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My adviser recommended American Funds Growth Fund of America and
EuroPacic Growth Fund along with several other American Fund Growth and
Equity and Bond Funds for my $450K 401k turn over. The mix sounds good
for my status as a 67 yo retired with a retired 64 yo wife. I want a
minimum of $25K/yr (~5.5%/yr) out of this to supplement the $75K we get
in SS and pensions. Since inflation is still going up, more would be
better, but less would put a serious crimp in our lifestyle! American
Funds, esp the 1st two, have a good rep (Morningstar and Motley Fool)
and the package has a combined expense ratio of 0.68% and a 12.29% 5 yr
average return. However, the upfront sales charge of 2.5-5.75% disturbs
me a little.
As I can get no-front charge Vanguard funds that are approximately
equivalent, why should I pay these sales fees? Are American Fund
managers that much better?
Chip
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Chip <c...@i...org> wrote:
>I want a
>minimum of $25K/yr (~5.5%/yr) out of this to supplement the $75K we get
>in SS and pensions. Since inflation is still going up, more would be
>better, but less would put a serious crimp in our lifestyle!
You better think real seriously about trying to get 5.5% a year out of your
portfolio. Depending on assumptions and asset mix, you've got around a 20%
chance of running out of money in 20 years. The favorite "rule of thumb"
around here is that 4% is a more reasonable withdrawal rate.
>American
>Funds, esp the 1st two, have a good rep (Morningstar and Motley Fool)
>and the package has a combined expense ratio of 0.68% and a 12.29% 5 yr
>average return. However, the upfront sales charge of 2.5-5.75% disturbs
>me a little.
American funds do have a good rep, but you have hit on the major problem.
>As I can get no-front charge Vanguard funds that are approximately
>equivalent, why should I pay these sales fees?
Only if you like giving money away.
>Are American Fund managers that much better?
Nope.
-- Doug
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On Thu, 17 Jul 2008 17:52:23 -0500, Chip <c...@i...org> wrote:
>As I can get no-front charge Vanguard funds that are approximately
>equivalent, why should I pay these sales fees? Are American Fund
>managers that much better?
I remember back when gold funds and rental property with their
double-declining depreciation were the rage. They were replaced by
John Templeton's international crew and anything "Pacific Rim" that
walked on water. They in turn were replaced by Fidelity Magellan
which really started the mutual fund era in my opinion. They were
replaced by Janus who took the investment world by storm until
internet technology pushed growth stuff to the forefront. Since then
there have been several - including American Funds,
Global/International, mid/small caps, rebalancing and so forth - who
have vocal proponents. As to what comes next, who knows?
Somewhere in there I remembered the old joke (Where are all the OLD
investment gurus?) and decided that a low-cost passive index fund was
my best shot at long-term financial security.
-HW "Skip" Weldon
Columbia, SC
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On Jul 17, 3:52 pm, Chip <c...@i...org> wrote:
> My adviser recommended American Funds Growth Fund of America and
> EuroPacic Growth Fund along with several other American Fund Growth and
> Equity and Bond Funds for my $450K 401k turn over. The mix sounds good
> for my status as a 67 yo retired with a retired 64 yo wife. I want a
> minimum of $25K/yr (~5.5%/yr) out of this to supplement the $75K we get
> in SS and pensions. Since inflation is still going up, more would be
> better, but less would put a serious crimp in our lifestyle! American
> Funds, esp the 1st two, have a good rep (Morningstar and Motley Fool)
> and the package has a combined expense ratio of 0.68% and a 12.29% 5 yr
> average return. However, the upfront sales charge of 2.5-5.75% disturbs
> me a little.
>
> As I can get no-front charge Vanguard funds that are approximately
> equivalent, why should I pay these sales fees?
Why indeed.
>Are American Fund
> managers that much better?
>
Nope.
> Chip
>
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Chip wrote:
> My adviser recommended American Funds Growth Fund of America and
> EuroPacic Growth Fund along with several other American Fund Growth
> and Equity and Bond Funds for my $450K 401k turn over.
You don't have an advisor, you have a salesman. You wouldn't consider
the guy down at Larry's Friendly New and Used cars to be your
"transportation advisor", would you?
> The mix sounds
> good for my status as a 67 yo retired with a retired 64 yo wife. I
> want a minimum of $25K/yr (~5.5%/yr) out of this to supplement the
> $75K we get in SS and pensions.
As others have said, that's pretty aggressive. Depending on how much
you want to leave behind, you might consider some immediate fixed
annuities.
Vanguard has some new managed payout funds, that supposedly guarantee a
certain level of return. They are pretty new, and I don't know much
about them.
> As I can get no-front charge Vanguard funds that are approximately
> equivalent, why should I pay these sales fees? Are American Fund
> managers that much better?
