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 Post subject: Need some advice
PostPosted: Mon Jan 14, 2013 7:10 pm 

Joined: Mon Jan 14, 2013 6:42 pm
Posts: 1
Hello all! I have recently begun listening to Dave Ramsey, and I've made the firm decision to get out of debt. We're doing better than most, but I am getting conflicting information on what to do. I could really use some advice.

Here's my background:

33 y/o, married, 2 kids. Combined income of $155,000

$0 credit card debt
~$90k in combined student loan debt. $15k @ 3.375%, $75k @ 3%
$309k mortgage, 30 years @ 4.25%
Car 1, $18k remaining @ 1.9%
Car 2, $15k remaining @ 1.9%
(please don't tear me up about 2 car loans...I know....stupid)

We have already set up an emergency savings that can cover 6 months worth of bills. My wife and I have put together a solid budget, and over the last few months we've really been sticking to it very well. If we can stick to this budget, we will have everything paid off including the house in 9.5 years.

Where my question lies is in regards to an investment account we have. We are currently with Ameriprise Financial, and have about $53k in very conservative bond funds. Last year, we saw about a 3.5% net return. After creating this budget and seeing it work, I started wanting to go even harder. So I hatched the idea of cashing in the bond funds and using it to pay down debt. Doing so would completely pay off 1 car, 2 of the student loans, and all but a couple thousand of the other car. This would leave us with only the bulk of the student loan debt (about $55k @ 3%) and the house. While we would have a lot of the loans paid off, and would be able to apply those payments toward the remaining debt, this plan would only shave off about a year and a half.

I'm not 100% happy with Ameriprise. I feel like we get dinged on fees. We get charged about $40/month in fees, and it's a front loaded fund, which at this point is not being actively contributed to as we are trying to pay down debt. Despite this we had a net return of 3.5%, but I feel like this is probably atypical for a bond fund. I really don't know what I'm getting for the fees we're charged, and I don't know what questions to ask. Also, I'm completely stupid when it comes to this sort of stuff, and I really don't know where to find a better fund, or even where to start looking.

So here's the options I've come up with, naturally I'm open to any sound suggestion.
1) Keep things like they are, follow the plan we've devised and let the money grow safely and slowly.

2) Keep the budget plan as-is, but move the investment money to a riskier fund for potentially higher returns. (Fund suggestions VERY welcome!!!)

3) Cash it in and pay down the debt.

I've proposed my plans to our Ameriprise financial advisor, and naturally he's trying to talk me out of it. The problem is, though I realize he doesn't want to lose our business, he's making a lot of sense. He seems to be steering me toward option 2, reinvesting in something riskier for potentially higher returns. He mentions that using the cash to pay off debt is not only giving the bank the money to pay off depreciating assets in the cars, but we'd lose the time value of investment. But I still feel like the fees associated with Ameriprise are really high. He's a good advisor and tries to do what's best for me and my family's money...but these fees....

I am so lost in this I don't know what to do. I could really use some unbiased advice.


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 7:22 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5356
He's an idiot or a snake if he says you lose the time value of money by paying off the loans. Paying off the loans gives you a guaranteed return of whatever the interest rate is for the remaining term of the loan. Your return for paying off the car is 1.9% for 3-4 years or whatever time you have remaining on the loan.

I think you should run, don't walk, away from Ameriprise. No one should ever be sold a load fund these days. No one should be paying $40 in fees every month on an account your size. It's downright reprehensible but unfortunately not illegal.

Call up Vanguard and T. Rowe Price for better options. Or even Fidelity.

Now, having said that, I don't think I'd pay off the loans you have quickly because the rates are really low. Your advisor could be giving you decent advice in that aspect although overall I think he is being a slimeball. At your age you should probably be mostly in stock funds. If I were you I would transfer your account to Vanguard, put it in either Total Stock Market or a target date fund close to around 2040 (which is pretty much going to be in the total stock market anyway) and never look back.

Also stick with your plan to pay everything off in 9.5 years.


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 7:23 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
It's hard to say what you should do without the entire financial picture. Generally, I am adverse to any debt except a mortgage (and student loans are understandable). So, it's hard to say if you should be more aggressive than a "conservative bond fund," as all your assets between you and your wife should be considered. Just as a note, I assume this bond fund is in a taxable account. If so, this is very tax inefficient.

