good!" I wanted to investigate and do my due diligence. I found that while all the funds seem fine and have performed well in their lifetime I immediately balked at some of the associated expense ratios. None of which he mentioned or talked about in his initial response.
(MSEQX) - Expense ratio .62% 8.79% - Lifetime Return
(EFAV) - Expense ratio .2% 6.84% - Lifetime Return
(SLYG) - Expense ratio .15% 5.68% - Lifetime Return
(CMGIX) - Expense ratio .9% 7.00% - Lifetime Return
(GBSIX) - Expense ratio .98% 13.66% - 3 Year Return
With the exception of the GBSIX fund most have performed around the same level of VTI. I'd also argue that once GBSIX is around longer that return will likely lower to something similar as the others. I'm assuming Vanguard has similar funds to the ones suggested with much lower expense ratios. I will be investigating those moving forward and proposing those funds instead. I have been meaning to take over this account fully, but haven't made the time. This is also on my to do list as his company charges their own "management" fees.
I know what fees can do overtime to an account balance and minimizing those is an important part of setting yourself up for a successful retirement and long-term investing career. Please, don't just go with what your "advisor" tells you. Most of these guys are sales people. If you need to talk to someone find a fiduciary or someone who doesn't make a living by selling you on certain funds.
Submitted March 06, 2019 at 12:58PM by meltedcactus https://ift.tt/2HiXzpJ
