Monday, May 23, 2022

DFA vs Vanguard Funds–Are the fees worth it? Live Q&A

Hey everybody welcome back to the financial freedom show my name is rob berger it's good to be back i missed the monday live stream god willing lord willing and the creek don't rise we'll be back at it this upcoming monday at 7 pm to do a walk-through of new retirement but i had to postpone that for a week .

But i am back i'm looking at the screen i've been studying my chess and these are all old chess games that i've played that i'm trying to enter into a database called chess base anyway i probably should have cleaned up a bit what else is going on i think that's more or less everything if you can hear .

Me give me a thumbs up seeing me is optional uh i want to start the show talking about dimensional funds fund advisors which is a mutual fund company dfa and um and vanguard and i already see a bunch of questions .

In the chat so i will of course get to them uh and uh if you want to ask a question or want me to cover a topic just tag me in in your in the chat so i see it otherwise i blow right by it haven't gotten a thumbs up from anyone though so if you can actually see and hear me i .

Would appreciate a thumbs up from somebody bueller bueller anyway i'll just keep talking so i see that and i will i will cover that oh i got i got the thumbs okay appreciate it russell and jim well russell he retracted although it could have been .

A typo could have been the reason and that's okay so the reason i want to talk about dfa funds and vanguard is it came up so i did something stupid uh i i got i i i didn't think it was an argument but one of the i think one of the .

Silliest things to do is to get an argument over so in social media it's just silly and you might think well rob were you talking politics or religion or something we were talking about advisor fees but those advisors who live on a one percent of assets under .

Management that's their business that's their livelihood they don't like anyone to challenge at least some of them don't in any event it came up in the context of dfa funds i've never owned dfa funds but from what i've seen of them and read about them i like them a lot back in the day .

30 years ago 20 years ago some point i wanted to invest in them uh because they had certain uh approaches like you know small emerging we're going to talk about emerging market small cap for example that vanguard just doesn't offer but you needed to go through an advisor and i wasn't going to pay one percent of .

Assets under management sure that's a surprise to nobody watching this show to have access to it so in any event uh on twitter i won't it doesn't matter who who it was but no one that i know by the way but an advisor he made a claim i'm gonna show you what the claim was that he made and it was accurate i think so i call it .

A claim he stated a fact i think this was factual i'm going to show you what it what it is what he did was he compared two investments he said what if you started with 100 grand and you invested it all either in vanguard's emerging market fund .

Or in three of dfa's emerging market funds sort of sort of like their core fund put 30 percent in that 30 percent in a an emerging value fund that dfa offers and then i think four yeah 40 in an emerging small cap how would those work out and i'll show you on the screen here it is this is just in portfolio .

Visualizer but here are the funds uh he didn't mention tickers and i asked him for the tickers and i never i never got an answer at least not an answer with actual tickers but i think these are the ones he meant but i guess i don't know dfemx which is sort of their one of their core emerging market funds uh here's the small cap 40 percent .

And then the third one is uh emerging market value right and we're comparing it to today this would probably be v-e-m-a-x is the reason i use v-e-i-e-x v-e-i-e-x yeah it's it's a different shared class but it gives you more data .

Time-wise so you'll see so we analyze this and you can see portfolio visualize visualizer goes back to january 1999 uh i think his analysis went back to may of 98 which was when some of the dfa funds uh their inception but this is close enough and we're .

Investing a hundred grand actually i'm going to take the the fee out for a second but 100 grand fine let me analyze it again so there's no fee so when i say no fee portfolio visualizer accounts for the fees that each of these funds charge the fee i took out would be an advisor .

Fee so so none of these have any extra advisor fees added right all right what do we get well um we get a number that i wasn't expecting okay did i have too many zeros hundred thousand no oh uh it's because i'm contributing that's not what i wanted let's try it again .

I was contributing a hundred thousand dollars a month yeah that would be nice okay so you can see we get 990 and 634 so the 990 is the dfa portfolio so it really crushed uh vanguard right so that's the data and uh .

It really troubled me this tweet you'll say rob you need to get a life yeah i get that uh i'm with you but it still troubled me why i mean it's just it's just data it's just facts right um it troubled me for a couple of reasons but but and i'll walk through them the overall reason was .

I don't i don't think a lot of folks would maybe be in tune with this analysis enough to ask the right kind of questions so these are the kind of questions i would ask one why are we comparing a vanguard sort of .

Total emerging market fund with a portfolio that includes value and small cap i mean they're you're not comparing apples to apples it'd be like comparing you know a total u.s stock market fund to a portfolio that had maybe 30 total stock market 30 uh value and 40 small cap there are two .

Totally different kinds of investments it doesn't make any sense to compare them but i'm not sure if you know a typical investor maybe not would maybe not appreciate that that's that was my first concern the second concern was the time period now i think the time period was picked .

Because as i mentioned a couple of the dfa funds that's when they they were started so i think it's a perfectly appropriate time period to look at but as investors what we have to ask is okay but is this consistent i mean you know is this gonna am i gonna see this sort of out performance regularly .

And uh and here if we start to change the time periods we see different answers now the dfa funds i think always do reasonably well again because they got small cap and value um but let's change it to like the last uh decade or so i don't know we'll put 2012. .

If you analyze it i think dfa's pi still comes out ahead now the numbers are smaller because um we you know we don't have as much time but uh whether you look at compound annual growth rate they're starting to mark converge a bit and now let's pick a different time .

Period let's go to 20 i don't know 14. and they're converging again it's about the same compound annual growth rate so they've come down some but still dfa is is is is winning and and again i like these dfa funds here's where the problem comes in then .

So we want to look at different time periods and we're going to do that again let me let me go back and reset it so remember this is what we originally looked at in this 990 number i want you to remember let's change the fee structure oops we're going to add one percent .

Which is sort of the standard rate for a lot of dfa advisors and what's that do so i'm only adding it to the dfa portfolio not vanguard what's that due to that 990 000 number whoa brings it to 786 right we're talking that that one percent cost you .

Over 200 grand now you might say well rob i appreciate that but i'd still prefer 786 000 over 634 000 i mean after fees i've done i've done better well yes but now we have to say okay are we guaranteed that's going to happen in the future of course not and again let's now .

Start changing the time periods let's go back to the last decade or so 2012. now with that one percent fee added still slightly ahead it's not bad but it's really close and if we go to i don't know let's jump to 14. so that's what the last six seven eight .

Years i guess um see now vanguard pulls ahead of course i suppose one could say yeah but uh for that one percent not not only am i getting these dfa funds but i'm also having someone handle it for me fair enough of course you can have someone handle it for you for a heck of a lot less than one percent .

But then what happens if we go back and and create a portfolio with non-dfa funds that actually match this to some degree so what would that look like well it'll be 30 here this fund is the spyder emerging market small cap right so that'd be 40. and this is a value fund so sort of a .

Momentum fund i'll show you where i found these but we'll put that in okay we will um go back and reset this to 1985. let's for the moment take out the fee even right and we'll analyze it now we're january 2018 .

