Investing through ING Sharebuilder

[moda0306]

Does anybody invest through ING Sharebuilder so they can do it all on one account an not have a separate one with Vanguard, ishares, etc.?

It's got good ratings and seems to hold a lot of good funds... just wondering if people use it as a one-stop-shop for their PP.

[MediumTex]

I have a small account there.  (I only opened it because they paid me a $75 bonus earlier this year.)  I don't have any complaints.

[Jan Van]

I have used it in the past, but somehow never really liked it. I've used buyandhold.com for a long time, and I liked that better than SB. But I might close B&H and move everything to Vanguard anyway. Not sure yet...

Unless you plan on using the automatic investment option, I don't see any advantage over Vanguard, TDAmeritrad, Schwab, etc...

[moda0306]

But then you need somewhere else to get your gold... only complaint.  I'd do vanguard in a heartbeat.

[Jan Van]

But then you need somewhere else to get your gold... only complaint.  I'd do vanguard in a heartbeat.

Do you mean at Vanguard? I use their brokerage for gold, iau...

[moda0306]

You can use Vanguard's brokerage to buy non-vanguard funds?

[Jan Van]

You can use Vanguard's brokerage to buy non-vanguard funds?

Yes. Non-Vanguard funds, Gold, platinum, you name it :-)

https://personal.vanguard.com/us/funds/other
https://personal.vanguard.com/us/whatwe ... ksbondscds

[moda0306]

Mind: Blown.  I'm assuming this is as available with Roth/IRA's as it is with taxable accounts??

Thanks folks... Merry Christmas.

[Jan Van]

I'm assuming this is as available with Roth/IRA's as it is with taxable accounts??

Yes. And the more money you have at Vanguard the cheaper trading get: https://personal.vanguard.com/us/whatwe ... ommissions

[steve]

Why I like Vanguard for Permenant Portfolio
My # 1 reason

I feel that  The 25% Cash held at Vanguard is safer than any other place. 

[moda0306]

At current rates, maybe under your mattress?

[Gumby]

Why I like Vanguard for Permenant Portfolio
My # 1 reason

I feel that  The 25% Cash held at Vanguard is safer than any other place.  

Well sure, it's safer if you can get into their Treasury Money Market Fund. Not sure their Prime Money Market Fund would be the safest place to have cash during a run on money market funds. Breaking the buck can happen to any Non-Treasury Money Market Fund under the right pressure. All it takes is a default on high quality commercial paper, which is usually followed by a high demand for cash redemptions. If the fund can't sell their assets without taking a loss (and they can't fund the losses somehow) then you can break the buck on any fund.

See (from Wikipedia):

Defaults on high quality commercial paper are rare, and cause concern when they occur. Notable examples include:

- On June 21, 1970, Penn Central defaulted on a debt of $77.1 million
The Federal Reserve intervened and cut Penn Central's bond rating from BBB to Bb.[8] This placed a substantial burden on clients of the issuing dealer for Penn Central’s commercial paper, Goldman Sachs.

- On January 31, 1997, Mercury Finance, a major automotive lender, defaulted on a debt of $17 million, rising to $315 million.
Effects were small, partly because default occurred during a robust economy.[7]

- On September 15, 2008, Lehman Brothers caused two money funds to break the buck, and led to Fed intervention in money market funds.

[pplooker]

I did some reading a couple of years ago on (non Treasury) MM funds, and the short version is that Vanguard's Prime MM fund seems to be the safest among them all insofar as not "breaking the dollar" goes, mostly because its administrative structure incurs far less costs than many competing offerings.

FWIW.  For people stuck with a 401k plan or some situation like that, it may be a little consolation.

[moda0306]

401k plans are a joke.  Mine's like 7 different managed stock funds, a real estate fund, an emerging markets fund, some "balanced" fund (that term makes me laugh), and a couple pathetic money-market funds.

No Gold.

No LT Treasuries.

No non-managed stock fund containing 5000 companies

No commodities

But low and behold, you can put $15,000 per year in a 401(k), but only $5,000 in an IRA.

[pplooker]

I hear you.

I left a job a couple years ago where it was very nearly the same situation, only there were eight funds (all actively managed) to choose from!  We had it goooood!

The problem is most people don't even know what's in their 401k (or their contribution rate, or what a 401k is), and companies defer all questions about it to HR, and HR people know about compliance and management and such things, not financial instruments, so nothing ever gets done!

