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Bogleheads on Investing with Rob Berger – Episode 48

Post on: July 26, 2022 by Rick Ferri

For our 48th Episode of Bogleheads on Investing Podcast, host Rick Ferri interviews Rob Berger, an investment technology guru. A  litigation attorney in a previous life, Rob started Doughroller.net in 2007, an online community for people to improve their finances and build wealth. The site received tens of millions of visitors. Rob sold the website in 2018 and became a Forbes Deputy Editor, published a book, Retire Before Mom and Dad, and now runs the Financial Freedom Show (YouTube), RobBerger.com, and Allcards.com, a website about credit cards and banking.

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Rick Ferri: Welcome to Bogleheads on Investing episode number 48. Today our special guest is Rob Berger. Robert was a litigating attorney before changing careers and following his passion by providing free online investment tools and a broad range of financial education.

Hi everyone, my name is Rick Ferri and I'm the host of Bogleheads on Investing. This episode, as with all episodes, is brought to you by the John C. Bogle Center for Financial Literacy, a 501c3 nonprofit organization dedicated to helping people make better financial decisions. Visit our newly designed website and find valuable information,and to make a tax-deductible contribution. 

And don't forget about our Bogleheads conference coming up this October 12th through the 14th featuring many speakers that I’ve had on this podcast, and more.There are a few seats remaining. You don't want to miss out. Visit boglecenter.net for more information.

Today our special guest is Rob Berger. Rob was a litigating attorney in a previous life. He received his JD from Boston University in 1992 and worked as a litigator in the securities industry and the technology industry. In 2007 he started a website called Doughroller.net which received tens of millions of visitors. After selling that website in 2018 he became a Forbes deputy editor, and he published a book called Retire Before Mom and Dad. Rob is now the host of The Financial Freedom Show. He publishes in-depth detailed reports on all of the free technology and low-cost technology that's out there to investors on his website RobBerger.com, and he has also started the website for credit cards and banking called Allcards.com.

With no further ado let me introduce Rob Berger. Welcome to Bogleheads on Investing Podcasts, Rob.

Rob Berger: Rick, thanks so much for having me.

Rick Ferri: It's really great to have you on the podcast. You and I have known each other for many years, and I know that you've interviewed me a few times, and now it's my chance to interview you. But I've just always been amazed at all of the information that you put out and have been putting it out for 15 years, a long time. Before we get started on where people can find that information and what you've done, could you give us a little background on who you are. How did you decide to get into this line of work because it's not what you always did.

Rob Berger: So I was a lawyer in Washington D.C., and at the time I started my first personal finance site, I was actually an enforcement attorney at the Public Company Accounting Oversight Board  [PCAOB] which regulates the auditors of publicly traded companies. I've been investing for twenty years and I was very interested in really all aspects of personal finance and I said to my wife one day, ”You know I'm kind of bored with the practice of law. What should I do?” She goes, “Well, get a hobby.” Out of that came a personal finance blog that at the time was just sort of a hobby. I enjoyed thinking about these issues, writing about them, and over a number of years it turned into a business. I ended up retiring from the practice of law, and I did some work at Forbes and I published a book, Retire Before Mom and Dad, and I ended up selling my original sites. And I've started new ones, and a YouTube channel, and now I'm talking to you.

Rick Ferri: So you're a lawyer. You're a litigator. You started the website, and the name of the website was DoughRoller, did that for 11 years, and then you also became a Forbes deputy editor.

Rob Berger: Yeah. So it kind of happened. You know how life sometimes opens doors that you're not expecting. So I had sold DoughRoller. I sold DoughRoller and the DoughRoller Money Podcast and a couple of other sites in 2018. And literally just a few days after that I went up to New York. I'd been a contributor at Forbes--actually by the way, thanks to you, you introduced me to Janet Novak.

Rick Ferri: Oh, okay thank you.

Rob Berger: Alright so really this is all your fault. Okay, so we were up on Forbes Fifth Avenue location in New York and it was for contributors. And I just talked to Janet afterward, and I said, “Yeah, by the way I sold DoughRoller.”  And the next day she calls me and says, “We want to start something called Forbes Advisor, will you be the managing editor?” And at the time I thought “I'm retired. I don't know what I'm going to do.” But I had no plans to keep working and it just seemed like a fun thing to do. So I was the managing editor. My plan was to do it for a year, get it up and running and turn it over to someone else. I ended up doing it for two years and turning it over to some folks who I think are just fantastic.

Rick Ferri: Well that's great. That's a great story. I'm glad I could help out. I didn't realize that you became a deputy editor at Forbes. Now you have a website called RobBerger.com, and you also have a Financial Freedom Show on YouTube and you have another website called Allcards.com, and that website is about credit cards. You must be working 80 hours a week.

Rob Berger: Well it's not quite that bad. Sometimes it feels like it. So they're each sort of their own little thing. So my idea with Allcards--and I have a couple of people that help me with that site--I want to come up with sort of a database of credit cards and bank accounts, primarily, that folks can go to and they can see everything that's available, rather than just a select few that you get from most credit card or banking sites. You can basically see just about everything, and that's taking some time but, fortunately, I've got a lot of help. And it and in some ways it's just been kind of a thing that I do that's kind of fun because it involves some programming. Nothing sophisticated for sure.

