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Posted by Joe on September 22, 2007, 9:51 am
just discovered that vanguard offers an "other fund families" category and
I'd like to invest in some of the inverse funds, such as bear market and
falling dollar, ie. Profunds FDPIX
apart from the 1.50% cost, most are no-load
for a small roth IRA account, is there something else to be aware of doing
it this way? would it be better to actually open a roth IRA with the fund
owner (ie. Profunds) rather that "doing it via vanguard"?
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Posted by joetaxpayer on September 22, 2007, 10:29 am
Joe wrote:
> just discovered that vanguard offers an "other fund families" category and
> I'd like to invest in some of the inverse funds, such as bear market and
> falling dollar, ie. Profunds FDPIX
>
> apart from the 1.50% cost, most are no-load
>
> for a small roth IRA account, is there something else to be aware of doing
> it this way? would it be better to actually open a roth IRA with the fund
> owner (ie. Profunds) rather that "doing it via vanguard"?
I would suggest doing everything different than you plan.
If you are with Vanguard, you should use them for what they excel, their
low cost index funds.
If you really want a fund they don't offer as no-fee no-load, consider a
low cost broker, who will offers as a regular no-fee purchase.
If you truly believe (I can't comment) the dollar will fall, your best
bet is to buy a good overseas fund. You'll get the return of the market,
and benefit from the dollar fall.
A Roth IRA is no place for a bear market fund which would be part of a
market timing approach, which few, if any, here, would recommend.
If you are just getting started, and this small Roth is all you have, an
S&P index or total market fund is a purchase that 10 years from now will
beat what most investors see for a return. (if the market rises 8%/yr,
most investors will see about 3-4, due to bad timing. I can post a
reference to the study that makes this conclusion)
JoeTaxpayer
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Posted by Andrew Koenig on September 22, 2007, 11:07 am
>> just discovered that vanguard offers an "other fund families" category
>> and I'd like to invest in some of the inverse funds, such as bear market
>> and falling dollar, ie. Profunds FDPIX
>> apart from the 1.50% cost, most are no-load
>> for a small roth IRA account, is there something else to be aware of
>> doing it this way? would it be better to actually open a roth IRA with
>> the fund owner (ie. Profunds) rather that "doing it via vanguard"?
> I would suggest doing everything different than you plan.
> If you are with Vanguard, you should use them for what they excel, their
> low cost index funds.
> If you really want a fund they don't offer as no-fee no-load, consider a
> low cost broker, who will offers as a regular no-fee purchase.
I don't understand this remark.
If you already have a Vanguard brokerage account, and you want to invest in
FDPIX, I don't see much of a downside in doing so through Vanguard. The
only cost is that you must hold your shares for six months or more;
otherwise Vanguard will charge you 1% when you sell (with a minimum of $50
and maximum of $250).
The 1.50% mentioned earlier is the fund's expense ratio, which is presumably
the same no matter how you buy the fund.
So, assuming that:
You have decided that you want to buy FDPIX, and
You already have a Vanguard brokerage account, and
You intend to keep your shares of FDPIX for at least six months,
then I don't see any reason not to buy it through Vanguard.
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Posted by joetaxpayer on September 22, 2007, 12:35 pm
Andrew Koenig wrote:
>>If you really want a fund they don't offer as no-fee no-load, consider a
>>low cost broker, who will offers as a regular no-fee purchase.
>
>
> I don't understand this remark.
> The 1.50% mentioned earlier is the fund's expense ratio, which is presumably
> the same no matter how you buy the fund.
>
I misread regarding cost. This is offered NTF (no transaction fee) thru
Vanguard. But 1.5%? Ouch.
My other remarks regarding the use of such a fund still apply, although
as happens with most new posters, we know nothing about him. I have yet
to see anyone suggest a falling dollar fund as appropriate for any
particular asset allocation.
JOE
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Posted by Beliavsky on September 24, 2007, 5:55 pm
> Andrew Koenig wrote:
> >>If you really want a fund they don't offer as no-fee no-load, consider a
> >>low cost broker, who will offers as a regular no-fee purchase.
>
> > I don't understand this remark.
> > The 1.50% mentioned earlier is the fund's expense ratio, which is presumably
> > the same no matter how you buy the fund.
>
> I misread regarding cost. This is offered NTF (no transaction fee) thru
> Vanguard. But 1.5%? Ouch.
> My other remarks regarding the use of such a fund still apply, although
> as happens with most new posters, we know nothing about him. I have yet
> to see anyone suggest a falling dollar fund as appropriate for any
> particular asset allocation.
> JOE
I suggested this in a message here in 2002 -- you can Google
"beliavsky viceira currency" to read the discussion. Here is the
abstract of the paper I mentioned.
Foreign currency for long-term investors
Authors: Campbell J.Y.; Viceira L.M.; White J.S.
Source: The Economic Journal, Volume 113, Number 486, March 2003 , pp.
C1-C25(1)
Publisher: Blackwell Publishing
Abstract:
Conventional wisdom holds that conservative investors should avoid
exposure to foreign currency risk. Even if they hold foreign equities,
they should hedge the currency exposure of these positions and hold
only domestic Treasury bills. This paper argues that the conventional
wisdom may be wrong for long-term investors. Domestic bills are risky
for long-term investors, because real interest rates vary over time
and bills must be rolled over at uncertain future interest rates. This
risk can be hedged by holding foreign currency if the domestic
currency tends to depreciate when the domestic real interest rate
falls. Empirically this effect is important.
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