One thing is for sure, however, you should end your relationship with Ameriprise. Here is an interesting read.

http://www.early-retirement.org/forums/f26/leaving-ameriprise-one-year-later-57353.html

I would also get the Bogleheads book for investing. Dave Ramsey is good for digging out of a debt hole. His investing advice, for lack of a better word, sucks. I would set goals with your spouse to help you maintain a standard of living long term, pay down debt and invest for your future goals.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 7:32 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
DoingHomework wrote:
Call up Vanguard and T. Rowe Price for better options. Or even Fidelity.


Gotta agree with DH here. I've worked with T. Rowe Price and couldn't be happier.

_________________
I can not dwell over that to which I have no control...


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 9:04 pm 

Joined: Wed Nov 07, 2012 6:21 am
Posts: 141
I'm willing to make you a stock portfolio for free if you want it. I'm an advocate of value investing, where stocks that are undervalued in comparison to other stocks being traded are the ones to buy. I select stocks that are cheap by known factors, such as comparing the price of the stock to the earnings, the price to the sales, the price to the equity, and the price to the free cash flow (money that can be distributed as dividends).

Because my system for stock selection is 100% data-driven, emotions are taken out of investment decisions. I create portfolios that are meant to be held for one full year.

Now, about the paying off the cars, I have to agree with the Ameriprise guy. One of the basic principles of finance is that "money has a time value". While I don't agree with all the principles that are taught in finance classes, I can definitely agree with that one.

And if you can make more on the money through investing than your cars are costing you (They're both at 1.9%, which is very low) then I see no reason to not continue investing the money as long as you make decent investment decisions.

As for Ameriprise, I can't really say. I am not that familiar with them or other funds myself, or really with bonds either. However, you don't need to take bigger risks to get better returns. Value investing improves both the profitability and the safety of investing in the stock market. (You'll get different opinions about this from other people here, but I stick by this)

I recommend you buy "What Works on Wall Street" (Fourth Edition) by James P. O'Shaughnessy. You can get it for less than $30 on amazon.com and it will teach you about why value investing works. My portfolios are based 100% on what is in that book (I have my own interpretation and I go farther with the data than what is mentioned in the book, but my system did indeed have the book as the root cause for how it developed) and I can tell you that it has certainly worked in the portfolios I have created (mostly simulations, but I have created some actual portfolios for people to use based on this data - you can check these out at prostockpicks.proboards.com). I also posted the simulated returns from my portfolios as of January 1st of this year over in the Stock Portfolio 2 thread (which you can see have performed really well) in comparison to the Dow Jones Industrial Average.

Based on the results in that thread, you would have to conclude either that

1) Value investing works
2) A series of flukes happened
3) I chose the stocks after looking at their results

Of course, the 2012 Nov 7th portfolio posted there was one publicly created in this very forum, so if you were you believe #3, then you would have to believe #2 happened for that portfolio as it is currently beating both VTI (the fund chosen by someone else here to compete with the portfolio) and the Dow Jones Industrial Average (which I posted superior results to when asked about how previous portfolios compared to it).


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 9:15 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
Matthew Clinger wrote:
I'm willing to make you a stock portfolio for free if you want it. I'm an advocate of value investing, where stocks that are undervalued in comparison to other stocks being traded are the ones to buy. I select stocks that are cheap by known factors, such as comparing the price of the stock to the earnings, the price to the sales, the price to the equity, and the price to the free cash flow (money that can be distributed as dividends).

Because my system for stock selection is 100% data-driven, emotions are taken out of investment decisions. I create portfolios that are meant to be held for one full year.

Now, about the paying off the cars, I have to agree with the Ameriprise guy. One of the basic principles of finance is that "money has a time value". While I don't agree with all the principles that are taught in finance classes, I can definitely agree with that one.

And if you can make more on the money through investing than your cars are costing you (They're both at 1.9%, which is very low) then I see no reason to not continue investing the money as long as you make decent investment decisions.

As for Ameriprise, I can't really say. I am not that familiar with them or other funds myself, or really with bonds either. However, you don't need to take bigger risks to get better returns. Value investing improves both the profitability and the safety of investing in the stock market. (You'll get different opinions from this from other people here, but I stick by this)

I recommend you buy "What Works on Wall Street" (Fourth Edition) by James P. O'Shaughnessy. You can get it for less than $30 on amazon.com and it will teach you about why value investing works. My portfolios are based 100% on what is in that book and I can tell you that it has certainly worked in the portfolios I have created (mostly simulations, but I have created some actual portfolios for people to use based on this data - you can check these out at prostockpicks.proboards.com). I also posted the simulated returns from my portfolios as of January 1st of this year over in the Stock Portfolio 2 thread (which you can see have performed really well) in comparison to the Dow Jones Industrial Average.

