Alright, I've been reading some of the posts in here, and I've begun reading the "Investment Guide" posted by ar-jedi. (Thanks by the way.)

I'm to the point where I would like to building my "nest egg" so to speak. I actually started this process a few months ago, but I'm not feeling too well about my first fund purchase. It appears that I have fallen victim to another "financial adivsor," and I was hoping one of you could offer some un-biased advice for getting things back on the right track.

Long story short, I'm a 24 year old orphan. I've been fairly poor all my life, but my parents had the unexplainable foresight to load up on life insurance. Up until now, I inherited their financial advisor as well. He deals in New York Life Insurance, and Mainstay Mutual Funds.

I've been out of school working as an Engineer for about a year and a half now. I saved up my first $25K about three months ago, and purchased MGAHX at the advice of my "advisor." We did not discuss which class to purchase, so naturally when I mailed him my check he purchased Class A. Needless to say, I was a little surprised to see my first statement and initial balance of only $23,711.35.

I work at a very small company, (<19 employees) and as yet there is no 401K option. I do have life insurance and about $80K in a NYL Retirement account though. My plan was to invest $25K, and then $5K quarterly for as long as I possibly can. Obviously that is going to ammount to a lot of money someday, but I want to take advantage of getting a solid start this early. So....

Is it time to kick my "financial advisor" to the curb? Or maybe Mainstay all together? Maybe find another job that has 401K?

I appreciate the help guys. I hate to spill my guts like this, but I lost the two people I trusted most before I got a chance to ask about things like this. Thanks in advance.

First, sorry on the loss of your parents.  I lost mom a few years ago and it still hurts sometimes.

If you're 24 years old with $25k to invest and the discipline to add $5k/qtr to that, you're ahead of 99% of your peers.  Congratulations!

MGAHX is a high income fund with a 4.5% initial sales charge, an expense ratio of 1.42%, and is a "9" on the Morningstar style box (long-term low-quality bonds) according to your link.  Did your advisor say why he recommended it for you?  As an engineer you're probably making decent money and you don't need current income; you need growth.  Any gains on this fund will likely be taxed in the year you earn them, which will also lower your gain.  Finally, interest rates are at historic lows and aren't likely to go lower, which makes long-term bonds a poor investment at this time.

Since your company doesn't have a 401k plan the first thing I'd do is open up a traditional IRA with one of the big 3 - Fidelity, Vanguard, or T Rowe Price.  All are known to have fairly diverse offerings and low expense ratios and fees.  Plus their web sites are set up so you can easily do your own research for your investments, which means kicking your advisor to the curb.  The $4k you contribute will be deductible from your taxes, which also helps.  If it's legal for you to roll the $80k from your NYL retirement account into it you'll avoid even more fees (e.g. Vanguard's "low balance" fees for folks with less than a certain amount invested).  Pick a few long-term growth funds, or one of the "life cycle" funds, and don't sweat the market's ups and downs since your IRA money shouldn't be touched for 30+ years.

You want to build your "nest egg" - for what purpose?  Buying a house in a few years?  Saving for retirement?  Getting a new car next year?  The answer will determine where you put your money.  The sooner you need your money, the safer an investment you'll want.

In the interest of full disclosure - I am a satisified Vanguard and Fidelity customer.

actually MGHAX

since you already paid, don't redeem (sell), consider an exchange (within Mainstay) if reallocating

Right now I'm not sure what I would like to do with the money. Possibly start my own business years down the road. Mainly, I just want to take full advantage of the head start I've been given, and just let it build for as long as I can. I am not planning on withdrawing anything from this account for the next 16 years at least. I already have 20% down on a house, and I won't need a new vehicle for awhile.

I asked my financial advisor to find me a fund to meet a 10% annual target, and that is what he came up with. It looked like it had gotten decent returns throughout its life, so I agreed. And frankly, I couldn't find too many other Mainstay funds that returned better.

As far as the retirement fund, I believe this would be relatively hard to undo. I started it three years ago with $50K, and it's already up to $80K so I can't complain too much (~16% a year). But I have no problem moving the mutual fund.

Is the initial sales charge a one time thing, or is it charged everytime I add money to that fund? Also, assuming it is a one-time charge, I would have been much better off starting with the minimum investment allowed, and then adding the rest of the $25K later, right?

