The costs/transaction relative to account value and Frequency of trades
is the issue for efficiency. Compare this to cost of owning a mutual
fund.

For example- If I buy $883 of one stock through sharebuilder this would
cost me $4.. low transaction cost. If I bought all 12 stocks in one
month for $10000, it would cost me $12 total. .12% expenses to
purchase and own. No cost of maintaining account
There would be a fee of $15+ per stock to sell.

Much lower percentages for costs than even most mutual funds. Each
year the stock is held, it favors stock ownership relative to mutual
fund ownership as it relates to cost.

If someone is trading more than holding, then I think another broker
type is more appropriate. Sharebuilder also gives the individual
investor less control over purchase price and timing.

trying to give some perspective.

Tad Borek wrote:
- quote -

Well, throwing in time as an efficiency factor, I can start to
understand. It is a lot more time-effective to buy an S&P 500 index
fund and just forget about it.

- quote -

I agree, a $10,000 portfolio qualifies as small and presents problems
with cost-effective diversification. Note that I said in my last post
that it appears the OP has enough funds to be diversified (although the
OP did not state dollar amounts).

- quote -

This is not a necessary fee - for example Scottrade does not charge a
minimum balance fee (although they are not my favorite brokerage).


- quote -

Now hold on - 4% is 4% and with that kind of market out-performance and
continued savings, this is not going to be a small investor for long.
And while the return on time *may* not be great in the early years, this
is where the investor gets hard-won experience. Do you play poker? I
do - it's a lot different game when you're just playing for matchsticks
than when you play for money. I find that even if the money is quarters
as opposed to dollars, people pay more attention. If it is worthwhile
to manage your own money when you have a $200,000 portfolio, where are
you going to get the experience? Not from paper-trading while your
money is in an index fund (not that paper-trading is a bad thing).

I started learning what I know of the craft as a very small investor
($2000). Of course, I was not diversified as that would have killed my
returns as you pointed out. And my lack of diversification stung at
times. But then, I learned first-hand about the value of
diversification (and promptly ignored that lesson when it came to rental
property, much to my dismay...).

- quote -

This is the essence of my question to John. For me, I enjoy the
research, etc. And I don't spend an inordinate amount of time on it
(although my wife may disagree...).

- quote -

I completely agree, but even at $25,000, this sounds like a "small"
investor. I manage much more than this for myself and my wife, and I
still consider myself a small investor. Maybe I'm not?

-Will

Will Trice wrote:
- quote -

Will,
I would have said "not an efficient use of money or time" but I
generally agree with John.

Let's say someone has $10,000 to invest and is being "borderline
prudent" and spreading the money over at least 15 stocks. That's $667
invested in each.

Let's say they bare-bones it and have just $5 commission per trade.
That's going to be $10, or 1.5% in transaction costs for the round-trip
(buy & sell). If they pay $15 per trade it's of course 4.5%.

I'll ignore the spread (gap between buy & sell prices) percentage
because that's there regardless of whether your purchases are $666 or $6666.

Depending on how often the person trades, this could become an
insurmountable cost. They might pick some good stocks but after paying
even that tiny 1.5% total commission they end up behind what they could
have done with $10k in a comparable mutual fund. This is especially true
if they trade a lot, of course.

Also - at $10k it's likely this person is paying some kind of
low-balance account fee, and if so that needs to be factored into the
costs as well. If it's $10 per quarter that's another 0.4% drag on
returns. Add these up, and let's say they hold stocks on average one
year, and their portfolio cost drag is 2% per year - higher than a
typical actively-managed mutual fund. So for the small portfolio, even
at bare-bones costs, you have some cost hurdles to overcome.

Now let's say they overome those hurdles and earn an extra 4% per year
on their portfolio. That would be big, but let's just say they do it.

4% of $10k is $400. That's not a lot of money. It's not like it comes
for free, considering the time it takes to research stocks, keep up with
them, do the record keeping, place the trades, etc - it's probably
dozens of hours per year, ie "less than minimum wage". That's just not a
very good return on the time investment. Unless stock-picking is some
kind of hobby, I think a lot of people would rather stick the money in a
mutual fund and do something else with their time.