But the YouTube channel is probably where my heart is right now. And the truth is I come up with a topic, I hit record. I record the video if it's not a live show, and I publish it. There's no editing. It's--I can have a video done and published in an hour. I might do some research depending on what the topic is, ahead of time. I've had some great folks on. I had Bill Bengen earlier this week, who's the father of the four percent rule. That was a fascinating conversation. I had--I don't know if you know Harold Evensky--but he's sort of the father of the bucket strategy which Christine Benz talks a lot about at Morningstar. I had him on Wednesday. That was a fascinating conversation.

Rick Ferri: By the way. It was a really interesting video with Harold, and I'll get to it in a minute, but you're also a competitive chess player, so I want to hear about that.

Rob Berger: Yeah it turns out I'm not a very good competitor. Yeah I've played chess since college. And in my less lucid moments I think I could become a master, which would be a rating of 2200. I was just over 2000 and then my rating has taken a nosedive, which by the way, happens by and large when you get to our age. I think. In fact I was in Philly over the Fourth of July playing in the World Open, getting beat by eight and nine-year-olds.

You can't see them behind me but I've got chess books, chess software databases. I'm like the golfer who has all these gadgets to try to improve their swing but still shoots a 115. That's me and chess pretty much.

Rick Ferri: You know I'm curious about what you just said though, this cognitive decline after a certain age. Is there some chess data statistically where the average chess player as they age this number declines. Is that out there somewhere?

Rob Berger: I couldn't point you to a study although I suspect they're out there. But I can tell you certainly at the world championship level it's a young person's game. At some point Gary Kasparov got to an age where he couldn't keep up. I mean obviously even today he's, it's like Michael Jordan. I'm going to guess he's still a pretty good basketball player, right, but probably not going to play in the NBA again. Gary is obviously a phenomenal chess player, but as you age it's hard to keep up with the younger players. Magnus Carlsen is the world champion now, still the best in the world, but there are several players that are probably going to catch him, when who knows. In my case, obviously I don't play it anything like that of course. I don't know that it's a cognitive decline. At least maybe I just try to convince myself.

Rick Ferri: Okay, well that's my point. See this is exactly what I'm getting at because of just what you said. Okay, in fact it is the cognitive decline, but we don't want to admit it. And I see it in myself. I've been trying to write a book for three years, same book right? Now I've written a lot of books, right?  I used to be able to bang out a book it seems like every six months--boom, boom, boom--but here I am in my 60s and I'm trying to write this book, and it's not a very complicated book, but I'm really struggling. And I can't tell whether or not I'm just trying to do a really really good job or if I’m having some sort of a cognitive decline issue. Of course I'd like to think that it's because I'm really trying to do a great job and really trying to be very clear in everything I say and maybe that is the case. And I think this is an issue with people who are, let's say in their 60s, which I am in my 60s, now my mid 60s, and we don't recognize cognitive decline for what it is.

And it's just interesting that you were talking about chess and talking about this, because when it comes to your investment portfolio and investing there's a lot of things that can help you with cognitive decline. And one of them is keeping a portfolio very simple. And this gets me to circle back to your Harold Evensky discussion because I'm sitting there watching that video and you said to yourself, gee the bucket strategy, I used to have a three bucket strategy, but realize that was actually overly complicated, and now I'm going to more along the Harold Evensky view of just a two bucket strategy. So do you recall that conversation you had with Harold?

Rob Berger: Oh sure. Absolutely.

Rick Ferri: What I see there is simplicity. In other words, for older investors, the simpler you can make things, the simpler you can make portfolios the better it is.

Rob Berger: When I first retired, right before I went to Forbes, and I thought I'm going to be living off my investments, the three bucket strategy really appealed to me. Maybe it's a little more complicated than two, but it's like how much more complicated can one one extra bucket be, right.

But when you actually start to sit down and figure out, okay wait a minute, when am I going to  move stocks from my bucket three to fixed income and bucket two. I think the three bucket approach just does--at least it doesn't work for me--because I want to allocate my investments based on percentages, not based on years of expenses, which is effectively what the bucket strategy does.

In a two bucket strategy scenario, like Harold described in the interview, yeah the cash bucket is based on years of expenses, but it's a very small component – it may be just one year of cash, for example – and the rest is just your basic whatever 70/30, 60/40, whatever works for you. So yeah it is simpler, the two bucket strategy. But I’m still not convinced that frankly a three bucket strategy works for most people because it changes the way you do your asset allocation and I think that can lead to some problems, particularly depending on your withdrawal strategy.

Rick Ferri: Yeah. Initially the bucket approach was what was called the Tobin Separation Rule, right. Tobin was a Nobel laureate and he basically said you have your risky assets, you have your non-risky assets. I mean the two buckets, and they didn't call it the bucket strategy back then, but that's what it was. And so your risky assets generally were equity, but can be a balanced portfolio of stocks and bonds. And the difference between the three bucket approach and the two bucket approach, I think, is that allocation to stocks and bonds and the two bucket approach is constant, it doesn't change, and the only thing that changes is moving money from that riskier longer term bucket over to the cash bucket that you would need to live off of.