Whoops that's not what we want what did i do here hmm why is that january 2018 let's figure this out because that's not what i want wow that only goes back that far well i would have to find a different value and i'm not going to take the time to do that so we'll just put this in .

And so uh what i've done very quick i thought i had more data on this one i don't so this portfolio has the small cap emerging but it doesn't have any value instead it's just put the what would have been in value in the total emerging market fund now this only goes back to 2019 because of limited data .

And um again dfa has done pretty well uh but it's you know the the comp annual growth rate is definitely the gap is closed and now if we go back in and add the one percent fee um actually the second portfolio outperforms again not by much so what's .

The takeaway of all of this well it's not the dfa's funds or bad funds i like the funds but when you're evaluating returns and also evaluating advisors what you can't do is just say let's pick one date in the past and one lump sum and see which one won out because .

You could often take different approaches with different funds that are free or nearly free but don't require an advisor one when you look at different time periods the results can be very different such that there's absolutely no guarantee going forward that if you pay an advisor one percent to get access .

To these funds that you can outperform not to mention we're only talking about emerging market right we're not talking about all the other asset classes now of course dfa does offer some of its funds in the form of an etf which you can buy on your own now i don't believe the emerging markets small or value are part of that i don't think um .

As i was doing sort of my research around this i found a site that i want to show you for those interested in dfa funds and uh it's here's the page altruist financial advisors it's altruist and and um i'll put a link to this below the video .

Uh uh after the show uh i don't know anything about this firm i do know that it's fees particularly for those who've got you know fair amount of assets to invest are quite reasonable but i don't know a thing about this firm i did look up the owner .

I don't know if vj is watching yet but the owner does live in michigan so you know you got it that's strike one and he went to the university of michigan that's strike two although in fairness i don't know maybe he didn't get into the ohio state university but in any event .

Uh he compares dfa and vanguard for all these asset classes this is just his view he bold faced the ones he prefers some are dfa some are vanguard some of them you'll notice aren't bold faced at all and if you go to this third column it's because he recommends other funds and then he has for i think all of these .

More details on the specific asset class like here's tax manage large cap if you click here he gives sort of his of a lot of funds so i thought this was a pretty good resource to check out um yeah so there you go that was sort of my initial thing that i wanted to cover um .

Yeah i get troubled when advisors i think it's perfectly fine to me if you ask an advisor that charges one percent um do you think people can invest on their own and do a good job i think what's the answer to that question well some can and some .

Can't probably right um but you'll get some advisors that have this view that basically virtually no one can or very small group and any fees below one percent and it's just a robo-advisor and it's just that's just don't buy that keep looking in my view all right .

I'm out of your questions the important part of the show bobby can you discuss the fed rate increase what does this increase apply to exactly so the increase itself directly applies to effectively the interest rates that banks charge is a sort of overnight lending .

Between depository institutions i don't know i think i pulled up i was looking at here's a well here's a fund rate page fed fund rate um they call it federal funds rate it's still this is by the way the federal reserve bank of new york it's still .

Showing um zero to 0.25 but that went up a quarter point um and so at first glance you might say okay well we're not large depository institutions so what do we care but it affects the prime rate so um what what's going to happen is .

Basically borrowing's going to go up if you have a hell if you have a home equity line of credit it's likely to go up immediately if you have an adjustable rate say mortgage those tend to set like maybe every year let's say so it may not go up immediately but you know you expect it to go up so .

Borrowing in in general um is is going to go up as a result of the increase and they're i think they're now saying maybe seven total increases for the year so it could go up by quite a lot even if it's just a quarter point each time you know you're you're at say 1.75 increase .

Uh it will go up now one of the big questions is will savings rates go up and the short answer i think is they're not going to go up immediately they don't it doesn't work that way and we'll see how they are affected uh i mean eventually they will go up but i don't i don't have a lot of confidence .

That they're going to go up quickly at all so yeah if you borrow money and it's and it's got it you haven't if you have a fixed rate loan of course you know a fixed rate mortgage this doesn't affect you at all or you have a fixed rate school loan or fixed rate car loan fixed rate personal loan um .

You know they're fixed rates so it's not going to affect you but yeah if you have an adjustable rate um just about any type of loan i would expect the rates to go up all right g branding says the book four pillars of investing mentions dollar value averaging rather than dollar cost averaging can you help .

Explain the difference um i think i can it's been a long long time since i read four pillars maybe i don't know i'll show you the book here in case anyone it's a good book as i recall um i want to say it was at least 20 years but then i think i don't even know .

When this thing was written um by william bernstein here's the book um it was a good book as i recall i don't actually remember the discussion in the book on dollar value averaging and i'll be honest with you i had to look it up to refresh my memory so with dollar cost .

Averaging you know you're just putting in a set amount of money every month or quarter or whatever but with dollar value averaging the idea is let's say uh you want to have you want to put to work 12 grand over 12 over a 12-month period so a thousand um a month .

Uh you'd put a thousand in the first um uh month but the second month you wouldn't just blindly put another thousand in your goal would be to put enough in so that your total goes to 2 000. so if you think about that if your first thousand after a month was uh now worth 1100 .

Meaning prices went up right uh you'd put in less because you just put in 900 that would get you to your 2000 which is what you want for that month too on the other hand if you know prices went down and your thousand was worth 900 you know prices went down you'd have to .

Put more in you'd put 100 in to get your 2 2000 and every month you do that or again it could be quarterly or whatever that's the idea behind uh value averaging some suggest that it's better you know that it beats dollar cost averaging i don't have an opinion on that at all no opinion at all .

All right andrew we are heading to boston next month to run the marathon that sounds like fun first of all congrats as i recall you can't just sign up for that you have to qualify right uh we have never been and are staying for a few days after any recommendation on things to see well keep in mind that .

I haven't lived in boston for 30 years um what did i like there i loved i loved um harvard square it just just the atmosphere the bookstores there were a couple of chess shops right there i don't know if they're still there or not um that was i i enjoyed that a lot um .

I like faneuil hall it's a bit of a tourist trap uh but you know some good restaurants i like that i love the north end some of my favorites we used to go to a restaurant i don't know if it still exists called florence's florence's .

North and boston does it still exist hmm i wonder if i guess it does i would show you this but it's not well here's here's the website i don't know if it's the same owner something tells me something changed about this restaurant i had read this .

May be urban legend that that it was the inspiration behind billy joel's scenes from an italian restaurant you know bottle of red bottle white olive rose that song anyway i don't know if it's the same but i'm used to love going to florence's you know boston common you know the park .

Not bad i guess um yeah there's some ideas but again very outdated i don't know i i i'm sure there's a lot of different new things to do that past me became you know came in after we left vijay .

Hello from michigan all right so second michigan reference today maybe you know that financial advisor uh t rowe price funds have higher expense ratios okay are they worth it i invested in pr dmx over past 10 years thinking of moving them into vanguard .

Well we can look at that fund let me pull up morningstar i'll show you this in a second i don't know this fund oops pr dmx here it is it is expensive it's 80 basis points um .

It's interesting absolutely no yield really none it is a growth fund so i guess here's how i would look at this so this is a mid cap growth now i don't know honestly if i assume vanguard has a midcap growth vanguard mid cap growth fund must right .