But scale that up and imagine it's a $200,000 portfolio. Same amount of
work, same (perhaps lower) transaction costs, and now it's an extra
$8,000 in returns. More worth-it?

Where to draw the line? For someone for whom it's a hobby the time
investment might not matter so much. Just on the cost numbers it seems
in a low-turnover portfolio, say average holding period of 3 years,
having about $25,000 devoted to individual stocks makes transaction
costs reasonably low, assuming you're trading through one of the
discounters. With higher turnover it would take more money; with fewer
stocks it requires less money, but your risks go up because of the lower
level of diversification. And it's important to keep your eye on returns
because if after all that work you're lagging the market - why bother?

-Tad

John A. Weeks III wrote:

- quote -

Why do you say this? I could see where instead of "smaller" investor,
you might make this statement for "new" or "inexperienced" investors,
but why smaller investors? I guess I might ask, what is your definition
of "small"? The OP seems to have enough money for proper
diversification - he's got money spread over 10 assets now.

Or maybe I don't grasp your definition of "efficient". Perhaps you're
thinking of transaction costs? I would think that the use of online
brokers mitigates that these days. I consider myself a small investor,
I invest in individual stocks, and my transaction costs are negligible.

Please note that I am not advocating individual stock ownership for the
OP, I'm just curious about your efficiency comment.

-Will

Andre' wrote:
- quote -


RE: fund selection...those expenses aren't awful, but you might read up
a bit on how Janus's funds fared after the 2000 drops...at the time I
really questioned the quality of the management there. A bunch of their
funds invested in a very similar list of stocks, which all went down the
tubes at the same time. These funds were sort of at "ground zero" of the
bursting of the bubble, and it led to some real losses.

Of course it's years later and the funds could be completely different
now. To me it's one of those "damaged brands" though, kind of like Ford
re-introducing the Pinto. I probably wouldn't buy a Pinto even if it
were a GTI underneath.

If you were to consolidate at a single fund group, and self-direct your
account, I'd suggest taking a look at Vanguard. Oh, you're on to that
already...


- quote -

OK - RED FLAG! - lots of potential problems there (and be very careful
when asking discount brokers for tax advice!)

The important thing to keep in mind is that only an IRA inherited from a
spouse can be "treated as your own IRA" and combined with your own IRA
or converted to a Roth.

An IRA inherited from your father can't be treated that way, it must
remain as an inherited IRA, and it is subject to some very specific
rules on distributions. You cannot move that money into your own IRA,
and you cannot convert the inherited IRA to a Roth. You must take
minimum distributions from the IRA each year, or face penalties.

Now, the Ameritrade person was technically correct...you COULD sell LU
in the inherited IRA, take money out of the inherited IRA (as a taxable
distribution), and then use the remaining cash to make a regular
contribution to your traditional or Roth IRA - meaning, use the
inherited IRA as a source of cash. But you'd be taxed on the
distribution from the inherited IRA so would be a silly transaction to
do. You'd start with $X in the inherited IRA, and end up with ($X -
taxes) in your own IRA. Why not just leave it in the inherited IRA? (and
move the inherited IRA to some other firm, through a direct rollover)

Generally people leave inherited IRAs alone rather than distributing
them (moving them to another fund company or broker perhaps, but not
liquidating them). That way you prolong the tax deferral of the IRA as
long as possible. But it's VERY important to take your "minimum required
distributions" from the inherited IRA _each year_, the penalty for
missing them is severe. If you have an accountant, talk this over with
them to make sure you're doing that. It's explained as well in IRS
publication 590, which you can view or download (PDF) at www.irs.gov

-Tad

It sounds like the OP is confusing two totally different issues:

(1) Choosing appropriate funds for investing his inheritance

(2) Wanting to roll the money over into a new Roth IRA

As far as issue (1) goes, as other people have pointed out, the
expense ratios on the Janus funds is not excessive, but maybe the
funds themselves are not so great. Personally, I see no reason for
the OP not to liquidate all the holdings and start from scratch with a
new set of funds, as long as he does appropriate research first.