But it was funny that you said something. You said, “Gee you know, I really am in line with a lot of the things that you were telling me.” This is what you said to Harold. He said, ”I don't want people to think that I'm stealing your ideas.” But  here was my comment about that, because again, you and I have been in this business a long time. Harold's been in the business a long time. Of course, Jack Bogle was in the business for how many years, long, long, longer than us. Probably twice as long as us. But as you get older, or as you get more experienced you become simpler in the way you think about things. And being simpler becomes much more helpful. So it wasn't like you were copying Harold or that I was copying Harold or that any of us were copying Jack Bogle. I think that what happens is that as we get older and more experienced, and whether with or without cognitive decline, it doesn't matter we just gravitate towards things that are simpler.

Rob Berger: Well it absolutely describes my investing story. When I first started truly understanding index funds and asset allocation--of course your book, All About Asset Allocation, I think is one of the best out there.

Rick Ferri:  I didn't pay you for that by the way I just wanted- but thank you for that, still I appreciate it.

Rob Berger: That was unsolicited, yeah an unsolicited endorsement. Back in the day, I can remember just being so upset that Vanguard didn't offer all of the really cool index funds that DFA offered and that to get Dimensional funds. And by the way, one of the founders, Sinquefield, is a big supporter of chess, I don't know if you know that connection, in any event…

Rick Ferri: No, I did not.

Rob Berger: Oh yeah. He's funded the chess club in St.Louis and the Hall of Fame and he has a Sinquefield Cup every year, big time.

But I remember being so upset because I wasn't going to pay an advisor to get access to these funds. Now they have some ETFs today and I’m trying to figure out how can I get these cool funds with different factors, international, small cap value and all these things. And today, fast forward 25 years or whatever, it's the last thing I would do. And it's not because there's necessarily anything wrong with doing that. It's just that I don't need the aggravation, right. And there's no way to know if it's going to improve your returns or your volatility. I mean maybe make some educated guesses, we all can.

But yeah, so I've absolutely moved from more complexity to less. And that's true even recently, I've been thinking, do I really need an emerging market fund? Do I really need a REIT fund? I mean, again, good arguments to keep them, to have them, certainly wouldn't talk anyone out of having a separate REIT fund, but boy it simplifies the portfolio when you don't have all those things. And the other thing, Rick, that could be part of it, there's aging, right. Make you kind of wonder how that influences this.

But the other thing is when you're starting out, maybe you've got a 401k, maybe you've got an IRA. Well today it feels like my wife and I have 47 different accounts, right. It's not that many but we've each got a rollover. We've each got a Roth. I've got an inherited. We've got two HSAs. We've got two taxable accounts. That's a whole other story. It's almost like playing three-dimensional chess. So when you're trying to balance all of that, having a simpler portfolio I think helps a lot.

Rick Ferri: I really like that analogy with three-dimensional chess. Not only do you have a lot of individual investments in each of these individual accounts, because each of the accounts have to have investments. You've got all these different accounts because of taxes. You can't combine your Roth with your wife's Roth. And you can't combine an inherited IRA with the traditional IRA. I mean so you've got all these different accounts. But usually if you have HSAs and 401ks, they even have different custodians. so you talk about three different levels, right. You have custodians, you have accounts, you have individual investments. I mean it really is complex.

It's complex enough where gee I want to make it as simple as I can wherever I can combine custodians, and get rid of some that I don't need. Combine accounts if I can. Roll a traditional IRA into a 401k that I might still be using. Then that's what I can do. And within the investment side, try to have fewer and fewer investments. To me, I mean I think the three-dimensional chess is a really good analogy for let's make it as one-dimensional as we can.

But it's impossible. I mean you can't, and I think that some of the tax regulations cause you to not be able to do that. And we'll get to more of this in a minute, and how to organize portfolios, when we start talking about all the tools and all of the work you've done to look at all these different tools and calculators that are on the internet--some for free, some with a little bit of cost-- and where you can find all this information on your website and other places.

But before we do that, you wrote a book, and the book was called Retire Before Mom and Dad: The Simple Numbers Between a Lifetime and Financial Freedom. Thank you for sending me a copy. I read it. I thought it was very good.  Tell me about the book. What motivated you to write it and what is it about?

Rob Berger: So it started out--actually my original plan was to focus entirely on compounding--I was going to call it Money Math--and someone pointed out that most people don't like math. That's true. And then I thought, you know I really want young people to read it before they wake up and find themselves in their 40s and 50s and having not set aside money. And so I called it Retire Before Mom and Dad, and it kind of does take, I suppose, a young person's perspective.

Although it's not really about early retirement. Although it certainly walks through the math. It's really about all the things you and I talk about. Spending less than you make, investing the difference in a very simplified low-cost index fund portfolio, and then get getting out of the way and letting it do its thing. And I go through some practical examples. I challenge--talk about thinking about your spending, what brings you happiness, how to test through life experiments what you think brings you happiness. Which I've had on different occasions an opportunity to do. And so that's basically the book in a nutshell.