So it's vmg rx so what i would do is i would compare that vanguard fund and i'll show you what i'm doing i just i'm just using uh let me clear this out clear these out i'm just putting in the two funds for a moment .

So one difference i'm given that this is 80 basis points i assume it's an actively managed fund whoops that's not what i needed to do let me try that again here we go i get a good good amount of data right we're going back to 2004. and um .

So it's interesting that the t row price has outperformed again remember what we talked about earlier right now i'm looking at a lump sum investment uh what i put in here yeah still a hundred thousand uh with a specific time period right so the outcome in and of itself is you know .

Worth noting but it's only a starting point so then i want to look at sort of annual returns and the red is the the t row price fund um and you know some years it it's up in some years it's down more recently it's been kind of a mix .

I would say more recently boy it looks like vanguard funds actually no no no that's t rowe price it would help i think if um i give it names so this is vanguard and this is t row let's do that .

We can see the scare the legend down here so vanguard is blue um i guess it's been a mix so what i'm looking at when i look at this by the way is a lot of times particularly when funds are first started that are actively managed they they may have some good investment .

Ideas they do really well in the early years the result is that a lot of money flows into the fund that the fund then struggles to invest in a in a in a sound way and rather than closing the fund they keep taking on more and more money and they have trouble investing it and the .

Returns suffer among other things one could argue that arc funds that's exactly what happened with arc although i think it's probably a lot more than that so i often look to see okay are there early out performance that accounts for um .

The overall you know the overall difference here and one way to look at that too is to go to rolling returns so you can see like the average here but consistently if you look at averages here and you compare it to averages here .

You know t row price has consistently outperformed even with that 80 basis point fee now you know there's always the question of will it continue to do so in the future which is why i moved away from actively managed funds forever ago because even though we can look here and .

Say well it seems to have done better and it seems to have um even on a rolling basis even if you just look at averages done quite well there's no guarantee it's going to continue to do that in the future the other thing you could do by the way you know is you could take a deeper dive .

Into its investment strategy you know and look at its your top holdings its its valuation metrics to see if they're fundamentally different than the vanguard fund but you know i i you know it's it's done well vj uh so i .

Can't say that it's been again we're looking at it over different time periods a lump sum investment versus sort of regular contributions like you would do in like say an ira or 401k so you could do that analysis as well but doesn't strike me as a bad fund if you want mid cap growth exposure .

James i'm 30. my uncle might sell his mom's three un unit apartment building to me when she passes i want to buy it but saving cash for unseen amount of time rather than invest how would you approach it well my initial reaction to that is i don't like the sound of it first of all the i .

I mean i get it family and stuff but you know you're sort of basically waiting for someone to die and then the person may or may not sell it to you it's a transaction among family members i to me there's a lot of red flags not knowing anyone that doesn't mean it's a bad deal doesn't mean you shouldn't do it .

These are just sort of questions i'm raising and things to think about how you guys going to agree on a price you're just going to get it appraised by a third party what you know you don't know when you're going to buy it so you're going to effectively lock up a lot of capital presumably in a savings account .

Waiting for some un unknown period of time at the end of which someone may or may not sell it to you at a price that may or may not be a good price so um i guess my question to you is what's so special about this apartment building .

Why not save up and buy a different one uh if you if you said no rob this is what i'm going to buy i mean you know you you can start saving for it normally when you're saving for a purchase you're putting it like in a high yield savings account that kind of thing maybe money .

Market maybe a short term bond fund you know if you're saving for a couple of years let's say like a lot of people do to buy their own home uh but here you know it could in the end cost you a lot of money right because let's say it's 10 years from now and all that while you've been out of .

The market of course who knows maybe the market will be down over the next 10 years maybe you'll you'll have been smart to have been in the savings account but i don't know james that just there's a lot of red flags on that one for me all right wayne wants to know financials what .

Financial sites do you like the most and he mentioned swab schwab fidelity vanguard uh so let me just try what have i used i've used in the past i've used fidelity uh scottrade doesn't exist anymore uh schwab um did i say vanguard vanguard m1 finance .

I i've used robinhood in the sense that i signed up and i got a free share of macy's stock uh i've used betterment i've used wealthfront i know i've used at least one other i would say out of all of them fidelity is probably the the website .

That i find the easiest to use when it comes to just looking at your investments and it's going to sound silly uh i think the reason why or simplistic but the way fidelity site is laid out is you know unless you have multiple accounts .

Because you could have an ira if you have a spouse they could you both have traditional and roth you could have hsas you know you could have a number of accounts their layout is very simple they have all of the your accounts in the left-hand column and you can look at them sort of as a .

Group where you can click just click on each one um that you want to see and then in the other part of the screen you get all the data you could want about that account the positions you hold performance news about uh the the investments that you hold .

Uh and i just find that to be easier than now i should i should say that vanguard has different versions of their websites and i think some people have a version that is probably a little better than the version i had and i think the reason i had what was .

Really a pretty crappy website to be honest with you i think was because i at one point i had some business accounts and the business side of vanguard the website is terrible i don't know so you could have a better experience than i did with your vanguard account and it's and it's not that these other ones are are bad oh i've used .

Merrell edge as well um it's not that these are oh yeah i mentioned them on finance i think it's not that these are bad it's just that i found fidelity easiest to sort of navigate in terms of actually buying and selling honestly i kind of felt they .

Were all about the same yeah jim says good morning i've signed up for new retirement and modeled my portfolio can you confirm the time for your monday live session you'll be 7 pm eastern time i had to go to a funeral is what happened by the way lost to .

Uh my wife's cousin's husband great guy young yeah anyway okay prescott i wanted to know if a brokerage firm like schwab charges a fee on top of the three basis points for an etf like vti no at least not don't charge me that .

If you buy a mutual fund depending on the fund they may charge you a fee and with vanguard mutual funds i think it's very likely they do but etfs it's like stocks now they're pretty much you trade them free pretty much everywhere paul okay so first he mentions uh kisses .

Kitsies he's a um i'll show you his website we've talked about them great website um kitz's i don't know how to pronounce his name i've emailed with him back and forth over the years here he is he's got a great website .

He says kits is uh does it and i think i think he's attributing what i'm about to say to michael kittses doesn't matter if withdrawals come from stocks or bonds if you rebalance right but estrada and he's um i think he's i've referenced him before he's a professor right .

And he's done some research yeah we've talked about it he's done a number of different things that i think i've referenced yeah here he is what's going on here there we go there he is um estrada apparently says what this means twists i'm not sure what that means dictate withdrawing from .

Stocks versus oh whether you should withdraw from stocks or bonds depends on the performance of the relevant asset classes how are both right that's a great question so some approaches so what what kid sees what kits is saying is look if you rebalance after you withdraw from your portfolios for retirement .

It doesn't from a reap from an asset allocation perspective it doesn't matter whether you take from stocks or bonds because you're just going to immediately rebalance so if you have a 60 40 portfolio take if you take all from stocks and then rebalance you'll be you'll have what you'll have 60 stocks 40 bonds .

