Derp Takes on Morgan Stanley

Ever since I got my Morgan Stanley Card for American Express I have gotten the hard sell from my financial advisor to roll over everything in all accounts, and just set it and forget it. The prospect of just paying some dude 1.3% every year to manage all my finances seem like taking the easy way out. A certain philosophical suicide, where I have become the trust fund baby that I always wish I was. I would not know how the money got there, what it was invested in, but daddy would tell me exactly my monthly allowance. I would become Billy Madison, some sort of a man-child prime for financial exploitation.

I also have not been a fan of active fund management because it costs too much (1.3% a year from Morgan Stanley). For this little experiment it would cost me $695 a year for management! This fee however includes all of the buying and selling of funds as they are commission fee. It does not include the management fees of each fund charges either, although some funds charge less than retail investors as a MS client. I thought, let’s not go nuts here and give away the keys to the kingdom. The Financial Manage agreed to manage only my Wife’s IRA to prove his fees are worth it. He even stated he usually doesn’t touch any account less then half a million dollars, but he liked the cut of my jib. I guess they are scraping the bottom of the barrel here with my $50K. This is whole set up is reminiscent of the famous Warren Buffett vs Hedge Fund Bet. Hopefully I come out ahead by being not sexy with my two fund portfolio. I will be honest, if he blows me out of the water, then I would be more than happy to shift my Roth IRA over to him. I mean her would have to return twice as much minus his fees!

Ultimately I need a benchmark to show that I am am capable of possibly beating active management by low fee indexing. I rolled over my wife’s IRA to MS just as a trial of what active management can do. I will be managing my Roth inside Vanguard and will rebalance every time MS rebalances. Here is what MS has allocated:

Description Symbol Percent
ISHARES CORE MSCI EAFE ETF IEFA 22%
VANGUARD GROWTH ETF VUG 13%
SPDR S&P DIVIDEND SDY 7.5%
WISDOM TREE LG CAP DIV ETF DLN 7%
AB HIGH INCOME ADV CONFIRM NBR AGDYX 7%
HARDING LOEVNER EMERG MKTS ADV CONFIRM NBR HLEMX 4%
VANGUARD FTSE EMERGING MARKETS VWO 4.5%
VANGUARD TOTAL BOND MARKET BND 3%
SPDR BBG BARCLAYS SHRT TERM CO SCPB 4%
SPDR DOUBLELINE TR TACT ETF TOTL 4%
PIMCO 1-5 YEAR U.S.TIPX IDX FD STPZ 4%
VANGUARD SHORT-TERM CORPORATE VCSH 4%
WISDOMTREE TRUST JAPN HEDGE EQ DXJ 3%
VANGUARD MID CAP VALUE ETF VOE 3%
VANGUARD MIDCAP GROWTH ETF VOT 3%
CASH $$$$ 2%
SPDR BBG BARCLAYS 1-3 MONTT-B BIL 2%
DELAWARE INV SM CAP VAL INST CONFIRM NBR DEVIX 1%
ISHARS MORNINGSTAR SML CP GRWT JKK 1%
ISHARES S&P SMLL-CAP 600 V ETF IJS 1%

And here is my not so sexy Vanguard allocations:

Vanguard Growth Index Fund Admiral Shares VIGAX 32.5%
Vanguard International Growth Fund Admiral Shares VWILX 67.5%

Right now as of 16 April 2017, I have $53.5k in the wife’s and $87k in mine, this will be the benchmark for comparison. I will use percent return as the final determination of success We can’t contribute to the Roth IRA due to the income limit, and I don’t care to do the indirect rollover. We will count all reinvested dividends as return, and let the best man win! I am going to check back in 3 months to let you all know where we all stand. We can finally see for ourselves if a 1.3% fee can make up for better returns.

-Derp

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