Rick Ferri: And I thought the title, by the way, is what caught my eye. So you were right in changing the title. Retire Before Mom and Dad, when I saw that I said that's a good title. It's catchy. It's better than investment math, money math. So anyway, the name of the book is Retired Before Mom and Dad: The Simple Numbers Behind a Lifetime of Financial Freedom.

Okay let's get into the nuts and bolts of why I really wanted you on. First of all, thank you by the way for participating in the Bogleheads conference which is coming up this October. You're going to be one of our presenters. You're going to be on a panel, and I appreciate you coming to the conference and telling everyone about all the great things that you've done. And a lot of your knowledge and helping to spread your knowledge among the bogleheads.

The big draw is all of the financial tool reviews that you have on RobBerger.com. I mean literally, it is a treasure chest of information:  reviews on all of these different software programs, robo advisors, on and on and on, all the different categories. I mean you have spent an inordinate amount of time looking at all this.

And also I know that you've looked at the Bogleheads wiki and the tools and calculators on the Bogleheads wiki. So first of all could you tell me about your obsession with tools and calculators and  then we'll talk about some.

Rob Berger: Let me first say in terms of the Boglehead site and the wiki. I don't think there's anything better. I mean in terms of just the information. It's phenomenal, the amount of work they've put into that is just extraordinary.  And I find myself going back to it time and again. I was, in fact, just looking at it the other day in terms of withdrawal strategies.

So in terms of tools, I’m kind of a tool junkie. I just find the technology fascinating. Before I was a lawyer in the securities field, I litigated technology related cases for about 10 or 15 years, and I just find it fascinating. And there's plenty more that I want to put on my site. I mean in many ways, I've got far more work ahead of me, and I want to go beyond tools too. I want to have a lot of detail on withdrawal strategies. Frankly a lot of detail on the different lazy portfolios because as much as I'd like to tell folks well just just do the Three Fund and you're done, I know that some people just want some spice, I guess, in their portfolio–

Rick Ferri: Icing on the cake.

Rob Berger: Yeah. In terms of the tools, I in fact  was just reworking a page on my site where I basically listed the tools that I tend to use on a regular basis. Happy to talk about them. You mentioned robo advisors. I certainly have some strong opinions about which ones I like. But I also cover things like retirement planning tools, calculators, just sort of investing tools. Like how do you know what your asset allocation is? How do you know not just what your investment fees are but what effect they'll have on your portfolio over time?

Rick Ferri: Well let's start with the first group. Let's start with the retirement planning calculators, because then that folds into asset allocation and then we could talk about robo advisors. So let's start with retirement planning tools. What's available out there, what's free, what's low cost, start with those.

Rob Berger: Okay. So in terms of retirement planning that's free, one would be Personal Capital which we'll probably talk about in a couple different contexts. So people have to understand what Personal Capital is. So Personal Capital is a registered investment advisor. So their business is getting – managing your assets for percent of AUM [Assets Under Management]. Frankly as a marketing tool they've built a pretty nice financial tool that's free.

Rick Ferri: You don't have to be a client to use it?

Rob Berger: No, I've used it since they launched it, and I'm not a client. Basically you connect all of your accounts, or not just investment accounts, but you can connect bank accounts, all your debt, if you have debt. You can actually connect the value of your home. They look up the price via Zillow for you.

And it kind of does a little of everything. It shows your net worth. You can use it as a budget, spending tracker- it'll automatically categorize most of your spending. Some of it it doesn't know the category for, but does a pretty good job. They have, I think, a pretty decent retirement planner. Based on the accounts you've connected, you can make certain assumptions, of course when you're going to retire, your assumptions about how long you're going to live, inflation assumptions. And if you're married you can factor that in. You can factor in expenses and income in retirement. So maybe you're going to take a trip around the world. You can put that in with a date.

In terms of a free retirement planning tool, particularly if you're still in the accumulation phase, you haven't actually retired  and you're just wanting to get a bird's-eye view of how you're doing, I think it's a pretty good tool.

But there's another one I like a lot that's free. But it's got a very specific purpose. It's called FI Calc, so f-i-c-a-l-c dot app, that's the website. Okay, and what it allows you to do is put in how long your retirement is going to be, how much you have, how much you're going to spend, what your asset allocation is--it's very simple, basically stocks, bonds and cash--and then you can select from, oh I don't know, maybe about a dozen withdrawal strategies. And then using historical data going back to 1926, which is effectively what Bill Bengen did in his ‘94 paper that gave us the four percent rule, it will crunch the numbers and tell you your chances of success. Success being not running out of money, right.

But the thing that I really like about this tool is that it will show you for all of the years. So starting in 1926 would you run out of money or not. But it'll also show you those 30-year scenarios, if that's how long you've put in for your planned retirement, where you didn't run out of money but you almost ran out of money. Because I think that's as important as just quote-unquote “success”.  I'm not sure I’d call success on the day, on year 30, dying with zero dollars. Because that would have been a hard last year. And so it will show you those periods where, yeah, you didn't run out of money but boy you were close.