If instead you take everything from bonds and then rebalance what will you be left with well 60 stocks 40 bonds doesn't matter because you've just rebalanced okay what some say and i don't know the paper you haven't mentioned the paper but i'll just assume this is estrada's view it's .

Also an approach taken by guyton klinger uh two two guyton and klinger are two individuals and they've done a lot of work on this where they say what they say is from a withdrawal strategy um and their withdrawal strategies get .

More complicated because what kitsas is effectively describing is the the bill bengal approach just take money from the portfolio and rebalance doesn't matter what you take it from but what some have done is said well you know if we if we just if we take from certain asset classes .

Based on performance uh and then there's but there's there's not the same kind of rebalancing that goes on right because if you rebalance after you've taken your distributions it doesn't you're gonna end up whatever your your asset allocation is because you've rebalanced .

But some would say take from like stocks if they're up but if they're down leave them alone right so uh i generally favor kitz's approach one for its simplicity and also because if you're not .

Rebalancing you can be in situations where say stocks have gone down and you leave them alone you shouldn't leave them alone you should be buying more stocks as part of a rebalance so i generally favor sort of the bill bengatz's approach by the way whether you follow something .

Like the four percent rule or not that's sort of a different topic the others and you know there's research on it you can look up guy and clinger and they're certainly viable withdrawal strategies i think they get pretty complicated um and i'm not sure at the end of the day .

That that they come out on top in terms of an approach i don't think they're bad it's just i i just for me it gets probably just too more complicated than i want so i think estrada least based on your comment i can't recall his paper on this off top my head but is effectively .

Suggesting a different approach to the withdrawal strategy not unlike guidance klinger hope that makes sense as i replay what i just said in my own mind i'm not sure it did hopefully did gus what do you think about using brk dot b which is berkshire hathaway stock the .

B shares in a taxable account as part of my stock portfolio isn't berkshire basically a very well managed mutual fund with zero expense ratio yes i think berkshire berkshire's a great investment um doesn't mean it won't won't go down i mean berkshire's stock price has been .

Cut in half at least three times i think over the last several decades um but yeah it's it yeah there's no dividends uh at least for now no expenses i don't know that the lack of expenses would necessarily be a vote in its favor oddly enough just because you can get a .

Total stock market for what three basis points but yeah i think it's a great a great investment all right marcus would viov be more comparable to avuv i don't know let's see and and then more comparable than what .

But we'll look him up what's the ticker viov that's event i'll show it to you that's a vanguard um small cap value fund if we look to the bottom left corner of the style box really small right and you want to compare that to av .

Uv well they're going to be pretty similar this one's the the market cap is slightly higher um one thing you could do is compare like top 10 holdings can give you some insight let me pull that up and compare the two iov let me show you .

Go back to portfolio so here's the avantus which i've heard good things about i still have not done a deep dive on advantas and if you compare that to vanguard's portfolio there's different ways to compare it my guess is the top 10 are going to be look .

Pretty different and they do there might be some overlap the other thing we can do let me just show you this i'll pull it up we can use an overlap tool with etfs we've looked at this before what is it viov and aev uv so there's not a ton of overlap at least .

According to this tool um but i i would think performance wise let's put it in and see v and av uv how much data do we get we get that's right because event has .

Just started it's not it's so you know it's it's still way too early why am i still seeing here we go oh i've got the wrong names in here but um av uv's outperformed uh but it's only been .

You know two years um you know they're both reasonably priced of course vanguards is gonna be pretty inexpensive well actually let's see you have 15 basis points and i think did we see avantus was 25 so they're both for the for the asset class they're hitting small cap value .

Uh yeah 25 they're both reasonably priced obviously you know vanguard is less but 10 basis points um one thing i like about vanguard is it's its portfolio is tilted a bit smaller than avantus but whether that proves to be you know better or not over any given period of time who knows i think these .

Are both reasonable funds at the end of the day that's my opinion so russell do you uh recommend vbr over avuv well we've heard of av uv what is well we know it let's see vbr so that's vanguard small cap value how much of my portfolio do you think it .

Should be i tried 80 20 vti vx us but feel i'm too overweight on large cap well when i want to tilt towards small cap for me it's always been 10 there's nothing magical about that number just what i felt comfortable with um as between these two fold we just looked at advantas right .

I mean vbr is the is it the same fun i don't know if it's the same fund uh that would be different no it's different so here's the thing let me show you so this is vbr and notice it's still small cap but you know .

Viov let the ticker just checking yeah viov was way down here this is almost up to the mid cap range it doesn't mean it's bad or or better or worse it's just um kind of keep that in mind but i like small cap value i think both of these funds are good funds i think the key is just to pick one um .

What's the um that's seven basis points the problem is you know here's the thing when we looked at it in portfolio visualizer you know there's not much data because avantus is new but the reality is my hunch would be that over different periods of time one will outperform the other .

You know long term which one will outperform over the next 10 20 30 years there's no way to know there's no there's no way to even make a reasonable prediction i think either one would would meet the need of .

Exposure to small cap value um i tend to go with the cheaper one and it's not that you know it's not that expenses are the only factor of course i mean ultimately what you're after is you know after fee returns but unless i have some .

Fundamental reason to favor one over the other why pay more that's generally my thinking and i'm not sure here that we do i suppose one might argue that this isn't small enough but then again you could just go with .

Viov but evantas you know is definitely smaller if you will and you can see it here and so if you know if you've got everything in vti you really want some small cap exposure yeah i just think i think all of these are good options .

I mean part of i think part of investing is you know i'll hear people interviewed i would be a terrible guest on like you know cnbc because they want what they want are people that are gonna you know put a stake in the ground and take this strong opinion of course avantis is better because of these three reasons or .

Whatever i think it's important to understand when you're facing a question where there's no either answer is reasonable it may not make for good tv or i don't know for live youtube streaming either um but i think that's important and that .

These funds kind of all fit the bill in my view i'd probably though lean towards the smaller cap weighted so for me it would not be vbr probably i want the smaller cap exposure but that's more of just a philosophical thing it's not because i think they're going to .

Outperform between now and when i'm dead all right roger surprised to see the stock market finish strong two days in a row is now a good time to buy or wait for the bottom well if you know when the bottom is going to occur i would generally wait for the bottom .

If you don't know when the bottom is going to occur then i don't see any other choice but to invest and i don't by the way i don't think anyone knows when the bottom is going to occur .

You know i mean i'm i'm investing every month you know just you know money comes in we buy some groceries have some money left over i invested that's what i do but the biggest risk is when people think they can they can they know the bottom .

Yeah i i just i mean even but day to day like yesterday the market went you know what up a couple percent then it was red then it finished a couple percent up or whatever it's like really what is going on .

And we think we can predict today it's kind of mixed anyway yeah i can't predict the bottom bobby we have no debt and a paid off mortgage nice congrats we currently max out a roth ira and have .

Access to a roth 457 investing in vanguard 2050 but but no match is it worth contributing or just use taxable um i think for me i'll answer it for me if i had a in this case a roth workplace retirement account .

And um i can afford to invest in it but there's no match or or i could say no i'm not going to invest and i'm going to put in taxable and i assume i'm investing for retirement okay i think that's sort of that's what i'll assume i would put in a roth .