Quoted: actually MGHAX since you already paid, don't redeem (sell), consider an exchange (within Mainstay) if reallocating

Thanks, I always type that backwards for some reason.

Actually, I'm having trouble finding anything within Mainstay that returns as much as this one. Also, besides an expense ratio less than 1% and a low or non existent sales charge, what should I be looking for?

I am due to make my first quarterly deposit of $5K. I wouldn't mind starting another fund with another company entirely. Any reccomendations for long term growth. Again, I'm satisfied with my current retirement account so far.

#1 do the right asset allocation
#2 don't chase return/performance

for A shares, look for break points (read your prospectus) that will reduce your sales load, usually in increments of $25M-$50M.  you will be charged a front load every time you purchase.  without mentioning this "bulk" discount/charge reduction, your adviser is not serving you right.

more complicated: if it fits your strategy and it's worth it, consider buying all at once into a lower charged short term bond fund, then averaging in though an exchange.  IM me for detail if you want.

simplest way is to buy all at once to take advantage of break point discount.

Quoted: #1 do the right asset allocation #2 don't chase return/performance for A shares, look for break points (read your prospectus) that will reduce your sales load, usually in increments of $25M-$50M.  you will be charged a front load every time you purchase.  without mentioning this "bulk" discount/charge reduction, your adviser is not serving you right. more complicated: if it fits your strategy and it's worth it, consider buying all at once into a lower charged short term bond fund, then averaging in though an exchange.  IM me for detail if you want. simplest way is to buy all at once to take advantage of break point discount.

Okay, I checked out the fund's prospectus (this would have been handy before the fact). I did not see any mention of sales break points. Max sales load was 4.5% for Class A, although it looks like I got hit with 5.5%? Also, the net maximum operating expense was 1.4%.

For the Class C fund, which has higher annual returns by the way, there is no sales load, and an expense ratio of 2.15%. For someone like me that wanted to consistently buy shares, would this not make much more sense?

Any one have a good mutual fund I could check out to compare with this one? I can see right away, that between sales loads, operating expenses, and taxes, I'm not even gonna come close to 10% annual with this one.

Thanks again.

Quoted: First, sorry on the loss of your parents.  I lost mom a few years ago and it still hurts sometimes. If you're 24 years old with $25k to invest and the discipline to add $5k/qtr to that, you're ahead of 99% of your peers.  Congratulations! MGAHX is a high income fund with a 4.5% initial sales charge, an expense ratio of 1.42%, and is a "9" on the Morningstar style box (long-term low-quality bonds) according to your link.  Did your advisor say why he recommended it for you?  As an engineer you're probably making decent money and you don't need current income; you need growth.  Any gains on this fund will likely be taxed in the year you earn them, which will also lower your gain.  Finally, interest rates are at historic lows and aren't likely to go lower, which makes long-term bonds a poor investment at this time. Since your company doesn't have a 401k plan the first thing I'd do is open up a traditional IRA with one of the big 3 - Fidelity, Vanguard, or T Rowe Price.  All are known to have fairly diverse offerings and low expense ratios and fees.  Plus their web sites are set up so you can easily do your own research for your investments, which means kicking your advisor to the curb.  The $4k you contribute will be deductible from your taxes, which also helps.  If it's legal for you to roll the $80k from your NYL retirement account into it you'll avoid even more fees (e.g. Vanguard's "low balance" fees for folks with less than a certain amount invested).  Pick a few long-term growth funds, or one of the "life cycle" funds, and don't sweat the market's ups and downs since your IRA money shouldn't be touched for 30+ years. You want to build your "nest egg" - for what purpose?  Buying a house in a few years?  Saving for retirement?  Getting a new car next year?  The answer will determine where you put your money.  The sooner you need your money, the safer an investment you'll want. In the interest of full disclosure - I am a satisified Vanguard and Fidelity customer.

I'm new to this so it took me a little while to understand what you were suggesting. It turns out my "retirement fund" is actually a "variable annuity." It has some pretty hefty fees associated with withdrawal until after 10 years though.

