Working backwards off the fee paid, I see the original poster has about
$233K under management.

In today's day and age that's chump change to asset managers and despite
the resassuring customer service from Bank of America it's almost a
certain he's getting a canned asset allocation and canned portfolio,
regardless of his individual needs. IMHO that's just not worth 1.5
percent. As others have posted, in today's world of single-digit returns
on your typical balanced portfolio paying 1.5 percent in fees in a VERY
sginficant haircut.

Now if he had $233 MILLION it would be worth paying 1.5 percent to a real
pro to run his money. But with $233K he's better off paying 0.20 percent
to Vanguard for one of their target retirement date funds. He'd get the
same "set it and forget it" approach for a fee that's 86 percent lower
than Bank of America charges.

Finally, I second Joe Taxpayer's advice that this investor would not be
well-served by trying to read Graham's book. He doesn't want to become a
bottom up stock picker. He just wants investment pros to watch over his
modest nest egg. Graham's book is not what he's looking for.

joetaxpayer <joetaxpayer[at]nospam.com> writes:

- quote -

I'd have steered him towards Eric Tyson's "For Dummies" books.
Personal Finance for Dummies - stupid name, ugly bright yellow
cover - great book. And it addresses more than just asset
allocation but other issues as well - insurance, debt management,
etc.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

dapperdobbs wrote:

- quote -

big snip

Quote from Marv's initial question; "It's important to note that, while
we're willing to put work in up front to find the right plan, we're not
interested in becoming active investors."

While "Security Analysis" is actually one of the books I suggest on my
site, joetaxpayer.com, it's a path toward active investment. That's
something Marv clearly wanted to avoid. I read his note above to mean
that he'd prefer a mix of index funds. And I'm certain that a good
selection of low cost ones will serve him well.

JOE

Marv -

(Let me see if I can get some disagreement on this ;-)

The basic-basic principle of "Security Analysis" is to analyse and know
what you are doing before committing any money. So as Elle and Tad have
strongly suggested, read up on fund selection, first (whether stock or
index or ETF's). When you feel comfortable with that, and have a
considerately thought out selection of funds in mind, move portions of
your money into your hands. Thinking it over a few days after you are
"ready" and/or bouncing it off your buddy won't significantly impair
your returns.

Also read Security Analysis - the principles there are the foundation
of stock selection, and when you are comfortable with that, it will
serve you well in understanding investments, markets, and in analysing
the stocks in a fund. (Even if you never buy individual stocks, it is a
wealth of knowledge.) You will know, at some point, whether or not you
want to try buying a stock. When you feel you have a stock that is
better than the average of the fund, move a small amount of money (2% -
5%) into the stock. See how you do.

Portfolio diversification is, in my observation, having read several
texts on the subject, predicated more on managing the risk of
speculation than it is about the relatively simple task of managing a
selection of sound investments. Ben Graham personally taught Warren
Buffett - granted, Buffett had talent, smarts, and worked hard, but his
entire portfolio of billions normally contains a dozen or so stocks.
Most portfolio theory managers will tell you a dozen stocks is far too
few. Just look at the number of stocks held in the average mutual fund
- it goes up into the 50's and 60's (that way, if one goes the total
loss way of K-Mart, well, shucks, it was only 2% of the total). Graham
and Buffett's point is to be sure of what you are doing, based on
analysis, research, and careful, methodical, thought. If you can do
that ... the rest is just being bashful about the outrageous returns
you are getting :-)

Returning to the first line: procede with knowledge aforehand,
exercising due diligence and moderation.

"marvster" <marvster[at]gmail.com> wrote
- quote -

As they say in Fargo, darn tootin'. An annual expense of
1.5% on one's portfolio sure takes a toll on its return over
the long run. If you have the time, by all means manage your
own portfolio, even if it's "only" managing index mutual
funds and index ETFs like your friend is doing.

For ideas about asset allocation (and doing so cheaply), see
the free online tools at
http://home.earthlink.net/~elle_navorski/id8.html . I think
they give a newbie do-it-yourself investor some perspective
almost immediately.

marvster wrote:
- quote -

Marv, given your intended approach (if I read right - Vanguard funds?)
I'd recommend books focused on basic asset allocation using index funds,
instead of stock-picking. Some good ones are:

Bogle's books, e.g. "Common Sense on Mutual Funds"

Bernstein's "The Intelligent Asset Allocator" (see also his web site
www.efficientfrontier.com)

Gibson's "Asset Allocation"

The last one is more directed at advisors but shows the approach that
might be used by a firm that charges 1.5% to do this for you.

-Tad

Hi Guys,

Sorry for my slow response. Thanks again for the great insight.

After also chatting with a pal who works for a company that carries
only load funds, but who says he keeps his personal money in a mix of
no-load indexes and ETFs, I'm sold on the idea that I can manage my own
money without paying BofA.