Again assuming that you could also put in the traditional i'm going to assume so you know you've already made the assessment that roth is preferable fine you get tax advantages with roth so i don't know why i would give those up .

Right the money i mean if you think about it uh in either case the money gets taxed right because it's a roth so it's going to get taxed of course you put in a taxable account that's after tax as well but what's in your roth assuming you follow all the rules you won't pay any .

Tax while it's growing so no dividend tax no tax on dividends no tax on interest you can you can buy and sell and rebalance at will and not trigger any taxes that's a huge advantage over a taxable account and then when you retire and you take money out it's tax-free with the taxable account you'll be .

Paying you know capital gains tax on any gains so i would stick with a roth retirement account that's what i would do if i were in your enviable situation all right russell can you explain what a roth 401k is .

Uh sure i have access and max out normal 401k and hsa and backdoor roth but i want to contribute more if i can is a mega 401k something i can should do well you've got a couple different you've asked me a couple different questions so a roth 401k .

Is similar to their differences but it's similar to a roth ira at least from a tax perspective you know money goes in from your comes right out of your check whatever you're contributing um you do pay taxes on that money so it's unlike a traditional 401k the contributions are not excluded from .

Your taxable income but then you follow all the rules and when you retire you take the money out tax-free right you can um roll it over into a rot like when you retired left your job you could roll it over into a roth ira i think that makes .

Sense for for for people um that's a different question so that's a roth 401k i i've contributed in the past to a roth 401k the whole mega backdoor roth thing so the idea there is with some plans let's say you max out .

Uh traditional 401k for a moment you got you got your tax deduction in in in some plans you can contribute beyond that on an after-tax basis not into a roth it's just into an after-tax part of the 401k and and and um so the thought is and then and then to add to that some plans .

Allow in-service rollovers where you can while you're still working there take that after tax those after-tax contributions and roll them into an ira and then convert them to a roth that's sort of your mega back door and the reason they call it mega back doors .

Because uh the limits are much larger in terms of how much you can do compared to say an ira uh congress has mega backdoor roths you know in their sights to get rid of whether i'm just looking up whether that's going to happen or not .

I don't know yet i just here's like here's an article i haven't read it just pulling it up to show you this is from investopedia legislative threat to mega back door roth conversions this was written end of last year so it might be worth looking into .

But i will tell you that in my experience i've never had a 401k that allowed me to do all of that and i think most don't certainly the in the in service meaning in-service rollovers meaning again rolling over while you're still employed i've never had you know i haven't had .

That many jobs so it's just it's anecdotal but i've never had i've never been able to do a mega backdoor raw well so tina please talk about how to exit assets under management with high fees well there are a lot of potential issues .

So the first is do you still want help with your investments and but you just want it cheaper um and so there of course you've got to find someone that's less expensive and there are certainly options and if you do .

Research you'll find them i am working on a page on my site that will list them and i ought to get that up sooner rather than later but in any event i'll show you one um actually you know i was mentioning um this site uh this is the you know the dfa versus vanguard comparison i looked up his fees .

By the way before i get to that he has a link here reading room i haven't dived into this yet but dived into is that right have a dove i don't know my mom's watching she'll text me and correct whatever i just said but uh i don't know this could be interesting stuff a lot of good resources in any event i .

Looked at his fees and uh for the first 10 million he charges 0.235 very low now there's a 20 000 minimum wait now it's 30. i read somewhere else where it's 20. so this would be for like high net worth folks because at 30 000 a year with 3 million .

You'd be at 1 but if you had 6 million you know you'd be at 50 basis points and if you had more eventually you get down to a very cost effective service again i don't know anything about this firm or or the advisor behind it um but in the event there you know asset builders one that i've noticed is is um .

Uh inexpensive i don't know i don't know if they're good but that's the first question is where are you going to go with your money maybe you're going to use a robo advisor maybe you know it's funny to me when i hear financial advisors dismissive of robo-advisors well you know they don't have any you .

Know personal contact well you know first of all betterment does vanguard does one could question is it the same as someone around the corner that you work with for 20 or 30 years okay i get that but also some folks to sort of come up with a good plan and stay the course .

Maybe a robo-advisor is all you need and they're a lot cheaper all right that's the first question where are you going to go it's not just that you're going to leave where you're going to go then the second issue if it's a taxable account are the taxes now you should be able .

To transfer the assets in kind so that you don't trigger taxes one of the problems though this is just the reality of the industry and i think it stinks is that a lot of you know fee only fiduciary investment advisors stick you in outrageously expensive mutual funds and then over time you have these built-in .

Gains and to get out of them you have to pay a lot of taxes i don't know if tina if that's your situation or not but you've got to evaluate the tax implications if you want to actually sell the investments and move into different investments if it's a taxable account um .

Let's imagine it's not let's imagine it's a rollover ira i mean you could just leave them i mean you know you would figure out where you're going to transfer the the account to now they have it because they're you they're not holding the assets themselves right shouldn't be any way they're going to .

Have someone else that takes custody of your assets so maybe you're at um schwab right maybe they're they're an advisor they have to work for schwab they can have their own firm but they may keep their clients assets at schwab you could you could end the relationship and keep your assets at schwab if you wanted to .

Or you could transfer them to another um broker or platform and if you wanted to do that i would contact the broker you know the platform betterment vanguard fidelity whoever it is and start with them say okay i've got this advisor i want to leave them i want to move my assets over to your platform .

And they will help you and walk you through it phillip rob just a very friendly reminder update on a possible video on your new and revised google portfolio spreadsheet i love it if you found a way to include return numbers it would make my day yeah .

I'll work on that i don't actually have that in my spreadsheet at the moment but i will um i'll see what i can do so believe it or not all those questions and it's now noon i'm just to the point in the show where you guys gave me your thumbs up those were all questions .

Before the show started all right john says love the show in your book thank you what is your interest rate threshold for paying off student loans aggressively money guy show uses a four five six percent threshold depending on your age that's interesting .

I like the money guys show um i see them once a year at a conference i don't actually watch their show i don't really watch anything um so first of all i don't have a sort of a line in the sand uh where i would you know say okay we've got to pay it off early um .

But i i think i'm not you know and i don't know i'm trying to think why age would matter i don't know but i would i would put it somewhere in that range uh well aggressively let me back up everything is a trade-off right so for example if someone said okay i'm at six .

Percent we'll just use the high end of their range so i'm going to pay off aggressively which means uh i'm not going to contribute to a 401k with a match um i wouldn't do that i would i wouldn't i would at least at a minimum get the match it's free money uh .

And even at six percent i don't think i would i'd probably it would for me it would probably have to be eight to ten percent before i said uh i'm i'm gonna ignore all other financial goals by the way i don't know that that's what the money guy should what they're saying but before i ignore i'm gonna ignore all other .

Financial goals and just focus on student loans even then i might attack it aggressively but not necessarily to the exclusion of everything else now if i had 24 credit card debt i might i might do that um but uh to me .