Anyway, a retirement account (most likely a Roth IRA) looks to be a good start. I used to have a mutual fund with Vanguard, and I will look into starting an IRA with them. This will take care of $4K a year.

Now what to do with the other $16K. I'm thinking a diversified mix of Vanguard mutual funds. I always thought the Mainstay thing was a little fishy, I just didn't know what to do about it. Since I've already paid the sales charge, I might as well just let it grow on its own without adding to it. Wish I would have talked to you guys sooner.

C shares end up costing more over time for a buy-and-hold strategy.  C shares cost less transaction wise and are best for the undecided or one who is expecting to liquidate within say 5 years.

Quoted: Alright, I've been reading some of the posts in here, and I've begun reading the "Investment Guide" posted by ar-jedi. (Thanks by the way.)

excellent, i actually helped someone.  

Quoted: I'm to the point where I would like to building my "nest egg" so to speak. I actually started this process a few months ago, but I'm not feeling too well about my first fund purchase. It appears that I have fallen victim to another "financial adivsor," and I was hoping one of you could offer some un-biased advice for getting things back on the right track.

not to worry, you are on the right track -- you are learning about financial matters while you are young and in a position where time is on your side.  as an analogy, no one hits the first curveball that is thrown at them -- no one.  you have to get some practice in, and work on reading the pitch and where the break is going to end up; then you can hit the curves over the fence.

Quoted: Long story short, I'm a 24 year old orphan. I've been fairly poor all my life, but my parents had the unexplainable foresight to load up on life insurance. Up until now, I inherited their financial advisor as well. He deals in New York Life Insurance, and Mainstay Mutual Funds.

you will be able to let go of your advisor, just like you let got of mom's hand when you went off to kindergarten so many years ago.

Quoted: I've been out of school working as an Engineer for about a year and a half now. I saved up my first $25K about three months ago, and purchased MGAHX at the advice of my "advisor." We did not discuss which class to purchase, so naturally when I mailed him my check he purchased Class A. Needless to say, I was a little surprised to see my first statement and initial balance of only $23,711.35.

ok, first read this entire thread regarding advisors...
ar15.com/forums/topic.html?b=1&f=133&t=565067

Quoted: I work at a very small company, (<19 employees) and as yet there is no 401K option. I do have life insurance and about $80K in a NYL Retirement account though. My plan was to invest $25K, and then $5K quarterly for as long as I possibly can. Obviously that is going to ammount to a lot of money someday, but I want to take advantage of getting a solid start this early.

excellent plan.  btw, plant a bug in someone's ear about starting a 401k (or a Roth 401k) at the company.  there are benefits for the company, and benefits for the employee.  call up The Big Three (Vanguard, Fidelity, T Rowe Price) and ask each to send you a "employer's 401k plan administration" brochure package.  that bundle will provide all of the info you need to understand the benefits to both sides.  

Quoted: So....   Is it time to kick my "financial advisor" to the curb? Or maybe Mainstay all together? Maybe find another job that has 401K?

feel free to kick your advisor to the curb.  trust me, you have all of the aptitude you need to successfully invest by yourself -- and at no cost to you i might add.

Quoted: I appreciate the help guys. I hate to spill my guts like this, but I lost the two people I trusted most before I got a chance to ask about things like this. Thanks in advance.

unfortunately our societal rules discourage discussing financial matters.  even within a familiy there is very often a lack of frank discussion about the ways of money.  

but let me tell you one thing that took me a while to figure out, something i think will help you out.  like you, i went to engineering school.  then, i got a job at an r&d company.  a bit later i tried to figure out this "investing thing".  sound familiar?  one concept that took a while to dawn on me i now look back at as my "Eureka!" moment.

in college prep high school, in engineering university, and in a technical workplace, our job as engineers is one of optimization.  in our minds, the end product should be the least expensive, most featured, delivered on the shortest schedule; resources (people and NRE) should be minimized, design re-use maximized, battery life extended, current consumption reduced, output increased, and so on and so forth.  everything we do is geared toward finding the maxima or minima of something and implementing a perfect product solution around it.  