Right now I don't get benefits at my job, but my 5k + I bonds gives me more space than I can take advantage of, but I feel sorry for people who do have benefits and have to contend with these problems.

(I know it's a little weird to say that but at least in my situation my lack of good insurance, etc. only effects me!)

[moda0306]

To make it worse, I work for an accounting firm, and our financial management arm manages our options... so we've got professionals picking our choices.... I've told my buddy in that department to talk to the higher-ups about TRUE diversivfication.

But since LT treasuries and gold are in the same risk category (quntity of risk, not type) as stocks, they feel like they don't need to be there.... I mean they've got 7 stock funds for God's sake... how diversified can you really be?

[MediumTex]

To make it worse, I work for an accounting firm, and our financial management arm manages our options... so we've got professionals picking our choices.... I've told my buddy in that department to talk to the higher-ups about TRUE diversivfication.

But since LT treasuries and gold are in the same risk category (quntity of risk, not type) as stocks, they feel like they don't need to be there.... I mean they've got 7 stock funds for God's sake... how diversified can you really be?

Good luck with that one.

When you say there are "professionals" picking your funds, in what way are you using that term?  Is that like a bunch of monkeys throwing darts while wearing business suits? 

I applaud your enthusiasm for true diversification in retirement plan fund offerings.  If you have any success, please report back.  I've been banging my head against this wall for many years and have come to the conclusion that there are some things people don't want to see, and thus getting them to see it is near impossible.

It's a bit like the story of the clerics who were afraid to look through Galileo's telescope.

[Jan Van]

Good luck with that one.

Quite so.
The 401K is kind of a pet peeve of mine... I work for a small company so our 401k is through ADP, at Mass Mutual. At least they have a few index choises, for stock, bond and international. Kudos for that, except they are from Northern and therefor too expensive at 0.20%, 0.73% and 0.91%. Could be worse though... And the of course the target date funds from Dow Jones and consevative/moderate/aggressive jouney from MassMutt. Plus a handful of other managed funds and a stable value fund. All in all 20 funds. But of course no LT bond or gold.
Always wondered how expensive it is to add a brokerage window. But that always seems to be a big problem...

[MediumTex]

A brokerage window is really the only solution.  The key is to get one or two senior executives on board with the brokerage window concept and then it's easy to get done.

You will have more luck getting a brokerage window put in than in getting the fund lineup improved.

[Jan Van]

My number one problem at the moment is the non-discrimination rules for 401k (something like that). I'm working at a small company and some people don't contribute to the 401k (not smart). So I can only contribute $2k or so a year. That just bugs me to no end. For one because I think it's a stupid rule. For two because I want to max out.
So somebody please explain to me why that rule makes sense...maybe i'll feel better...

[MediumTex]

My number one problem at the moment is the non-discrimination rules for 401k (something like that). I'm working at a small company and some people don't contribute to the 401k (not smart). So I can only contribute $2k or so a year. That just bugs me to no end. For one because I think it's a stupid rule. For two because I want to max out.
So somebody please explain to me why that rule makes sense...maybe i'll feel better...

What you are asking is far more complicated (and the answer far more gratuitous) than you would believe.

The way many employers with a relatively large concentration of "highly compensated employees" (an IRS defined term) is to put in a "safe harbor" plan under which all employees receive a minimum contribution from the employer that is fully vested immediately.  This minimum contribution to all employees allows the highly compensated employees to contribute up to the maximum permitted deferral amount without running into nondiscrimination problems.

Of course, the cost to the employer increases if a safe harbor contribution is instituted, but that's the idea.  The IRS's concern (and Congress in passing the unerlying nondiscrimination rules) is that left unchecked employers would only provide rich retirement benefits to the more highly paid employees.

A few Google searches will get you everything you need on this topic.

***

On the subject of brokerage windows, let me offer an example of just how dumb things can be in this world:

It is not at all unusual for 401(k) plans to have funds with high fees.  The reason for this is basically that 401(k) plan vendors can get away with it because plan sponsors are not very sophisticated consumers of investment products.  Thus, assume that, on average, the fees in the average 401(k) plan mutual fund are higher than an individual investor could find if he shopped around.