Certainly i would not aggressively attack it in the mid single digits um i i i might be saving for home i might be getting a matching contribution uh at work uh obviously if you have other high interest debt that would come first um .

You know are you saving for a car i mean you know you could work real hard over the next five years to pay off your student loans at five percent only to have to get a car loan okay i'm not sure how much you know progress you've made are you saving for your next car um or other big expense .

So i kind of look at it that way i don't have i don't i don't have a line in the sand on the interest rate i will say you know once you start to get above five or six percent certainly in today's market in particular where savings rates are so low um it would certainly be a could be one of many but a priority for .

Me that's how i think about it john richard i have a fairly large 401k to rollover 50 percent of his net worth but moving this amount makes me nervous it does doesn't it just kind of freaks you out anyway since it will be out of the .

Market oh see that's that part doesn't bother me it's the someone's moving my my nest egg that's what scares me any advice well you know it's just out of the market for you know with a rollover trying to think if it has to go to cash i think it does .

I think so but depending on the process it's not that long i just i personally wouldn't worry about it richard um and i did rollovers end of last year wasn't 50 of my net worth but it shouldn't be that long and in fact with one rollover you know i got the check in the mail and i actually .

Deposited it into the ira that i had opened up with my smartphone you know just like you deposit a check to your own bank account i was able to deposit the rollover check into my you know ira and i think i was out of the market maybe a week maybe two .

I don't think so it was i think about a week uh jd what are your predictions with how the s p 500 index ends up at the end of the year that's good let's do a prediction what is it now is it 4300 wow so here it is this you can't really see it i know i .

Can't make that any bigger but here it is well here we go yeah still can't see it 4364. 4364. what are your guys's predictions i'm going to predict um i'm going to predict 4 000. there you go someone remind me of that at the end of .

The year 4 000 that's my prediction by the way nothing about that will change how i invest desire to retire love the name can you explain how daf donor which donor advised funds work are they good for tax issues from roth .

Conversions well so the idea of a donor advised fund is you you you transfer assets to the donor advised fund and a lot of people use them to transfer appreciated stock or mutual funds or etfs because you don't recognize the gain and you get .

A full tax deduction there are limitations on the on the value of the say stock or whatever etfs that you transfer so if you were to transfer say the shares of vti to a donor advised fund today um that could potentially be a um a .

Write-off when you when you you know for the year in which you do the transfer so in this case 2022 once it's in the donor advised fund you can actually invest it uh you don't have to give it to charities right away you can wait a year or you can give it to charities over .

Time and while it sits there you again you can invest it so vanguard you invest in vanguard funds schwab has a donor advised fund fidelity does uh and and then you know to make a charitable contribution you basically just log in it has to be a registered you know whatever 501c3 i don't know if .

There's other designations but and you know you just tell them who you want the the check to go to how much and depending on the charity there's other information you fill in and you know you can set it up to be a monthly thing you say every month i want you know x dollars to go to this charity .

Uh and so where i found it very useful it's an easy way to give appreciated stock now the one thing you have to keep in mind so in order to get the benefit of that from a tax perspective you have to itemize all right uh although i think what this last year .

You got like maybe 300 was that uh deduction if you didn't itemize for charitable contributions maybe part of the covid thing but putting that aside you only get a benefit if you itemize and if you're if you're donating appreciated stock i think you're limited .

To i think it's 30 percent of your agi yeah i say that because google search came up with something that this is from schwab here we go let's see ah in general your donation deduction will be limited to 50 of your adjusted gross .

Income unless unless you only give cash in which case the limit is 60 whereas the limit on donating appreciated assets to a to qualified charities is 30 of your agi i think then there's a carry forward uh i think um so that will so if you did a roth conversion that's going to be that's .

Going to trigger income presumably unless you know you you're converting um assets that you know like like a back door roth but assuming you're doing a roth conversion of pre-tax from a pre-tax ira that's going to trigger income and among all your other income for that .

Year and donating to a donor-advised fund if you itemize could be deduction if it's appreciated assets i think of that and for me mainly appreciated stock there is that 30 of agi limit but i will say the donor advice fund doesn't in any way increase .

Your tax benefits i mean you and and in fact you can um you can contribute say appreciated stock to some charities but but the the problem is a lot of charities aren't set up maybe the large ones are but a lot of charities aren't set up to handle the donation of stock or etfs and so don't .

Because the way don't our advise fund works is when you're going to make the gift they just liquidate it and send cash or check or whatever yeah i hope that helps ram says you should consider the equivalent evantus i think it meant etfs .

With low fees uh you're right and i just need to do some more advantage research i'm looking around for a pinch i can take a note there's no pin here i got no pins anyway all right this is from displaced hoosier welcome back .

Rob i'm looking at transferring 150 grand inherited ira to fidelity as an 80 20 portfolio with a tilt toward value funds your thoughts on the best funds at fidelity well keep in mind you don't have to buy fidelity funds at fidelity right you're not limited to fidelity funds .

Uh but you know let's but let's think about this how would we go about doing this or finding funds it's more the process than the answer so you could just google fidelity uh value funds let's do that see what we get i'll show you on the screen .

So i see this value fund a couple value funds here what we don't know is what asset class this could be just an overall value fund um they call their portfolio composition so it's a it's a mid cap right so you could you could google um .

Fidelity large cap values small cap value they're going to have all of those and you could put it in whatever percentage you want now the thing that i will tell you about fidelity is you're likely to find both index and actively managed funds and you'll know the difference well the index fund will almost always have the .

Word index in it but you can tell by the expense ratio this one's 79 basis points and then if you look down here you'll you'll see how they describe it let me um let's do fidelity value index fund so i'm googling that .

I just don't know the ticker's off the top of my head this is a fidelity large cap value index fund so if we go again go to composition you'll see the morningstar style box now it's up here in the large cap value uh if you go to summary you'll see it's very cheap three and a half basis points .

So you could put together a portfolio um what again index funds if you prefer or if you want actively managed funds i mean fidelities aren't aren't bad for actively managed funds they're not what i would pick but there you go it's really you know there you go it's that simple again if you want to use etfs you could pick .

Schwab you could pick vanguard you know whatever you wanted ah russell so he wants to know about this f96 keyboard i already see if there's an affiliate link i could sell tens upon tens of these things and who knows how much money i could make yeah it's with a mac it works for the .

Mac i'm using you can't see it but it's an imac which i'm not happy with actually i'm going to replace it um i want to just uh you know um they're pro whatever they came out with uh what was it called they came out with a .

New one that i haven't investigated yet and it's called mac studio yeah i don't know i was just gonna get a mac pro but i'm cheap and mac pros are not there's that yeah it works for the mac all right so greg i see your your question about donor advised funds i .

Think i got i think i got that one i think i answered it so i think we're good there denise dinesh says can you explain if vt which is a vanguard sort of total world stock fund is better than the three fund or six fund portfolio you've demoed in other videos .

Well first thing is they're different right so a three fund portfolio is what is generally comprised of a u.s stock fund international stock fund and a us bond fund right and six fund portfolio .

Breaks out all the six fund portfolio does is break out the he says i'm using fingers this is the u.s stock finger it breaks it out between sort of large cap and small cap so it takes what's in one fund with a three fund portfolio and splits it into two say well why .