And you can actually click on each year and it'll give you details about how that retirement would have looked had you, for example, with the assumptions you put in, and the withdrawal strategy you've chosen and retired in whatever, 1968 or whatever year you want. How that would have worked out. And by the way in the different withdrawal strategies they include the Vanguard dynamics spending strategy.

Rick Ferri: Well before we go on, could you explain what dynamic spending is?

Rob Berger: Yeah. So if you think about the four percent rule, the way Bill Bengen tested it was you start with a certain percentage of your portfolio in year one. Let's just assume four percent. And then every year thereafter, the four percent is irrelevant, you just adjust the previous year's distribution by the rate of inflation. So that would be considered a static spending rule. Static on an after inflation basis because you're effectively spending the same amount of money on an after inflation basis throughout retirement.

Basically just about every other spending strategy is dynamic, right. Again dynamic meaning the amounts changing on an after inflation basis. And one extreme would be a fixed percentage. So you're just going to take out five percent every year and that's dynamic because, well, think of it this year. The market's down 20%. Let's say it ends the year that way. If you take your five percent this year it's going to be a lot lower than the five percent you took last year. So that would be sort of an extreme case.

And frankly the static approach that Bill Bengen took, I personally view as an extreme approach to retirement spending as well. They're just sort of on opposite ends of the spectrum.

Rick Ferri: The four percent rule or any percentage, I've always had an issue with that because my expenses are going up with inflation and if my four percent is less than my expenses that doesn't work. I still have to take the money out and pay my expenses.

Rob Berger: Again, the four percent only only applies to the first year, right.

Rick Ferri: Okay. That's what I wanted to get across.

Rob Berger: Yeah, and then you adjust for inflation. By the way he believes with a somewhat more complicated portfolio, by the way, small cap, mid cap even micro cap, it's 4.7%.

Rick Ferri: Yeah, well good luck with that.

Rob Berger: Well look, I’m just reporting what I've read…

Rick Ferri: Fair enough. Okay so we've got two, now two different programs, and is there a third one that you might like for retirement planning?

Rob Berger: The most robust tool for consumers would be New Retirement.

Rick Ferri:  Okay from a planner perspective they're going to use Money Guide Pro or e-Money Advisor. And I've worked with both of those tools but those are generally not available to consumers unless they have a planner that they're working with.

Rob Berger: New Retirement is, I think, comparable to both of those tools. And it's a very robust tool. It's not the kind of thing where you can just spend five minutes with it and have results because it walks through pretty much everything that would be relevant to spending during retirement. So it's going to walk through long-term care insurance, it's going to walk through Social Security questions, it's going to walk through Medicare and estimate your Medicare premiums and medical costs. You're going to enter your accounts, your investment accounts, and you can link them and have that data pulled in automatically or you can manually put them in if you're more comfortable with that, which is what I do.

But you're going to set both pessimistic and optimistic return assumptions for every single account, which is useful if, like me, you really take advantage of asset location. So because my traditional retirement accounts, I don't expect the returns to be as high as my Roth and taxable accounts because of what I have invested in them. And so you can make those assumptions separate on an account level. You can walk through, if you expect to get an inheritance at some point, you can model that. Maybe you have passive income or some other sort of side income in retirement.

So you can model all of these things. You can even model Roth conversions. And once you get done inputting all of this information it gives you really a lot of both charts and tables showing you here's your chances of success, again success defined as not running out of money. And they use Monte Carlo analysis, but it gives you a wealth of information. It'll show you your tax brackets all the way through life expectancy, including when your RMDs [Required Minimum Distributions] kick in. It'll show you your state income tax.

You can model, maybe you move. Maybe you live in California when you're working and you're going to move to Texas or Tennessee for the taxes when you retire. You can model that, including you can set separate inflation rates for real estate, and model  that home you're going to buy 15 years from now. And it'll change the tax implications, depending on where you're going to move from and to.

So it really is I mean a feature-rich tool. It is not free though, but I think the cost in my view is really reasonable. So they have three different tiers. The lowest which gives you access to the tool is $120 a year. So you can go up from there. They actually have started offering planning with a certified financial planner if you want.

Rick Ferri: Is that extra obviously?

Rob Berger: That starts at $1500 a year. But you can also do what they call Planner Plus Live--I feel like I'm a salesperson--I can also do Planner Plus Live, which is $360 and you get one-on-one coaching. For me, I just use the tool, but for others the coaching for a year might help. But for me it's probably the most comprehensive retirement planning. It's really designed for when you're getting, I think, closer to retirement. It's not the only one out there. There are some other interesting ones, but New Retirement is probably my favorite.

Rick Ferri: The technology for do-it-yourself investors on the retirement planning side has really come a long way. Like you were saying most of the technology used to be Money Guide Pro or e-Money and that's for people in the industry. But with these new companies coming along, the ability to do it yourself for do-it-yourself investors for a very nominal fee is really exciting, I think.

Rob Berger: And I will say it's a hard market. I mean I think selling to advisors, planners is much easier, if it's competitive of course. But how many people really want to dive into a tool like this? I mean those that do are probably all listening to your podcast, Rick.

Rick Ferri: I'm not sure.

Rob Berger: But you randomly ask a person on the street who's say within five years of retirement. Hey, you want to go to a coffee shop and spend three hours looking at retirement projections. Probably not going to get a lot of yeses.