For issue (2), part of the problem is that only part of the OP's
father's investment was in an IRA. The remaining part can't be rolled
over into an IRA of any type. For the IRA part, the OP needs to
understand the IRS's rules about inherited IRAs, first. I'm not sure
of the details, myself. But the general rule is that money from
traditional IRAs can only be transferred into another traditional IRA
account. If you want to roll it over into a Roth, you need to transfer
it into a traditional IRA first and then do a Roth conversion. The OP
could use some of the non-IRA money he inherited to pay the taxes and
effectively increase his amount of tax-protected savings.

-Sandra

The fees don't seem that excessive for managed accounts. My portfolio
of mutual funds at Fidelity has an average expense ratio of about 0.8%,
which is in line with the numbers you give. You can get lower expenses
if you switch to index funds.

I don't know much about Janus, so I suggest that you check the 3 and 5
year returns against corresponding funds at other mutual fund
companies. Since the basis on the cash accounts was stepped up to
current market value on the date of your Father's death, you may not
have much tax consequences in moving the money into funds more to your
liking.

Regarding moving the IRA, you cannot roll them into your own name.
There is a special way an inherited IRA must be named. Check with Janus
or with the fund company that you want to move to. You have to do it
right, or the IRS could rule that you have taken a 100% distribution
from your father's IRA and made an improper contribution to your own.
There would be major tax implications for both of those.

Dave

In article <1141781627.729754.300510[at]i39g2000cwa.googlegroups.com> ,
"Andre'" <eyesright05[at]yahoo.com> wrote:

- quote -

The expense ratios are all under 1%. I don't know what you are
worried about since being under 1% is pretty darn good. I would
part with the Lucent stock. That is too much money in one place
to keep, and owning individual stocks is not an efficient use
of money for the smaller investor.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

Hello everyone,

I have inherited my fathers financial plan after he passed away. I am
new to investing, but after review of my fathers financial plan, I
don't agree with it. Here is a breakdown of what he had invested.

Janus Mutual Funds 40% IRA, and 60% Savings

Symbol Name total shares % invested Expense Ratio
JAENX JANUS ENTERP 78.793 1.467091317 0.95%
JAGLX JANUS GLOBAL 450.088 8.380442382 0.96%
JAGTX JANUS GLOBAL 422.481 7.866412075 1.03%
JAMRX JANUS MERCUR 133.452 2.484818073 0.92%
JANSX JANUS INVT F 185.445 3.452905071 0.87%
JAOSX JANUS OVERSE 273.983 5.10144404 0.89%
JAVLX JANUS TWENTY 495.693 9.229587605 0.86%
JAWWX JANUS WORLDW 228.854 4.26116173 0.85%
JSVAX JANUS CONTRA 3101.906 57.75613771 0.93%




He also has 900 shares in Lucent.

I am not sure why he stuck with Janus, but those expense fees seem
outrageous. Does anyone know if there is a better pay out to make up
the difference for those expense ratios? I am not sure whether or not
they are performance fees or not. They should be accurate since I
retrieved them off of the CNN money website.
Also, I am interested in rolling my fathers 2 Janus accounts and the
Lucent stocks into my own IRA with possibly the Vanguard corporation. I
haven't decided on the types of mutual funds to invest in yet (so you
are welcome to recommend).
Ameritrade said today that I would have to liquidate the Lucent shares
in order to transfer them to a new Vanguard IRA (I don't have an IRA
yet). They said that I can only trade from like account to like
account. Does anyone know if I will encounter the same difficulty with
Janus if I want to take my fathers Savings and Sep IRA and roll it to a
new Roth IRA with Vanguard? I am trying to avoid tax implications.
Also, I will be able to put all assets into my Roth IRA instead of
having to take out 4,000 each year from one account into my new Roth
IRA right?
If anyone has any information, I would appreciate it.

Andre'