Integrity Advisory, LLC
As a Financial Advisor at Integrity Advisory, LLC Matt Ahrens is focused on helping business professionals simplify their financial lives and find financial security as they face life's everyday challenges.
Since joining the firm in 2015 as a financial advisor, Matt has overseen the investment management and portfolio construction process for our clients. During this time, he earned the Certified Investment Management Analyst® designation which included an extensive class on portfolio design at the prestigious Wharton School of the University of Pennsylvania. Matt specializes in assisting physicians, small business owners, and young entrepreneurs who often find themselves with little time to manage their own investments.
Matt and his team help their clients track all of their investments in one centralized location and use the information to make sure they can retire when they want to and how they want to.
BS, Accounting, Washburn University
Assets Under Management:
Great question. Despite the great trend in lower, more transparent fees in the 401(k) space, the 403(b) and 457 markets have not kept pace. Many of these plans are expensive, so I would start by asking your administrator for a copy of the annual plan review. This should detail the costs you are paying inside the 457 plan. Often that will include a fee for the record keeper, a fee for an advisor (who you probably never see), and these fees are unfortunately rarely taken to market for new prices. This may or may not be the case for you, but it's worth looking into.
Since you're already fully funding your Roth IRA, however, the only other place to put money is in index funds in a taxable account. If the fees in your 457 plan are reasonable, then I would continue down the route you're already on. You are getting a tax benefit for your pre-tax amount, and you're building up your tax free amount in the post-tax (Roth) bucket. The compounding on those tax benefits will likely be better than opening a taxable account. You can contribute a combined $18,500 (if you're under age 50, $24,500 if you're over) in your pre-tax and Roth buckets of your 457, and in all honesty, the 457 fund lineup should already include index funds. If they don't then you should feel comfortable asking someone about the fund lineup or have an advisor reach out on your behalf.
Good luck to you.
Good question. Given the fees still prevalent in the 403(b) world today, it might be better to roll into an IRA. Many 403(b) plans are set up as Tax Sheltered Annuities or Group Annuities. These often come with some form of surrender schedule, and also higher fees. I would suggest having a financial advisor review a statement or do a joint call with you and your current 403(b) provider prior to making any moves. You will want to make sure there is no penalty from the current provider if you roll the account into an IRA. If you do not have an advisor then consider a fee only financial advisor who is considered a fiduciary, and required to act in your best interest. Please let me know if you have follow-up questions.
Good luck to you, and congratulations on your retirement!
Good question, and there are some great answers on here already. I would also suggest going to www.morningstar.com, type in the ticker in the Quote search bar, bring up the mutual fund, and click on the Expense tab. This tab provides some great information that includes comparing the expense ratio to its peers, but also a couple of other important factors. Check under the sales fees, and see if you have a deferred or redemption cost. Some funds may have a lower internal cost, but charge you to sell positions. Deferred costs go away after a period of time (often 90 days, but could be longer). Redemption fees will likely be charged when you sell the fund. Also look under the Other Fees/Expenses section. There is a line item called 12b-1 Actual, and this refers to fees going back to your advisor. It's a charge you don't see leave your account, but is paid as a commission trail out of your assets regardless.
I like the suggestion from a previous answer, where it was suggested you move the positions to a discount broker like Fidelity, Schwab or TD Ameritrade. They should be able to transfer the positions in kind, which means you wouldn't have to sell the positions and realize the tax liability. Then you can sell positions over time and spread out the impact to you. While we place a great emphasis on fees, it is more important to know whether the objective of the portfolio matches your objective and your risk tolerance. Some active managers can provide good value in helping control portfolio risk, but many U.S. equities are highly efficient already, and you will find limited value in active managers in domestic large cap or domestic mid cap funds. Often you're better in an ETF, but beware some ETFs are expensive as well. Look up their expense ratios in Morningstar as well.
Good luck to you!
Great question, and congrats on doing a great job in saving for retirement. I would continue to at least contribute the 6% to your company's 401(k) to receive the match. The match is free money, and I can't think of a situation where that would not be the right thing to do. After that, you can max out your Roth IRA account. At a recent JP Morgan Conference we discussed this exact topic, so here is the typical priority that I suggest to clients:
- Emergency account (3-6 months of living expenses)
- 401(k) savings to maximize employer match
- Additional payments on higher interest loans (i.e. credit card debt/student loans with interest > 6%)
- Health Savings Account (if eligible)
- Additional 401(k) savings up to the maximum contribution
- Additional payments on lower interest loans (i.e. student loans with interest < 6%)
- IRA contributions (if eligible)
- Taxable accounts
Since you are concerned about high fees in your 401(k) then in step 5 replace that with maxing out your Roth IRA. I think the step most often skipped is #4 with the health savings account, but these really can be beneficial. Hope this was helpful, good luck to you!
Dear Beginner Investor,
I hope that I am following all of your questions, but I think it is best to answer your question by explaining how analysts determine their target stock price. Forget publically traded companies for a second, and consider that you were going to buy a local private company. To determine how much you're willing to pay for that company, you are going to look at top line (gross sales) and bottom line (net profit) growth. Then you will take that expected earnings and multiply it by some factor. If the company is growing really quickly then the top line probably looks great, but the net profit may look a little slim. You want in though, because you believe in the potential and you see how quickly they are growing. As such, you are willing to pay 30 times the net profit. Now you've invested in a growth stock. If the company is not growing really quickly, but they have strong cash flow, and they're willing to pay you a nice dividend check then maybe you're willing to pay 10 times the net profit. Now you've invested in a value stock. The 30 times and 10 times profit is made up in this example, but publically traded stocks have other companies like them so you look and see what multiple other investors are willing to pay for their companies when looking at yours.
Analysts will look at a company's prior compounded annual growth rate to see how successful they have been in increasing revenue. Then they will look at the big picture and see what might influence this market. Is there a new competitor? Is there an expectation that the widgets they are making are going to cost more because of a global shortage of material and that will squeeze their profits?
An analyst will provide a target price below a stock's current market price if they believe the stock will fail to deliver the growth required to justify that high price (i.e. the high multiple investors are willing to pay for profits). So yes it would be fair to say they are bearish on that stock in the short-term, but you will often see analysts continue to adjust target prices as companies continue to grow and expand. If a stock is considered overvalued and you want to buy some shares, then figure out how much you want to invest then invest maybe 1/3 of that amount. Companies that are overvalued have very little to no margin of safety which means you are likely to experience volatility.
You also mention that you are having trouble understanding why a low share price is more profitable than a share selling for a high price. If you are comparing two companies and Company A is selling for $10/share and appears to be profitable, but Company B is selling for $50/share and doesn't appear to be profitable then you are making a comparison you shouldn't. Company A may be selling for $10/share but has 500 million shares outstanding which means they have a market cap (outstanding shares multiplied by price per share) of $5 billion. Company B may be selling for $100/share but have 10 million shares outstanding which means they have a market cap of $1 billion. Company A is five times as valuable as Company B even though their share prices are flipped.
Hopefully that helps you!