The e-mail basically stated that my website is displaying the Vanguard logo, which must be removed immediately due to their endorsement policy. The wording of the e-mail made it sound as though I had stolen the Vanguard logo and was displaying it as my official site logo on every page. It also made it sound as though I were purporting my website as being officially endorsed by Vanguard.

Uh, what??!!

I had to scratch my head as to what in the world they were talking about. Why are they threatening me? I’ve never made any claim that my site is affiliated or associated with Vanguard, and I certainly don’t have their logo in my blog header or anything like that. And then I found it….

Back in March 2007, when I first started this website, I wrote a short post talking about transferring my Roth IRA from American Funds to Vanguard. You can see the post here. It was only the second post I had ever written, and it includes a little Vanguard logo as part of the post identifier. Even now, my site is hardly a blip on the radar compared to the big personal finance blogs, but it was completely obscure back then. So, this is why they decided to threaten me? This stupid little post?!

Even more confused and starting to get angry, I penned a reply to Vanguard’s legal department:

Dear L######,

Yes, it’s true. I wrote a post on my site explaining how much I like Vanguard and about how I had just opened a portfolio there. I wrote that post on March 23, 2007, well over two years ago.

Are you trying to tell me that I can’t give FREE advertising to Vanguard? My use of the image was part of an endorsement post FOR Vanguard. I’m under no impression that Vanguard is endorsing my site. The article I wrote years ago has gone into my archives and is not displayed anywhere near the front page. My readers would have to dig pretty far to find it.

And now you’re sending me a threatening message asking me to remove my free advertising for you? Sure, I’ll be happy to comply. I’ll also be happy to transfer my entire portfolio to one of your competitors, such as Schwab or Fidelity. I’ll also be delighted to actively dissuade my readers from ever considering opening accounts with Vanguard because they attack bloggers simply for recommending them.

The ball is in your court.

Signed,

A customer (for now)

Weeks went by and I never heard a response, nor did I delete the image, so I assumed that someone at Vanguard had simply made a mistake and that it wasn’t worth picking on lil’ ol’ bloggers like me. Weeks turned into months, and I completely forgot about the whole ordeal.

Until today. This morning I received a second threatening e-mail from the same person at Vanguard’s legal department. It was a follow-up from the previous correspondence since I had not resolved the issue to their satisfaction. This e-mail was even more forcefully worded, explaining that the Vanguard logo was a highly protected asset and that they will go to great lengths to protect it (obviously). If I try to resist, my puny website and I will be crushed by the towering might of their legal department.

Unbelievable. I’ve been a happy Vanguard customer for years, and because I wrote a post back in early 2007 promoting Vanguard and attached their logo to it, they’re willing to pursue legal action against me? With friends like that….

Naturally, I had to send a response:

L#######,

Congratulations! Vanguard has forever lost a longtime customer! I will be transferring my accounts to Schwab immediately. Not only that, I will do everything in my power to dissuade other people from ever depositing a single penny in a Vanguard fund.

You make it sound like I’ve been using the Vanguard logo as my personal logo. Nothing could be farther from the truth. I put a low-resolution copy of the logo as an identifier in my post PROMOTING Vanguard. That was only the second post I had ever written for my site, and it quickly disappeared into the archives, so I suspect only two or three other people have ever seen it. I will remove it, but Vanguard has now gained a lifelong enemy.

So this is what you do with your time at Vanguard? You search the Web for small-time personal finance bloggers and attack them for daring to promote your company? Pitiful. Since you seem to enjoy it so much, here’s some more fodder for you:

1) http://arsicles.com/2007/10/31/ultimate-financial-lifestyle-guide-part-1
2) http://www.jalbertfinancial.com/useful_links.htm
3) http://www.bloggingstocks.com/2009/09/06/technical-trade-5-vanguard-ftse-all-world-ex-us-etf-veu/
4) http://www.mymoneyblog.com/archives/2009/06/vanguardadvantage-all-in-one-checking-account-at-vanguard.html

Bon appetit!

Brian

I doubt I will receive a response, unless they actually decide to sue me. This entire situation is asinine, and I offer my deepest apologies to the owners of the above sites if it actually causes the wrath of Vanguard to come down on you! I just did a quick Google search for their logo and those were the first four that I found.

As for me, I don’t have the resources to fight their legal department, so I’ll delete their image from my server. Eventually. In the meantime, I’ve already opened a Roth IRA at Schwab and will start the account transfer process from Vanguard later tonight. It’s really a shame because I’ve been happy with Vanguard, but I now retract anything nice I’ve ever said about them. Any company that goes to this length to attack individuals for writing a promotional post doesn’t deserve my business, nor anyone else’s.

So, if you have a personal finance blog and you’ve ever used the Vanguard logo as part of a post, watch out! The Vanguard legal department shark is cruising the Web, smelling blood, and will mercilessly attack you if they find you.