Would we do that it's just more complicated yes but it gives us more control over what percentages we have in large cap and small cap and to which you might say well is that important is that a good thing yeah that's how i've always felt at the end of the day i can't tell you i'll outperform a three-fund portfolio but .

You know you got to pick something and i do add reits as well so i guess us read so there's really three funds on the international side you divide the total international into developed and emerging so again why do you do that so you can control the percentages is that a good thing the older i get the less i think it's a .

Good thing i don't think it's a bad thing but i'm not sure that the added complexity is necessarily going to increase my returns over a long period of time but so i feel less strongly about it that's kind of what you're doing right with vt you could take the enter the u.s stock fund .

Of the refund portfolio and the international fund and put them together that's what vt is it's those two things combined we can look at it here it is go to the portfolio and you can see it's got 58 percent u.s equity the u.s equity here 40 plus percent non-us and again you might say okay well then i .

I could i could use i could take a refund portfolio and just convert it into a two fund portfolio it's even easier so what's all the brouhaha about three funnel why is that a thing again it's because some people want to have more control over u.s equities versus .

International they may not want 40 international they don't want that much how do you do that well you don't use vt you you break vt into two funds that's that's the whole concept of all of these things just it's like it's like it's like we're playing with legos and you got you know there aren't that many different kinds .

Of basic lego blocks but you can you can build them in all kinds of things um so vt wouldn't it would it could replace the stock the u.s stock and international stock funds of a three-fund portfolio if you wanted it to and if you were happy with that u.s international stock split .

I remember as a kid i wanted legos we couldn't afford them i had lincoln logs those were the poor kids legos and my one of my best friends for a while he had like lego box after lego box after lego that was my goal so for our kids i got all kinds of legos .

And they had no interest in none whatsoever hope kilta i don't know why do you say you were lucky that your stock picks worked out if you pick good quality companies you'll be fine all the companies that i bought have decades of steady growth well .

Yeah i mean i i think i made sound decisions with the choices and i don't think that's luck right but i'm very um slow to attribute some some investing success say over and above in in my case it would be the s p 500 because i'm buying large u.s companies .

Berkshire wells fargo bank of america apple i'm very slow to say uh it's the result of me making really good choices as time goes by i kind of say okay maybe i made good choices and i got a little bit .

Lucky right i mean the timing worked out well for me now i bought based on valuation so you could say well it really wasn't timing per se and i guess that's fair um but i i'll tell you a couple of bad decisions can easily wipe out 10 or 20 or 30 years of of .

Outsized gains above the s p 500 so any time i think uh look at me i beat the s p 500 i think rob you're you're just heading for a brick wall buddy and all you're doing is hitting the accelerator pump the brakes right check yourself before you wreck yourself so that's .

That's my thinking and i'll be honest with you even though they've done well there are days when i say to myself if i could snap my fingers and convert all of those individual stocks to part of my index fund portfolio without taxes i would do it and then the next day i buy a few more .

Shares of the company so there's there's that okay so i think the fund this is from joshua acwi i think is the ticker excluding us it's msci acwi i think is the ticker before i read you his question let me just make sure that that's right i could .

Be wrong it happened once before yeah and i share's fine okay um so what's the question does this fund provide enough exposure to emerging markets let me just stop there well first uh what's enough right how do you even define that .

It includes emerging market but is it enough to achieve the diversification benefit ah of investing directly say 10 well let's first figure out how much an emerging market it has if our goal is 10 so in my case it's ten percent of my my whole portfolio which may be too much .

But in any event here let's assume you're going to put i don't know 30 of your portfolio in this fund and we go to portfolio and we can look at uh we'll come down oops we'll come to region that's what we want .

And you can see europe it's almost nothing and asia it's five percent okay so if you have 30 of your portfolio in this fund and 5 of that let's call it uh is in emerging markets you've got very little in emerging markets right so it does this provide .

The same diversity as 10 of an entire portfolio in emerging markets obviously not um but that doesn't mean though that putting all of your say international exposure into this fund's a bad idea at all and i think some could argue that my exposure to emerging markets is more .

Than it should be although it was up big the last day because china said uh maybe we do care about the stock market and all of a sudden you know we talked about alibaba the other day did you see that was up like 27 in one day still well below i mean if you look at .

It let's see i think i've got it in my stock app no but i can look it up it was up big time but here it is uh if you look at one week you see right here it's like hello but it just dropped .

So if we look at like one month it's down three months it's down six months down red year to date obviously one year down two years it's down from two years ago five years it's lower than it was five years ago how about 10 years there we go .

Anyway um so no this to answer your question joshua um that fund even if even if you put 100 of your portfolio in it which i'm going to assume you're not going to do it wouldn't give you the same exposure to emerging markets as separating out and having 10 allocation to emerging markets .

But um i i'm not at all convinced that having just one international fund is not a i think it's a solid way to to invest um and i you know i am working on simplifying my portfolio .

And um probably the first two asset classes that would be on the chopping block would be a chopping block meaning not that i wouldn't have any exposure to them but i wouldn't have separate exposure via separate funds would be reits and emerging markets aiden says can you share your thoughts .

On indexed annuities as a tool for retirement so i'm not a big fan of indexed annuities um so i i get the idea of sort of a spea single premium income annuity right or immediate annuity you know where you just you invest a lump sum .

And you get an annuity for you know you get payment per month or per year until you die right i think for some people those can make sense you can think of it not unlike social security although there's a big difference they're not indexed for inflation but you know .

Annuitizing a portion of a retirement nest egg for some people can make some sense there's a lot of downsides to it i mean um when you die your loved ones don't get any of that money it's gone uh obviously whether it pays for you to do it from just a purely you know financial .

Perspective depends entirely on how long you live the same by the way is true for social security and when you should claim your social security benefits i mean you know the the big unknown is how long you're gonna live with indexed annuity so the idea so indexed annuities are based the .

Marketing strategy if i wanted to sell an indexed annuity what i would say is look stock market's uncertain one day it's up then the next day you could lose 20 percent of your nest egg you know look at the great recession you could lose you know 50 and most people just can't recover from that and it's scary .

Um and by the way all that's true everything i just said is true uh so with with an indexed annuity you'll never lose money you'll never have a year where you have a negative return ever guaranteed that's true too the problem is that there's a cost associated with that .

Right i mean if you think about it i mean i hope people would think it'd say there's obviously a cost that's initially we might not know what the cost is but you know insurance companies aren't going to guarantee something like that for free right they'd go bankrupt um do insurance companies actually go bankrupt or they .

Get taken over by the state in any event they go belly up one way or another so they have to charge you now to me uh a sort of upfront way to charge you is okay we're going to give you this annuity you'll you'll never lose money there's a fee for that so for every 100 grand you .

Give us to invest we're keeping 40 000 of it that's the fee i'm making that number up but trust me it would be a big honking number and you could see it as transparent you could look at it you can make a decision but that's not what they do it gets really complicated and what they say is .