I'll pick up Security Analysis!

Cheers,

Marv

Joe is right, and I'm not sure I can add anything, except to note that
you're paying for (as I mentioned above) the decision to allocate
between stock and bond funds. And as you get more money, you should be
able to specify your preference between types of income.

Btw, the amateur mistakes I saw were at a major bank. Just one example:
a stock position was sold for a sizeable gain 11 months into the
holding period. Gimme a break! I can think of three alternatives right
off the top of my head. But the bank (likely) sold the position
wholesale across all accounts, and (probably) if the individual manager
doesn't follow the indications of the group head who follows the
recommendations of advisory services, he gets canned.

You seem like a bright buy - take responsibility for your money, put in
some time (read "Security Analysis", by Benjamin Graham) and learn
about selecting your own portfolio. If you want someone to select and
buy your new car for you, then you should pay a fee. Peter Lynch
pointed out that people spend months researching a new refrigerator for
$1,000 bucks, then buy $40,000 of gold based on five minutes of thought
and a guess.

marvster wrote:

- quote -

You can use the Vanguard targeted fund as you suggested, and have much
of your money there, it's diversified already. Or you can choose the
funds from the Vanguard or other low cost funds to choose your level of
risk/agressiveness. You need to decide the extra value, if any, that the
1.5% is buying you.
JOE

Hi Guys,

Thanks for the insight. One of the good things about BofA is they're
big and bureaucratic and conversative enough that I'm pretty sure
they're not going to make amateur mistakes. And just to clarify, they
don't have all our money in one product -- it's spread among many
different stock and bond funds.

I guess the bottom line question is, if I'm happy to lean conservative
anyway -- i.e., I'm not sure we have the stomach to work with an
advisor who's going to be super aggressive with our investments -- is
it worth paying that 1.5% when I can find an equally conservative place
to stick our money with another "blue chip" company like Vanguard?

Cheers,

Marv

If you have a plan that is conservative, it should be easier to manage
(e.g. allocating funds between large cap stocks and bonds and muni's
isn't a lot of work). And the numbers Joe ran are worth paying
attention to.

However, the "Appreciation" of your account, and its consistency, is
the key consideration to measure other plans against. Another is the
responsiveness of the bank to your preferences, as these change. Make
sure they back up their fuzzies and toasters with service and
performance. (When it comes time to retire, you could put money into
laddered CD's, or go to a broker and get laddered muni's - I mean,
that's pretty easy stuff - you could even go to a broker checking /
money market account in either ordinary income or muni's - and you
wouldn't be paying 1.5%. That's not "cheating" - you paid the bank well
for the appreciation - that's what you bought from them.)

Quality is very important - critically important - when selecting an
investment. If you have a bad money manager, you may lose much more
than the fee - and have to pay the fee anyway. I saw two personal money
managers that charged 1.1% and 1.2% - but both of them made elementary
mistakes that were hair-raising. I saw a (third) broker lose his
client's money in it's entirety, in a margined account (she expressedly
said "no margin", but the guy ignored her and margined high tech in
late 1999).

The quality comes first, the appreciation comes second, the fee is
third, and the coffee? Buy one.

marvster wrote:

- quote -

The Vanguard you suggest shows a .20% cost. Over 10 years, that
difference will be over 13%, 20 years, 25%.

To look at it a different way, the withdrawal rate at retirement to be
sure you won't outlive your money is 4%, give or take. A 1.5% cut seems
huge compared to that withdrawal rate. It's possible, but hardly likely
that one product will consistently beat the other by enough to justify
that extra expense.
My two cents.
JOE

About a year ago my wife and I rolled all our money into the BofA
investment group with a financial planner that came highly recommended.
Before that all of my money was just plunked in the big Vanguard index
(VFINX) and my wife's was scattered among various old 401k accounts.

We're in the BofA "Appreciation" portfolio, which is a kind of set it
and forget it plan where BofA buys and sells to hit a target return
without needing approval from us. Based on the amount of our assets
under management, we're paying a 1.5% commission (currently amouts to
about $3,500/year but of course will go up as we add more). This isn't
a horror story: BofA has done fine for us, and the personal service is
nice.

But my question is, are we paying too much for what amounts to a
conservative return target and a lot of warm-fuzzies for being premier
banking clients? As I've learned a little more, I've found programs
like Vanguard's Target Retirement and LifeStrategy funds that seem to
do the same thing BofA is doing (diversify, shift assets appropriate to
age) for WAY less than 1.5%.

It's important to note that, while we're willing to put work in up
front to find the right plan, we're not interested in becoming active
investors. We just want to put our money with a source we can trust and
not spend an unreasonable amount in fees. Do a yearly review, that kind
of thing.

Anyone else have experience with BofA in particular, or with plans
similar to the Vanguard plans mentioned above?

Thanks very much,

Marv