Rick Ferri: But you know what, maybe employers at some point would incorporate this as in their HR departments.

Rob Berger: That's already happening. I can tell you that's already happening.

Rick Ferri: Oh that's great. Let's get into something that is an important part of retirement planning and financial planning, and that's investment software, asset allocation software, portfolio management software. So this is a part of it, you've got to get a certain rate of return, or you're looking for a certain rate of return on your money. So let's talk about the tools that are available out there for doing investing, the free ones, and then things that might cost a little bit.

Rob Berger: I think most of these are free that come to mind. Well I'll go back to Personal Capital because they have a very slick asset allocation feature that's got graphical elements to it where it shows you particularly on the US side--I'm not sure the international side is as robust as I recall--but it shows you your basically different asset classes in boxes. and then in table form. And you can click on a box and it drills in and it'll show you for your large cap value, here are the funds, and how much, what percentage each fund contributes to that asset class. And you can draw all the way down. It'll show you sectors.

And the other thing I like about it is they have a fee analyzer where of course it pulls in--it knows the fees of your funds-- and that's pulled in automatically. If you have an advisor that's charging an AUM  fee, you can model, you can include that. 

You can also make assumptions, if you're still working, what your contributions are and what - if there's an employer match, you can actually model that. And the thing I like about it, then it shows you how these fees will affect your wealth up until you retire.You put that date in the tool.

That to me is probably---when I'm talking to folks that don't appreciate the impact of fees, and you know it's hard to say well one percent, what's that you know--but when you show them well this is the impact over the next 25 years, they wake up, that gets their attention. So I really like that tool. So that that would be one.

Rick Ferri: Anything else? 

Rob Berger: Morningstar is kind of interesting right now. So I think in terms of just quickly understanding a fund, to me Morningstar  is probably the best thing out there. It's really good.

Rick Ferri: Is there a cost to the level that you're talking at right now?

Rob Berger: No. So if you just want to evaluate a fund, you can put the ticker in Morningstar.It'll give you the style box, right. So it'll show you is it small cap, large cap, value, growth. All of the the valuation metrics, P/E, price to book, price to sales. Of course it'll give you its expense ratio. It’ll show you, I think they show for free the top 30 holdings, right.

They have always had a portfolio tracker. At one point it was free. You had access to the X-ray analysis and other things with the paid version. They're moving over to a new system, it's actually investor.morningstar.com-- and they upped their game in terms of the user interface. Because the old version was like the 1990s, and it wanted its website back. I mean it was really outdated.

The new one is much better but I still think it's a work in progress. They're still trying to work out the kinks and figure it all out. You get a wealth of data but at some point it look it looks like a lot of the features now are behind-- you have to pay you, but still, I mean an overall good tool.

Another one I like is Portfolio Visualizer. I don't know if you're familiar with that tool, but you can put in-- it's not really to track your investments--but you can put in a portfolio, either based on asset classes or specific tickers, and it will show you the historical returns of that portfolio. You can compare multiple portfolios. It'll show you rolling averages, say five, ten-year rolling average returns. It'll show you standard deviation, of course the compound annual growth rate. And they have some pre-programmed portfolios, like they have the Bogleheads Three Fund Portfolio where you just click a button and it fills in Vanguard funds and percentages.

And they also have one guy named Rick Ferri, I don't know if you've seen it, but your Four Fund, your Core Four Portfolio is in.

Rick Ferri: Well, I actually use it on that Core4 website.

Rob Berger: Another part of the tool is they have a Monte Carlo simulator. It's not unlike FICalc, but you can put a specific portfolio in there and model the drawdown. So you could put in  a million dollar portfolio or whatever, assume let's say a $45,000 initial withdrawal, adjust it for inflation every year, but put your specific portfolio in there and it will model how that has done. And you can actually change a number of the different statistical assumptions, but for example, it can use historical data. And so I find that tool to be extremely helpful.

Rick Ferri: Okay. Anything else out there for portfolio management and asset allocation?

Rob Berger: I will mention one other tool, in large part because I’m so frustrated that like all of the other brokers don't offer this. I've used M1 Finance a bit. I don't have an account there now. But you can create a portfolio, a very simple low-cost index fund portfolio and invest your money through M1 Finance. And then when it comes time to rebalance--first of all, when you can make new contributions, they will automatically put it into the various funds to try to bring you back to whatever your planned allocation is. And you can also just click a button and they will automatically rebalance for you. Now I probably wouldn't do that in a taxable account, or not without understanding the consequences. But within a retirement account, boy that's pretty nifty.

And I am waiting for, I don't know, Vanguard, Fidelity, Schwab. It doesn't seem like it would be that complicated, and investment advisors have rebalancing tools, but as far as I know M1 Finance is the only one that's actually made it available. Well, other than robo advisors that do it for you.

Rick Ferri: Let's talk about robo advisors for a bit, and then the last thing I want to talk about are all the tools on the Bogleheads wiki Calculators and Tools. So let's talk about all the work that you've done on evaluating robo advisors. If someone decided they wanted to have another company manage their portfolio and do the rebalancing, could you go through your list of top three robos?