We're going to tie this to an index it's usually going to be point to point which means it doesn't include dividends so the s p was at this point you know it's that value 4300 right and the end of the year it's down here at 4 000 or up here at 46. that's what we're going to measure doesn't cover dividends number one .

Uh and uh if it goes down you don't lose anything if it goes up you you get that gain but either there's a cap you you get it up to six or ten percent after that we keep the difference so if there's if there's a year when it's up 25 you don't get that you get it up to whatever the cap is .

Um and we get the rest or you might get it all but there's a participation rate so you only get 80 of the gain we get the other 20 percent the problem with that is that it's really expensive and it's hard to really know i think for the average .

Person to really be able to put that expense into a number that's why i like you know just tell us you're going to keep 40 grand of every 100 or 30 grand or whatever the number is then people like hello okay now i can see the expense it's smacking me right in the face now what do i want to do they can't see that participation rate .

Or cap i mean you know they can understand it they can follow it they can think about it but you really can't put a number on it it's hard to so i'm not a fan for those reasons it's just expensive um and i think there are other ways to protect yourself .

Yeah again if you're afraid of market declines you could just do a single premium annuity for some part of your portfolio market drops you're still getting your check every month right just like social security just not indexed for inflation .

Okay this is from andy if any if etfs are tax efficient how would one dollar cost average with an etf say vti uh over its mutual fund counterpart which is vtsax that does allow you to auto invest .

That's a great question and i i messed that up actually one of my past videos so you can't auto invest with etfs for the most part i don't know i mean you can like well you could like an m1 finance right but at vanguard i don't think you can um a viewer emailed me about that .

At fidelity i don't think you can it's a problem you'd have to manually do the buy order ah nicholas greetings did you decide if you're going to the berkshire meeting this year yeah i i don't think i am i think i'm just going to watch it live or you know or virtually i just got other things going on and .

Getting away uh not gonna work i'm afraid that could change if it does i'll let you guys know but at the moment no all right from uh raw which it's r a a how would you pronounce that r capital r space .

Capital a lower a ra i don't know in taxable account do you avoid capital gains dividends by exchanging vtblx for b and d well i don't own either of those in a taxable account so both distributed about two percent .

Income capgain and 21 is exchanging non-taxable events so you can exchange some mutual funds for their etf equivalent without triggering taxes whether you can do that with this fund i don't know i want to show you this this is the vanguard site here's vbtlx if there's a mutual fund equivalent .

You'll see some kind of like something like this down here and if we hover over the etf yeah this is b and d so they are equivalents look at this design version of this page look they're trying to up their game i like it let's let's look let's try it out ooh pretty .

Yeah i like that got my expense ratio market price nav year-to-date return i don't like that anyway risk got all my details down here including my q sub because who doesn't want to memorize that um .

Yeah i like it i wonder i have to i don't know if like behind the scenes has changed but in any event let's look at admiral shares do we keep the same all right looking good vanguard i like it so you could ask vanguard i could let's see tax-free conversion of vbtlx to bnd .

Well according to the bogle heads and they are good i recently converted blah blah blah now that's not what i want i called vanguard today this was in 21 so october last year to convert vb tlx to b and d i was told that although a lot of mutual funds can be converted to their course by etf vb tlx cannot .

So now according to bogle heads and you can always call vanguard and confirm but according to the bugle heads and apparently from comments below that it's been discussed many times and the answer is a resounding no although selling vtblx might not trigger capital gains .

I mean it's a it's a bond fund so you're learning you're earning um interest there could be you could have some capital gains in theory but don't assume that you do i mean you can log into your account and see what your gains are so .

Something to consider anyway benjamin where is the best place to invest an emergency fund what one year salary well traditionally it would be like an online savings account so you could think of um ally marcus capital one axos .

Although axos has a good rate but one year salary i think they're good good rate 61 bips uh as a viewer pointed out to me is limited to like 25 grand there are some um checking accounts from neo banks so like in one finance you have to be a .

Plus member but it's one percent um i want to say so far yeah i don't know if there's a dollar limit but it's one percent see whenever i see this little footnote i get i get nervous remember the big words giveth the small words taketh away here's number one .

So you have to have direct deposit you're in one percent on the first 50 grand that's it's an option you know you could do a short-term bond fund retired mike if the consensus is that you shouldn't .

Have money in the market for for that you need for for the next let's say two years then shouldn't we have two years of normal expenses in cash um well well i think when most people say that they mean the stock market not the bond market .

However you know there's a huge difference between a short-term us government bond and a high-yield bond junk bond or emerging market debt right so if you had like a short term sort of u.s bond fund that's pretty safe .

And it could be part of your bond allocation but you could also just have it in cash the thing that i would do the thing that i i do is that if i'm gonna hold you know a couple years of cash that will be part of my bond allocation i don't include like what i'm spending .

Now so what's in my checking account for the next few months and my business account that's separate but if i want to hold uh like a year of cash like in perpetuity right i'm always gonna have that there for like emergencies um i might have it in a savings account but i'm going to .

I'm going to include it in my bond allocation all right i know it's 12 30 but i'm actually going to only go to an hour and a half for these because two hours is just exhausting for me that being said let me get one last question in ah someone pointed out that i was doing .

Some portfolio visualizer analysis with still having that one percent annual fee ah not good yeah that makes a difference anyway it's too late i messed up all right here we go mary this will be the last question for the day hopefully .

You guys can join monday at 7. even if you don't use new retirement don't want to use it you know it won't be just about the tool it'll be about all the issues that it brings up social security medicare how much can you take out you know monte carlo analysis so i think it could be .

Be good hopefully mary doesn't vti encompass large mid small as well as value and growth yes it does so why do you supplement your portfolio with small cap value though the idea is just to get over exposure to small cap value and frankly .

This is why i've become less enamored with it even though i still do it why do people do that like paul merriman's a big fan of this and i have been too because if you look at history small cap value has been in the us the best performing asset class the problem is there's no way to know .

Going forward if that will still be the case and i think what can happen is when anything outperforms you know people learn about it and they flood into that investment arc perfect example .

Small cap value and so what could have been uh an asset class that did great in the past might not do as well going forward so i i've become less convinced that i don't think it's a bad approach and i still have a separate allocation to .

Small cap but i'm less convinced that it's uh i i don't know that it's its likelihood of success is as high today as it was when i started investing 30 years ago i guess i'll put it that way of course time will tell right but that's the idea mary is that someone to get and that's .

True whether it's small cap value or reit emerging market some people want a growth exposure like a qqq all of these things not emerging market but all of these things are encompassed in like a total u.s stock fund the idea of having that plus one of .

These is to get over exposure based because you believe you know it's going to do better than the market as a whole and historically small cap value has done just that whether it repeat itself i don't know time will tell and i know jack bogle .

That he was of that of that view too it's like yeah it's done better but don't assume it's going to do that going forward so that's sort of the issue all right gang i'm going to call it a day as always thank you for hanging out with me again monday at 7 p.m eastern or again we're going to focus on new retirement and all the sort of .

Retirement issues that go with it looking forward to it hope you have a great week and until next time remember i guess i should say great weekend it is thursday my week's all fouled up anyway remember the best thing money can buy is financial freedom


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