this thinking model does not work for investing -- at all.  there is no "perfect" solution.  it may exist only temporarily, and then it's gone.  rational, deterministic behavior of the variables does not happen.  backtesting a complex, finely-tuned parametric model over the last 20 years may suggest that one can predict the price of corn futures in 2 years.  fast forward 24 months and you will then have a brand new datapoint not even close to your model.  so as you can see, investing is not a balanced chemical equation, investing is not an integral over a given area, investing is not the application of a transform which nets you an answer.  it just doesn't work like that.

so, do we give up?  no. i'd suggest that you don't give up if you eventually want to retire.  

successful investing means being "good enough".   you will hear the same from a real estate agent -- it is true the perfect house for you is out there, somewhere, but it will take infinite time and infinite resources to find it or to build it.

so, my teaching today is not to worry about finding the perfect investing solution.  you can't -- there is none.  instead, you should strive to find a "good enough" solution -- one that has a risk level that you can tolerate, one that will protect you in a downdraft, one that will reward you in an updraft, one that fits your income and tax sitiuations, and finally one that will hopefully meet your long terms goals. yes, that's a long list, but it is not difficult to create a portfolio around those maxims.  remember, do not attempt to optimize your portfolio -- there are simply too many variables at play here and you can not possible control all of them.  

revisit this thread,
ar15.com/forums/topic.html?b=1&f=133&t=531982
and see if you can deduce from my initial posting in that thread (#2 sequentially from the top) why i may have picked the funds/ETF's that i did.  i'm not trying to be difficult here, and there is not a "right" answer.  also see this recent M* Instant Xray of the portfolio (link)

also see this thread,
ar15.com/forums/topic.html?b=1&f=133&t=575352
specifically my post of 5/8/2007 11:03:32 PM EDT which starts off "well, yes and no."  from your readings in the "Investing 101" post your referenced, you should start to see how asset allocation is done.

regards,
ar-jedi

Dude!  He sold you a high yield (junk bond) fund?  

1)  Fire him
2)  Open an account at Fidelity, or ETrade, or Vanguard, or wherever.  
3)  Check out one of the do-it-all funds like FFNOX (one of my favs) or FFFFX.

Quoted: I'm new to this so it took me a little while to understand what you were suggesting. It turns out my "retirement fund" is actually a "variable annuity." It has some pretty hefty fees associated with withdrawal until after 10 years though.

A variable annuity? For a young guy?  AAAAAAAAARGH!

(Ar-Jedi is gonna puke when he gets here)

Quoted: Dude!  He sold you a high yield (junk bond) fund?   1)  Fire him 2)  Open an account at Fidelity, or ETrade, or Vanguard, or wherever.   3)  Check out one of the do-it-all funds like FFNOX (one of my favs) or FFFFX.

acccckkkk.  i didn't even get to the point of evaluating the advisor's recommended investment.

Quoted: Is it time to kick my "financial advisor" to the curb?

yes.  

he's apparently an idiot.  the fund he selected is 180 degrees opposite from what you are looking for at your age bracket and income level.

that bond investment is so inappropriate for an initial fund i would actually consider making a case with him that he reimburse you for the load you paid.  all that fund is doing is increasing your taxes, and that's about it.  don't get me wrong, it's probably a great fund -- if you are 70 years old and retired, in need of income from your savings, and are in the lowest possible tax bracket.

ar-jedi

Quoted: Quoted: I'm new to this so it took me a little while to understand what you were suggesting. It turns out my "retirement fund" is actually a "variable annuity." It has some pretty hefty fees associated with withdrawal until after 10 years though. A variable annuity? For a young guy?  AAAAAAAAARGH! (Ar-Jedi is gonna puke when he gets here)

no, i'm not going to puke over anything.  our friend KScoltAR is just getting started here; time is on his side, he is willing to learn and educate himself, and he has already caught on to some things that take others 30 years to figure out.  take it slow, we'll get him squared up.

ar-jedi

ps:

Quoted: Is the initial sales charge a one time thing, or is it charged everytime I add money to that fund? Also, assuming it is a one-time charge, I would have been much better off starting with the minimum investment allowed, and then adding the rest of the $25K later, right?

NO -- IT'S CHARGED EVERY TIME, on every dollar you invest!   it's like a leak that you can't fix.  

ar-jedi

Go to     Bobbrinker.com     subscribe to his newsletter and rest peacefully. It will more than pay for itself.  If you cannot beat the indexes and most cannot over 85% of investors...then buy the index from discounters like Vangard...