This time, not so much. Sure, I still have those nostalgic feelings on a personal level, but economically, I’m ready to kick 2008 to the curb. As painful as it is, here is how my meager portfolio fared for 2008. Suffice to say, it got pummeled.

All of my mutual funds are held at Vanguard. I like them for their simplicity, consistently low expense ratios, and selection of no-load index funds.

Retirement – Roth IRA

Here’s an overview of my Roth IRA. I started contributing to it in 2007, so there’s not a ton of money in it yet, and there’s even less after the brutal beating of 2008.

The yellow line is what I have contributed, while the blue line show its actual value. That huge dip in late 2008 is depressing, but perhaps the upward curl at the end is a foretaste of the feast to come? Maybe I’m just optimistic….

Here’s a comparison of year-end values:

At the end of 2007, my Roth IRA had just over $9,000 in it. Fast-forward one year, and my Roth IRA has… just over $9,000 in it. Had I not maxed out my contributions for the year, this would not be so depressing. As it currently stands, all my contributions for the year disappeared. That’s okay. This is long-term money, right? RIGHT?

Taxable Mutual Funds

In addition to my Roth IRA, I also have a meager selection of mutual funds in a taxable account at Vanguard. These funds are not quite as aggressive, but they have still taken a nice pummeling.

Once again, the yellow line represents my contributions, while the blue line represents the current value. Things were going pretty well until the bottom fell out in mid-2008. Phooey.

Here’s a comparison of year-end values:

Yet again, the value of my taxable portfolio ended slightly up, but when one considers the contributions that I made, depression sets in.

All together, my Roth IRA is about -41% into the red for the year, while my taxable funds are about -24% into negative territory. Ouch.

Care to share how much your portfolio has been bruised by the Great Portfolio Pummeling of 2008? Misery loves company, so I’d love to hear that I’m not alone.

Here’s to a better 2009!

It doesn’t seem fair to indirectly punish someone who currently makes little money from taking advantage of tax-free growth. For example, suppose a full-time college student with a part-time job hears about the benefits of a Roth IRA, but can’t scrape together the initial investment amount to open an account at a place like Vanguard or Fidelity. What then are his/her options?

Option 1 – Keep Saving

Of course, you can just keep saving a little bit every month until you DO reach the required minimum at your company of choice. Scheduling an automatic weekly or month transfer into an online savings account can help. You can even try taking advantage of a few bank or credit card sign-up bonuses to help expedite the process. Once you reach $1,000, your choices begin to broaden.

Option 2 – Local Banks

Another option is to visit a few local banks and ask about opening a no-minimum IRA. Many banks offer IRAs that utilize a money market or a CD. One disadvantage is that you may only have a short “window” each year in which you can invest additional cash. Plus, if you are young, a CD or money market is a very conservative investment. A mutual fund is better more suitable if you have decades to invest before you retire.

What then, are some choices involving mutual funds?

Option 3 – Fidelity

• Minimum required to open an IRA: $2,500
• Minimum requirement waived if you agree to a $200 per month automatic transfer.

As you can see, Fidelity requires a pretty steep commitment to open an IRA, but offers a SimpleStart option that waives the minimum amount. This feature is nice, but our example college student may not be able to scrape together $200 every month. However, if you can afford this monthly transfer, Fidelity is a great choice. Otherwise, let’s look at some alternatives, shall we?

Option 4 – T. Rowe Price

• Minimum required to open an IRA: $1,000
• Minimum requirement waived if you agree to a $50 per month automatic transfer.

T. Rowe Price’s IRA offerings are a little more suitable to those with a small initial investment, although the $1,000 minimum is still higher than desired. However, if you can afford the $50 per month automatic transfer, T. Rowe Price is another great option. I suggest looking into their SmartChoice IRA Funds, which are targeted toward a specific retirement year.

Keep in mind that T. Rowe Price charges an annual custodial fee of $10 for all IRAs that have balances lower than $5,000.

Option 5 – ING Direct

• Minimum required to open an IRA: $250
• Minimum requirement reduced to $25 if you agree to a $25 per month automatic transfer

Now we’re talking! Due to their recent acquisition of ShareBuilder, ING Direct has recently started offering mutual funds and retirement accounts, and the $250 minimum is ideal for someone starting a Roth IRA on a budget. If that amount is still too high, you can open an account for as little as $25 if you agree to a $25 per month automatic transfer. Even a college student with a part-time job should be able to afford that!

All is not well in the land of ING, though. For starters, they charge a $10 annual custodial fee on IRAs, no matter how much you have invested. Please see their Fund Fees and Minimums page. Not only that, the expense ratios on their 15 funds are higher than average. As of this writing, the expense ratios range from 0.61% (Money Market Fund) to a whopping 1.75% (Global Science and Technology Fund)! Not sure what an expense ratio is? See here.