Based on the results in that thread, you would have to conclude either that

1) Value investing works
2) A series of flukes happened
3) I chose the stocks after looking at their results

Of course, the 2012 Nov 7th portfolio posted there was one publicly created in the forum, so if you were you believe #3, then you would have to believe #2 happened for that portfolio as it is currently beating both VTI (the fund chosen by someone else here to compete with the portfolio) and the Dow Jones Industrial Average (which I posted superior results to when asked about how previous portfolios compared to it).


I wouldn't listen to this spammy assclown. Nor would I give him a cent. He is broke, has no money of his own to invest, in his 30's and finally "going back to school." His "portfolios" are wildly risky. In essence, he takes stupid risks with YOUR money. Also, he needs to be licensed and regulated by his state for offering "investment advice," but he has yet to ever produce his license. Caveat Emptor.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 9:29 pm 

Joined: Wed Nov 07, 2012 6:21 am
Posts: 141
Thus speaks someone who has absolutely no idea what he is talking about. The above person won't back up what he says about my portfolios with a single cent of his money. Not only that, but he has very little knowledge of value investing. And further, you don't need a license in my state to give investment advice. You simply need a license to be able to obtain and be able to use the title "investment advisor", which is a totally different and separate thing.

Bichon Frise's opinion, from his previous posts, is that he knows better than everyone that has less money than he does and he won't take a bet to back up his words, even though he claims confidence in what he says. He has no confidence. What he has is a lot of words with not one thing to back them up. You'll notice he doesn't deny that my portfolio is doing better than VTI (a Vanguard fund) or the DJIA. He does meaningless things like make personal attacks on people because he can't attack the results that the portfolios produce.


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 10:17 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1842
Bichon Frise wrote:
I wouldn't listen to this spammy assclown. Nor would I give him a cent. He is broke, has no money of his own to invest, in his 30's and finally "going back to school." His "portfolios" are wildly risky. In essence, he takes stupid risks with YOUR money. Also, he needs to be licensed and regulated by his state for offering "investment advice," but he has yet to ever produce his license. Caveat Emptor.

You realize, of course, that taking investment advice from him is like taking advice from a eunich in a harem. He knows how it's done. He sees it done every day. But he can't do it himself.


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 10:38 pm 

Joined: Wed Nov 07, 2012 6:21 am
Posts: 141
You ever notice how those who have more than you like to take the time to point out that they have more than you?

Of course, these guys won't mention stuff like the first portfolio I created for this forum just over 2 months ago, which has 13 stocks, has the following results so far:

12 stocks up, 1 stock down
9 stocks up individually more than that one stock that is down
Of the 12 stocks that are up, 6 are up more than 10%.
1 of these 6 stocks is up over 20%
Number of stocks with a 10% or greater loss: 0.

As of today, that portfolio is up 9.71% including dividends and expenses.

Of course, I have heard VinTek say the same thing before, yet he cannot make portfolios like these. So many here prefer indexing. So yeah, I make portfolios and don't have the money to invest myself. But I make great portfolios that produce great results time and time again. It drives these guys crazy (as you can see).


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 Post subject: Re: Need some advice
PostPosted: Mon Jan 14, 2013 11:59 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Matthew Clinger wrote:
Thus speaks someone who has absolutely no idea what he is talking about. The above person won't back up what he says about my portfolios with a single cent of his money.


Sounds like a con to me... trying to goad someone into give you there money. Why should he back it up if he doesn't trust you.

_________________
I can not dwell over that to which I have no control...


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 Post subject: Re: Need some advice
PostPosted: Tue Jan 15, 2013 12:49 am 

Joined: Wed Nov 07, 2012 6:21 am
Posts: 141
I didn't ask him to give me his money. I made him a bet based on how my portfolio would perform. He claims that he believes it wouldn't work. So I bet him money, using circumstances in the bet that were favorable to him according to how he claims he saw my portfolio, and yet he wouldn't take the bet. A bet is not "giving". And I don't handle others' money. I am not a broker. I create portfolios. People buy their own stocks using their own accounts.

