Dropping Edward Jones and moving my money to Vanguard

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Vanguard investment strategies are all over the personal finance blogs. Automated dollar cost averaging into passive index funds has a beauty to it that I didn’t appreciate until afterwords.

  “lower fees, from computerized passive index investing versus active management, leaves more wealth for yourself, and in 97% of the cases, gives you better portfolio performance as well”.

For 8 years I invested with Edward Jones active mutual funds. And they did okay.

Beginning in college I read books and blog posts about personal finance, including I Will Teach you to be Rich.

I mainly changed my spending habits. But I was reluctant to change investment strategies. I was young and didn’t want to devote too much time to investing.

After running my own analysis, I realized that excessive fees were costing me lots of money.

And I don’t want that to happen to you.

I was paying 5% load fees, 1.5% expense ratios and account maintenance fees.

What I didn’t know was really hurting my investment portfolio.

But, I didn’t switch over because I believed I was paying for solid performance.

I had my reasons.

-I didn’t want to upset my broker at Edward Jones

-I didn’t want to lose money in taxes and fees

-I didn’t have any experience with Vanguard.

But when I read Money: Master the Game by Tony Robbins, and his chapter on fees, I realized I had to do something.

In 2015, I opened a Traditional IRA with Vanguard.

Then I tracked performance for 2 years and saw better performance in vanguard along with less fees.

Once I had that information I knew I needed to make a change.

I had wasted 3 years and hundreds in fees telling myself that I needed to switch.

But once you have momentum it’s hard to stop it. It’s why 2.1 million people still pay for AOL internet from a CD they got in the mail in 1998.

I Finally did an in-kind transfer from EJ to Vanguard. .

For a disclaimer: I am not an investment professional, and this is not investment advice. Past performance does not predict future performance. This is purely entertainment writing.

With that out of the way. Here are my takeaways.

The end of excessive fees

Edward Jones charges a lot to people. A Roth IRA is $100/year. Vanguard doesn’t do this.

Vanguard has no loads, and some of the smallest expense ratios in the business. With a minimum 3,000k to invest.

Processing fees to change over

$100 per account to roll them over. It’s bullshit, but worth it to be rid of their loaded funds.

Forms to fill out

You only need a form from Vanguard. I filled it out, signed it, and within 2 weeks my account was fully moved over to vanguard from Edward Jones.

I got a call from Edward Jones asking about canceling the auto draft from my bank. I told them to cancel it, said thank you, and got off the phone.

That was it from Edward Jones. And I spent 3 years procrastinating on it.

All it took was $200 to EJ, a 10 minute form, and a 1 minute phone call. Finally high fees were a thing of the past.

Current management ratios

My current ratios range from 0.20% to 0.06% in the Vanguard funds I am invested in.

Passive investment

Each month I have set amount of money taken from my bank account and processed without loads into buying Vanguard shares.

I did this before. But it’s still important to build that money machine as a young man. Time is on my and your side.

Warren Buffet wrote an Op-ed piece in 2008 during the tumultuous Financial Crisis. “Buy American. I am.”

The S&P 500 was a roller coaster that month. The largest percentage swings in history.

The day his article was published the S&P was at 909.53. His critics slammed him. But a 9 year Bull market vindicated him. Today the S&P stands at 2,500.03.

Linking up banking information

Takes a few minutes, but all they need is a banking account number and routing number. Set up an auto-investment and then lay back in a hammock.

Better Website

Easy to find portfolio breakdown and performance. Really good infographics and tools on the vanguard website for a passive investor. The Edward Jones site was clunky and hard to find real numbers.

That’s what I’ve noticed. I’m glad a made that change at an early age. I now I want to take a calculated risk.

Future investment plans

I turned 18 on the day of the largest point swing in S&P 500 history, -106.95.  This current 9 year long bull market will end. Everything that goes up will come back down. I’m preparing for it in the same way Mr Money Mustache has.

Recent books I read on Personal Finance and investing that were good.

Bachelor Pad Economics: Funny, engaging, actionable.

https://www.youtube.com/watch?v=jAf7I5gl72A

Money: Master the Game: Great All-Weather portfolio allocation strategy.

 

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Book Review “I Will Teach you to Be Rich” by Ramit Sethi: Frontload the Work and Relax

This book is great for young professionals that want power over their finances. Ramit is a smart bachelor whose mission is to maximize his utility and manage his limited willpower. I’ve put his systems into action and I’ve saved thousands. We also agree on how to eat chicken wings.

I read this in college after hearing Ramit on the Art of Charm (back when it was pickup podcast, RIP). After 2 years in the oilfield, I know this book laid a solid foundation. Last month I put his negotiation tactics to work while shopping for car insurance and got a 30% reduction by switching to Allstate. His tactics paid for the book 20 times over. Besides that he makes financial literacy interesting and has a biting dry wit.

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Ramit sets 6 weeks to put in his systems. By the end all of your finances will be automated. Your credit card, online savings and investment accounts will be connected. They will all be low-fee, high-interest, and minimal maintenance. The last section is about saving for weddings, negotiating for cars, and creating a rich life for yourself.

automation-overview

These are the habits I gained and recommend doing:

  • Mint: Probably the best thing I have learned from reading this back in college was getting a Mint account. I have had it for 4 years now and have an awesome data set. I spent the other day running through what I’ve spent over the past 4 years on alcohol, bars, groceries, amazon shopping, and even income.
  • Get rid of all subscriptions: Magazines, cable, Netflix, and linkedin. They are soul sucking. If you want them, buy a la carte.
  • Craigslist: I find its great to buy/sell used items.  I have sold bikes, shoes, furniture and TV’s.
  • Investing: Automation, putting money away for an index fund. It’s like tinder dating for your money. Keep working hard and learning at your job so you deserve the raises that will come your way, and you can invest those. Nothing feels quite like making money while you sleep.

Ramit has a large collection of articles and courses. I almost pulled the trigger on Dream Job but I decided to implement his free stuff first before I moved on to the premium services. This is an entertaining book and I plan on giving it to my nephews and cousins when they are in college.

For 2 great interviews of Ramit:

http://theartofcharm.com/podcast-episodes/ramit-sethi-will-teach-you-to-be-rich/

http://theartofcharm.com/podcast-episodes/episode-172-ramit-sethi-iwillteachyoutoberich-com-dream-job/

For another good book review of IWTTBR. Look to Mr Money Mustache’s Book Review.  He calls the title into question, “At best, it should be called I Will Teach You to Stay Out Of Trouble”. MMM is more of a stoic frugalist. Ramit is more of a measured hedonist.

Ramit’s main message is to set up the financial system so you CAN live a rich life. Whatever that means to you.

Buy the book here