Rob Berger: Yeah. And just for a sort of perspective, I've used Wealthfront, I've used Betterment and I've used Vanguard's Digital Advisory Services. And then I spent a lot of time studying Schwab’s and SoFi’s and others. My personal favorite today is Betterment and I use it. We invest our credit card rewards. So we get cash back, or whatever – I don't spend it, we invest it. Part of that is to show people how small amounts of money invested over time  can grow significantly.

And it also allows me--I move it from time to time just to test out different platforms--at the moment it wasn't in M1 Finance--at the moment it's at Betterment, and I just really like Betterment. I mean it's got great tax loss harvesting tools, which – I don't view tax loss harvesting as some massive addition to a portfolio. I think in some cases it could be. But it’s there. They have an asset location tool, if you have your retirement accounts there.

I think they've got some great core portfolios. And some other things I don't care for, but their core portfolio, I think, is good. And you can actually create your own. You're limited in the ETFs you can use, but for a Boglehead they've got everything we could want.

Rick Ferri: Speak a little bit more about the asset location tool. That interests me. How do they do that?

Rob Berger: They have an automated feature that when they're setting up your accounts they'll do an asset location analysis and divide your investments based on an account type. I've read about it. Like I said, I haven't used it so I can't speak from experience, but it seems like the kind of thing that technology should be able to do for us pretty easily. And I still kind of marvel that it's not more widely available. But maybe it's available with other advisors. Betterment's the only one at least that I know of.

Rick Ferri: Wealthfront was recently sold, correct? And you had money with them. And how do you feel about Wealthfront and the fact that now they're owned by UBS.

Rob Berger: Yeah. I liked Wealthfront. I mean I think it's a solid robo advisor. It would probably be my top three if I were going to come up with three. One could wonder what the sale, how that will affect it going forward, and I guess there's no way to really know. Maybe it'll have no effect, maybe they'll invest more money in it. I don't know.

All of these robo advisors, they're trying to survive, right. And so I do see them going in directions that I personally-- maybe getting into crypto or getting into the smart beta kind of thing as examples. Or really pushing direct indexing as Fidelity and Schwab are both doing that now – and I'm just not convinced that these are things that for most people are worthwhile. And in direct indexing, which you typically want to do in a taxable account, I talk to folks who decide later they want to leave whatever – Wealthfront’s had direct indexing for a while – they want to leave it and manage their own investments, and there they’ve got 120 positions they’ve got to manage.

Rick Ferri: At least.

Rob Berger: Yeah. So you’ve got to be careful. I know in theory direct indexing, I think, has a lot of appeal in theory, but in the event you've got to be careful as you evaluate what they offer. But overall I like Wealthfront. I was not as impressed with Vanguard's Digital Advisory Services.

Rick Ferri: Now this is the personal advisory service but only basically the electronic portfolio management side, no advice, no speaking with somebody, correct.

Rob Berger: Yeah. I had--there were a lot of technical issues. I mean to their credit they were eventually resolved, but it took me two weeks just to get the account going because of technical issues. And then pieces of it didn't work. But again to their credit they got it fixed. It's not nearly as feature rich. I mean in some ways it's almost like a LifeStrategy or Target Date fund wrapped in a cool user interface.

Rick Ferri:  So more tax efficient though, correct.

Rob Berger: More tax efficient than a balanced fund like a life strategy?

Rick Ferri: Yeah.

Rob Berger: That's an interesting question. I mean as you know Vanguard had some issues with the taxes on their target date funds and I don't know if you saw, they said they reached an agreement with Massachusetts on that. But it's a good question, Rick, I don't know if it's more tax efficient or not.

Rick Ferri: Okay. Fair enough. Any other robos that you might like, that you've looked at?

Rob Berger: SoFi is interesting. It's quote-unquote ”free” but they use some proprietary indexes for some of their funds rather than the S&P 500. And with Schwab you're required to keep so much in cash. So it's quote-unquote “free” but not really. And you saw that settlement they had on that.

Rick Ferri: Schwab settlement for holding a lot of money in cash.

Rob Berger: So yeah. I think the issue was that they were representing that it was free and that their recommendations were based in the best interest of the users. But whatever--I mean I applaud companies for trying to make these tools available for quote-unquote “free”--but you’ve got to be transparent. And you and I both know that holding 6% or 10% or 15% in cash in a portfolio is not free.

Rick Ferri: Well in addition they also hold a lot of Schwab funds, not that the funds that they hold are really expensive, but they do hold in the Intelligent Portfolio, they do hold a lot of Schwab ETFs.

Rob Berger: Yeah the thing I look to, maybe you do too, is one, are they based on a proprietary index, or not in these – because Fidelity Zero Funds, for example, are based on--and it's not that they're necessarily bad funds--but they're based on a Fidelity proprietary index.

Rick Ferri: Correct.

Rob Berger: I just feel  more comfortable with the old S&P 500 or whatever sort of well-recognized index. And then yeah, you’ve got to look at fees. I think for the most part these ETFs are pretty inexpensive.