Next, for anyone who is not familiar with brokerage windows, they allow a 401(k) participant to treat his account as a normal brokerage account, which allows him to buy basically anything, including most mutual funds, ETFs, bonds, individual stocks, etc.  There is normally an annual fee of $50 or so to keep a brokerage window, which is not a big deal to me.

The concern that plan sponsors (and everyone else has) with brokerage windows is that they provide 401(k) plan participants with an opportunity to take enormous risks with their plan accounts.  This is the reason that most plans that have them almost never advertise this feature and make it difficult to set one up.

What never seems to occur to anyone is that a 401(k) plan brokerage window can also allow plan participants to take LESS risk than they would with the plan's normal investment line-up.  A brokerage window does this in two different ways.  First, rather than buying the 401(k) plan's expensive mutual funds, a brokerage window allows a participant to buy basically the identical fund, but in a cheaper package (either through another mutual fund with lower fees, or through an ETF with even lower fees).  Second, for a 401(k) participant who wants to buy treasurys or shares of a gold ETF to provide PP-like balance to his portfolio, the brokerage window allows him to do this.  Most brokerage windows would also allow a plan participant to buy PRPRFX, if he was interested in one-stop shopping.

Right now, most of my 401(k) plan account is invested in TLT and IAU through the plan's brokerage window.  Anyone looking at this account in isolation would say I was crazy (though these funds have done quite well together), but when you look at my 401(k) account, my IRAs, my taxable accounts and my other assets, you would see a typical HB PP, with the expected safety and stability.

One of the ironies of the brokerage window is that everyone thinks it is a vehicle to take MORE risk with retirement funds, while I would argue that it is actually a better tool to allow an investor to take LESS risk with his retirement funds.

[Jan Van]

I work for a very small shop, around 20 employees. A while ago I actually brought up one of the alternatives open to us, but that also meant the employees would need to contribute a minimal amount every paycheck. If I remember correctly it was something like $25. I was told some of the office workers would never go for that, so that plan was off the table. As far as the employer providing rich benefits, in our case the employer doesn't even match anything. But yes, it's different elsewhere. I just fail to see how it hurts my office-based co-worker who is unwilling to contribute even $25 per paycheck to the 401k, that I would be maxing it out. Oh well...

As far as the choices and the brokerage window are concerned, yes, obviously all 401k participants have to be treated as absolute morons who can't decide for themselves what's good. So limit the choices and don't give them the brokerage window as a way to self destruct. Hmmmm.... maybe some education would help??? Have to admit I find it sad that people refuse to contribute to their 401k. Not because I can't max out as a result of that. I'll be fine. I have to wonder about their retirement planning though. (Or maybe they are very sophisticated, figuring an IRA is better because the employer doesn't match. Somehow I don't believe that...)

Sorry about the rant. As I mentioned before, pet peeve...

[MediumTex]

As far as the choices and the brokerage window are concerned, yes, obviously all 401k participants have to be treated as absolute morons who can't decide for themselves what's good.

Visualize rats in a maze with laced cheese at the end of a few strategically placed dead ends....

Sadly, the paths to success in society are narrow and no matter how many green strips you see in retirement planning commercials, for most traditional investors those green strips sooner or later will lead off the edge of a cliff.

I believe that the sooner each individual can learn this lesson, the happier (and less disappointing) his life will be.

It breaks my heart to see the scale of disappointment that much of the baby boomer generation is going to experience in retirement.  Many of them have simply bought into a multi-dimensional fantasy.

[Jan Van]

It breaks my heart to see the scale of disappointment that much of the baby boomer generation is going to experience in retirement.  Many of them have simply bought into a multi-dimensional fantasy.

Yes, agree. Though just like the whole mortgage crises mess, here too I have dualistic feelings. I'd like to blame the banksters for everything, but there is some room for individual blame in there somewhere too. Don't quite know yet where to place most of the blame...

[MediumTex]

It breaks my heart to see the scale of disappointment that much of the baby boomer generation is going to experience in retirement.  Many of them have simply bought into a multi-dimensional fantasy.

Yes, agree. Though just like the whole mortgage crises mess, here too I have dualistic feelings. I'd like to blame the banksters for everything, but there is some room for individual blame in there somewhere too. Don't quite know yet where to place most of the blame...

It really doesn't matter who is to blame.  Foolishness is older than the hills.

The important thing for the individual is to see the basic cause and effect relationships that flow from bad monetary and fiscal policy coinciding with bad demographics and arrange his affairs appropriately.