Quoted: Go to     Bobbrinker.com     subscribe to his newsletter and rest peacefully. It will more than pay for itself.  If you cannot beat the indexes and most cannot over 85% of investors...then buy the index from discounters like Vangard...

Bob Brinker made a couple of good calls (his famouse sell before the internet bubble broke) but he is not a prophet.  And newsletters are expensive.  

Buy a good book like "Coffeehouse investor" or "four pillars of investing", and follow the suggestions there.  Don't fool around with market timing strategies.

Quoted: Buy a good book like "Coffeehouse investor" or "four pillars of investing", and follow the suggestions there.  Don't fool around with market timing strategies.

+1 billion.  i strongly agree with what is stated above.

ar-jedi

Wow, there are a lot of replies since I was last on. Basically, I'm busy studying up to at least learn the basics before I make any more moves. I appreciate all the replies, and it has been very helpful.

It will take me awhile to even fully realize my own mistakes, but hopefully soon I can start making the right moves. I really feel like I was backed into a corner on a lot of the investments that I was told to make in the past. I never felt comfortable, but I didn't know any better.

I look forward to having some intelligent investing discussions with you all in the near future, but until then, I have a lot to learn.

sounds like very little damage was done. dont worry.  at least you have investments.

You didn't make any mistakes, it was the crooked agents who sold you the things that were not in your best interest... and im not talking about the loaded funds... there's nothing wrong w/ a "leak that doesn't stop"  

This small "leak" can be compared to a lake that "leaks" 1 inch a day but it rains 10 inches each day.

Go to "The Mutual Fund Store" website and click on recent shows. You can hear 4 one hour radio programs by Adam Bold. He thinks that people who sell variable annuities are theives.He also says never buy loaded funds. He has a call in radio program and you might be able to get through.He also recommends funds on his site. He runs a "for fee" mutual fund service.
 Check him out and let us know what you think. I'm going to move some of my funds over to him later this year. He requires a 50K investment as a minimum to use his full time service.

Quoted: Go to "The Mutual Fund Store" website and click on recent shows. You can hear 4 one hour radio programs by Adam Bold. He thinks that people who sell variable annuities are theives.He also says never buy loaded funds. He has a call in radio program and you might be able to get through.He also recommends funds on his site. He runs a "for fee" mutual fund service.  Check him out and let us know what you think. I'm going to move some of my funds over to him later this year. He requires a 50K investment as a minimum to use his full time service.

good radio show, but

he does charge, quarterly, a fee from .225% - .375%. of course, on top of expenses of the funds.

so, he is not that much different from the managed/wrap accounts of other houses...

Yea, i just got passed by Mr. Bold in his Ferrari... w/ the license plate that reads "Bold"

Quoted: Dude!  He sold you a high yield (junk bond) fund?   1)  Fire him 2)  Open an account at Fidelity, or ETrade, or Vanguard, or wherever.   3)  Check out one of the do-it-all funds like FFNOX (one of my favs) or FFFFX.

+1

KScoltAR,
how are you making out with the changes suggested above?

ar-jedi

I hope he's threatened to sue the "advisor" for the front-load.

Quoted: KScoltAR, how are you making out with the changes suggested above? ar-jedi

For now, I haven't done anything. October of this year, I'll have another equally large  chunk of cash to invest elsewhere, as well as a good amount from the recent sale of some personal property.

Right now, I'm looking into starting a Vanguard account and which mutual funds I might start with for a well allocated taxable account. I still haven't decided whether or not to cash out my Mainstay account, but I'm tempted to just take a small loss on it and get out on principle alone.

As for money I make in the future, I plan to start a Roth IRA and make the maximum yearly contribution of $4K. Then, I'm working on my boss to get some kind of 401K offering at work. His excuse for not having one thus far is that we have too few employees (18). From what I've seen there are still plans available. So hopefully he finds something before the end of the year, or I'll find another employer. Anyway, I'd like to make the max yearly 401K contribution with my remaining yearly income.

I have about seven years left before I can withdraw from my variable annuity without taking heavy penalties. So I'll worry about that later on.