Bichon Frise will say stuff like "I wish he would put his money where his mouth is" and then back off immediately when I put my money against his over the performance of my portfolio. I gave him his wish and he backed off right away from what he said. You see, he's very comfortable criticizing others and claims all sorts of things, but has no wish to back up his words at all.

Which is why he'll mouth off anything he wants to, and never seems to use specifics. He'll stay stuff like "His "portfolios" are wildly risky", but do you notice the lack of details? In what ways specifically are they risky? And why does he believe that?

I state very clearly what I base my portfolios upon and anyone should easily be able to verify (if they ever took the time) that I created the portfolios exactly the way I said I did, which is based totally on value investing information contained in that book. Anyone at all who picked up the book and looked at my stock selection could answer the question "Why doesn't he have any technology stocks in his portfolios?".

Well, it is a very simple answer which would be clear to anyone who decided to actually read the book. Or you could ask "Why does this stock picking process work?" Again, it would be easily answered by reading the book. You guys, who claim to have so much money.. Why would you not read such a book that only costs $30 if it could help you to be a better investor?

You doubt and doubt and doubt, even as my portfolio continues to crush the returns of VTI. So much faith you'll put in a fund merely because it is popular.


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 Post subject: Re: Need some advice
PostPosted: Tue Jan 15, 2013 6:30 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1842
Matthew Clinger wrote:
Of course, I have heard VinTek say the same thing before, yet he cannot make portfolios like these. So many here prefer indexing. So yeah, I make portfolios and don't have the money to invest myself. But I make great portfolios that produce great results time and time again. It drives these guys crazy (as you can see).

Yes, I've said it before. It's an apt analogy. Talking to you is like talking to someone who's read all the cookbooks but never peeled a potato. Or talking to a carpenter who's read some DIY books but never actually swung a hammer.

It doesn't drive me crazy. After all, you don't "make" portfolios. You plan them, but you don't "make" anything. If you "make" something, it has to exist somewhere other than in your mind.


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 Post subject: Re: Need some advice
PostPosted: Tue Jan 15, 2013 8:22 am 

Joined: Wed Nov 07, 2012 6:21 am
Posts: 141
VinTek, that's like saying that things have to have physical form before they exist. You might as well insist that feelings do not exist if not acted upon, that a marriage without a certificate and rings is not valid, or some other such things.

Tell me who is the better chef.. The one who knows how to cook and has all the skills to cook and has the tools but not the food, or someone that has heard about cooking and merely copies cooking from television? Really, we all know who the real chef is between the two. The difference here is that if you substitute investors into this analogy, you think that you who have food (money) are clearly superior at it while lacking the skills to do anything other than copy a mass produced recipe.


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 Post subject: Re: Need some advice
PostPosted: Tue Jan 15, 2013 8:36 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1842
Matthew Clinger wrote:
VinTek, that's like saying that things have to have physical form before they exist. You might as well insist that feelings do not exist if not acted upon, that a marriage without a certificate and rings is not valid, or some other such things.

Tell me who is the better chef.. The one who knows how to cook and has all the skills to cook and has the tools but not the food, or someone that has heard about cooking and merely copies cooking from television? Really, we all know who the real chef is between the two. The difference here is that if you substitute investors into this analogy, you think that you who have food (money) are clearly superior at it while lacking the skills to do anything other than copy a mass produced recipe.

A marriage can be real because people live it. A cook can be genuine because he's actually cooked. You, on the other hand, have not invested. You do not have a portfolio, which is akin to a chef who has never taken his knives out of the box.

Edit: bad analogy about the chef. most people who earn the title of chef has undergone the schooling and been tested in the kitchen. You have done neither.


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 Post subject: Re: Need some advice
PostPosted: Tue Jan 15, 2013 10:12 am 

Joined: Tue Jan 15, 2013 9:55 am
Posts: 2
It seems the person who originally asked the question would invest money in the stock market. The stock market can sink - like a stone, or slowly, over time. I'm a huge fan of investing in the stock market, but only with money I consider 'gambling' money. If my portfolio falls to half its value by next year, it won't be as painful because I have more money in CDs than I'd ever put in the stock market. For someone with kids, and debt, yeah, age is a factor (being young, you have more time to gamble) but gambling is gambling. Fun, and I love it.

I never forget the recommendation from a person I know who works for a huge pharmaceutical company... it only took 20 years to get the price of the stock back to what I paid for it!


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