Don’t let me dissuade you. This would be a fine “starter” account, but I would consider transferring to a different company with lower expense ratios once you have accumulated $2,500 or more.

Option 6 – E-Trade

• No account fees or minimums (when you sign up for online statements and confirms)

And here we have what is perhaps the best deal yet. E-Trade offers the option to start an account with no minimum, provided you agree to receive all communication online rather than through “snail” mail.

E-Trade has a massive amount of funds (over 7,000), and there have been worries about bankruptcy, so this choice may be intimidating for a beginning investor. Still, considering that there is NO minimum, it is a viable choice provided that you are willing to do your homework in deciding which funds are right for you.

If in doubt, I suggest going for one of the no-transaction fee, low-expense ratio funds, such as their S&P 500 Index Fund.

Other Thoughts

Of course, this list is not comprehensive, as there are many other options and companies available. No matter which option you choose, contribute as much as you can, and your nest egg will continue to grow tax free.

My own IRA is currently held at Vanguard, but the initial investment minimum for most funds there is $3,000. The only exception is the STAR Fund, which requires only $1,000. Once you reach the 3k threshold, you may consider transferring to Vanguard, as it is a solid company with consistently low expense ratios.

Of course, my disclaimer is that I have attempted to provide entirely accurate information, but please make sure to do your own research before investing. I hope that the information I provide is valuable, but please leave a comment below if you find an error or would like to suggest another offering. We can all benefit from that knowledge.

Happy investing!

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I have both a Roth IRA and a Traditional IRA, but right now I’m only contributing to the Roth. I have about $900 remaining that I can invest for 2006, so within the next week or two I will max out my contribution. The current contribution limit is $4000 per year, but that amount will go up to $5000 starting in 2008.

If you can afford it, it’s important to max out your IRA contributions since you can never go back and add money for a particular calendar year once the deadline has passed. In the case of a Roth IRA, you can also withdraw your contributions at any time for any reason, so a Roth can double as a savings account. Most people don’t recommend withdrawing anything from a Roth IRA, though. You want ALL of that money compounding away!

To illustrate, if you skip one entire year of contributions (at $4000), over a period of years that initial lost amount adds up. At a fairly conservative estimated yearly return of 6%, over 35 years that $4000 that you did not invest turns into at least $30,744 of lost future income. Ouch!

If you’re just starting to invest, a Roth IRA is a smart choice. In a nutshell, you invest after-tax dollars, and Uncle Sam allows that money to grow in peace, without any taxes. Once you reach age 59.5, you can start to withdraw your earnings.

As I mentioned previously, I recently moved my Roth IRA from American Funds to Vanguard. When I transfered, I placed all my money in the Vanguard STAR Fund (VGSTX) initially, which only requires a $1,000 minimum. Recently I contributed enough money to break the $5,000 mark, and this was my signal to exchange the money into a different fund.

I chose the Target Retirement 2045, which is an all-in-one portfolio. It’s currently comprised of almost 90% stocks, making it very aggressive.

The three largest holdings in this fund are:

• Vanguard Total Stock Market Index Fund
• Vanguard European Stock Index Fund
• Vanguard Total Bond Market Index Fund

That’s a decent breakdown. When I eventually have about $50,000 in the fund, perhaps I’ll split it into a few different funds of my choice, but I like the current holdings.

What I like about the Vanguard Target Retirement Funds is that they start aggressively, but as the years pass they gradually become more and more conservative, thereby helping you keep keep more of your earnings. Best of all, the adjustments are done automatically, allowing the investor to “add money and forget about it.” Since I’m in my 20s, I have lots of time to let the money compound away.

Today I transferred my Roth IRA from American Funds to Vanguard. Why, you ask? It’s simple. There is not much money in it, but the idea of paying a “load” sickened me.

What is a “loaded” mutual fund?

A “loaded” mutual fund is one in which you pay a percentage of your investment as a commission to a financial adviser each time you buy shares of that fund. American Funds currently charges a 5.75% load for Class A shares, which means that if you invest $1000, they take $57.50 for themselves, leaving you with $942.50 as an actual investment. Ouch! All of Vanguard’s funds, by contrast, are non-loading funds, which means that a $1000 investment remains a $1000 investment.

Is this necessarily a bad thing? The point is debatable since the adviser must earn a living somehow, and if he/she is worth it then by all means, spend the money for his/her advice. That is how I started, since a few months ago I knew absolutely nothing about mutual funds and chose American Funds on the advice of a friend. Am I upset about the friend’s advice? Absolutely not! He initiated my interest in mutual funds in the first place, which caused me to move my IRA from a bank CD earning a measly 4%.

American Funds is still a good company, but I’m no longer interested in paying their added fees now that I have the desire to more actively manage my portfolio.