Besides the sales charge, AF funds carry higher expense ratios. Check
the chart for GFA against the S&P:
<http://finance.yahoo.com/q/bc?t=my&s=AGTHX&l=off&z=
m&q=l&c=&c=%5EGSPC>
Also EPG against Vanguard's EAFE index:
<http://finance.yahoo.com/q/bc?t=my&s=AEPGX&l=off&z=
m&q=l&c=vdmix>
As always, past performance does not guarantee future results, and
that's only 10-15 years of results. Still, no evidence that the AF
funds you mention are world-beaters.
Brian
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On Jul 18, 10:57 am, "Default User" <d...@y...com> wrote:
> Besides the sales charge, AF funds carry higher expense ratios. Check
> the chart for GFA against the S&P:
>
> <http://finance.yahoo.com/q/bc?t=my&s=AGTHX&l=off&z=
m&q=l&c=&c=%5EGSPC>
I don't follow how the above statement correlates to the link. That
chart doesn't have much to do with expense ratios. Sure, higher
expense ratios lead to "investment drain", but nearly a dozen other
factors could be the cause for that performance variance. GFA invests
primarily in LCG, avoids LCV, and can hold as much as 25% of its
assets in non-S&P equities and debt. According to M*, both GFA and EPG
have expense ratios that are less than half the average for their
respective categories. If one was FORCED to by loaded funds, these
aren't bad choices.
That aside, I'm in the no-load passive index fund camp.
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kastnna wrote:
> On Jul 18, 10:57 am, "Default User" <d...@y...com> wrote:
>
> > Besides the sales charge, AF funds carry higher expense ratios.
> > Check the chart for GFA against the S&P:
> >
> >
<http://finance.yahoo.com/q/bc?t=my&s=AGTHX&l=off&z=
m&q=l&c=&c=%5EGSPC>
>
> I don't follow how the above statement correlates to the link. That
> chart doesn't have much to do with expense ratios.
Sorry, I didn't word that well. I meant to show that the AF funds don't
justify higher ERs, because the either come close to or lag indexes or
index funds.
Brian
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"Chip" <c...@i...org> wrote in message news:g5oiep$g8e$1@aioe.org...
> My adviser recommended American Funds Growth Fund of America and EuroPacic
> Growth Fund along with several other American Fund Growth and Equity and
> Bond Funds for my $450K 401k turn over.
> As I can get no-front charge Vanguard funds that are approximately
> equivalent, why should I pay these sales fees? Are American Fund managers
> that much better?
If your advisor is recommending American Funds, or any load fund, it
probably means that your advisor is receiving a commission on your
investments in those funds. In other words, the advisor is really working
for the fund company (or companies), not for you.
One place to find alternatives is http://www.fundadvice.com/explode.html
A quote:
Three pieces of advice if you're thinking of buying a load fund:
1. Don't do it.
2. Don't do it.
3. If you choose to ignore Rules 1 and 2, ask your broker why he or she
is recommending this fund. Ask if the fund has other classes of shares, and,
if so, which class would be best for you.
The fundadvice.com website is run by a Seattle-area financial advisor who
operates on the fee-for-service principle. He claims--truthfully, as far as
I can tell--that the reason he is dispensing free advice is the hope that
some of the people who read that advice will become his clients, and the
general view that better-informed investors make for a better investment
climate overall. Whatever his reasons, the site is packed with advice, most
of which seems to make a lot of sense.
As for Vanguard...I've been their client for more than 10 years and am very
satisfired. They have a wide variety of funds with the lowest fees in the
industry, and their service and (especially) their system design is
exemplary. They are definitely geared toward buy-and-hold investors, and
their online facilities are definitely less fancy than others I've seen, but
if that's what it takes to achieve their low costs, I'm all for it.
If you want to roll over $100K or more to a Vanguard IRA, they'll assign a
person to help you with the paperwork. If you can scrape together $500K (it
appears you're almost there already), which doesn't all have to be in an
IRA, they'll work up a financial plan for you at no charge. Even if you
don't have $500K to invest at the moment, you'd pay at least $25K in
commissions if you put it in American funds -- you can buy an awful lot of
planning services for that price.
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"Default User" <d...@y...com> wrote in message
news:6ebsrpF6eci8U1@mid.individual.net...
> Vanguard has some new managed payout funds, that supposedly guarantee a
> certain level of return. They are pretty new, and I don't know much
> about them.
I didn't see anything in the literature about these funds that would suggest
that they guarantee a particular return. Are you sure about your
impressions?
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On 2008-07-20 08:07:47 -0700, "Andrew Koenig" <a...@a...org> said:
> Three pieces of advice if you're thinking of buying a load fund:
>
> 1. Don't do it.
> 2. Don't do it.
> 3. If you choose to ignore Rules 1 and 2, ask your broker why he or she
> is recommending this fund. Ask if the fund has other classes of shares, and,
> if so, which class would be best for you.
And then number four:
Head for the door.
(A still better way, to save time, is to head for the door at the first
hint of a "load fund."
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