Rick Ferri: Okay. Let's get into the last thing I want to talk about because I asked you to take a look at this. Are all of the tools that are available on the Bogleheads wiki Tools and Calculators page. Just an incredible number of free tools. So have at it.

Rob Berger: Well, first of all I would recommend that those folks listening who are interested go to it. I don't know if you can leave a link. But it's just a few bogleheads wiki tools and calculators and I mean you could spend a lifetime, right. I mean it's like I don't even know where to begin. It's like drinking from a fire hose, a lot of the tools are--some of them we've already talked about-- like for example backtesting they mentioned Portfolio Visualizer, as a good example.

But they include things like a back testing spreadsheet that the community put together. I've not personally used it but it's on my list to use it. And you know that kind of thing is very unique to the Bogleheads community and I would highly recommend it. But they have bond calculators. If that's something that listeners are interested in, they link to tools. And Vanguard actually has a good one on college savings if you're at that stage of life where you're saving for say a child's education.

They have things like life expectancy and calculators there. I tend to avoid looking at those things. I’m not sure I want to know. But they have everything. They have a ton of loan and mortgage calculators, and again, these are not necessarily things built by Bogleheads. Some things like that spreadsheet I mentioned are. But these are just links to other calculators. One they have, that's one of my favorites, that I actually haven't been to in a while, but it's called Carl's Mortgage Calculator. It's a simple mortgage calculator, but it's really easy to use and if you're looking to figure out how much a mortgage is going to cost to buying a home. That's excellent.

Rick Ferri: Yeah they actually have dozens and dozens and dozens of retirement savings calculators on here. Free ones and ones that you can buy. They have a kind of a spreadsheet, which ones do which and so forth. But again, like you said, you could spend a lifetime on here because they have put in so much time, all volunteers, have put in so much time putting this wiki page together. In all the different aspects of the free calculators and free tools page, that is just absolutely phenomenal. I mean literally anything that you're looking for. If you don't know where to go first, go to Bogleheads wiki Tools and Calculators is probably a good bet to go there, you'll find something.

Rob Berger: Yeah. The thing I would say, I mean if you're a calculator junkie like maybe you and I are, it's a great place to go. If you're not, the thing I would say is--it's as you look through something like this great resource on the Boglehead site-- is just figure out what it is you need. And we talk about a simple portfolio. I would keep the whole tools and calculator aspect as simple as possible too. And if free tools work for you then why pay for it. And if you get some benefit out of maybe more advanced tools, then that's great too. But I mean, because at the end of the day, I probably only use a handful of two or three or four tools on a somewhat regular basis, just because it's all you need really. 

Rick Ferri:  And so what's the next step for you, Rob. I mean you're continuing to build out your website, continuing to do the YouTube videos,  going down the credit card alley, and working on that as well. I mean where is it all going?  What's the next step

Rob Berger: I do have a couple of books that I want to write.

Rick Ferri: Oh okay. Great.

Rob Berger: One about how to invest once you're retired.

Rick Ferri: Investing in retirement?

Rob Berger: Yeah because  this hit me hard. I wasn't expecting it, but when I sold my sites and thought I was retired I was really scared to spend our money even though by every known calculation we had plenty of money to retire.  It's nerve-wracking to start spending your money and at least I found it to be so.

Rick Ferri: No it's true. I mean I work with a lot of clients. In fact I had a call today and this year, where this client is transitioning from accumulation to distribution in retirement is the most nerve-wracking time of your life, financially anyway, because you just don't know how it's going to work, and you've got a lot of questions, and you could have a substantial amount of assets and your spending be very low, and you're still afraid to make that leap.

Rob Berger: Yeah and unfortunately in the industry there are a lot of players that will try to profit from that fear.

Rick Ferri: Yeah. I agree.

Rob Berger: And yeah, you don't encounter that when you're 20 or 30 and you're just saving. But when you start to retire then you get folks who will try to scare you into certain products. So yeah, it's just much more challenging than I had anticipated.

Rick Ferri: Any parting words for us, words of wisdom?

Rob Berger: Well I do hope as many people as can come to the Boglehead conference-- I’m really looking forward to that--and I think where people can find me, the YouTube channel is where my heart is in terms of trying to produce content that helps folks. It's not fancy. I don't have a production person and I don't even edit the videos. So if I mess up, well you get to see it all. But I do live shows as well. People ask me questions and I do my best to answer them. So I think it's fun. I'm not sure if everyone else does, I don't know, but people keep showing up.

Rick Ferri: Very good. Well Rob, it's been a real pleasure having you on Bogleheads On Investing. I'm certainly looking forward to seeing you in person in October, and thanks for joining us today.

Rob Berger: Thanks Rick, really appreciate it.

Rick Ferri: This concludes this edition of Bogleheads On Investing. Join us each month as we interview a new guest. In the meantime visit boglecenter.net, bogleheads.org, the Bogleheads Wiki, Bogleheads twitter, listen live each week to Bogleheads Live on twitter spaces, the Bogleheads YouTube channel, Bogleheads Facebook, Bogleheads Reddit. Join one of your local Bogleheads chapters and get others to join. Thanks for listening.

About the author 

Rick Ferri

Investment adviser, analyst, author and industry consultant



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