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Old 03-19-2017, 04:14 PM   #4326
n00b590
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Re: General investing questions, newbie queries and thoughts megathread

Do you expect your capital gains tax rate to be lower in the future? Deferring the tax indefinitely is nice, but it's especially nice if you expect to see your tax rate go down as well. It's definitely worth running the numbers to get a better idea though. I'm guessing if you assume emerging markets will outperform the banks by 2% over a significant time frame, it would be worth rebalancing.
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Old 03-20-2017, 11:03 AM   #4327
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Re: General investing questions, newbie queries and thoughts megathread

Yeah, no I'll always be in the top tax bracket. Okay I'll run the #'s this week, it'll be a good exercise to do regardless to learn how big X actually has to be (not sure it's as big as 2%, but I'll see what happens under a few different scenarios)
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Old 03-20-2017, 08:14 PM   #4328
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Re: General investing questions, newbie queries and thoughts megathread

Assuming 20 year time frame and the average gain on your current positions is 100%, then X is ~0.5% if my math is right.
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Old 03-22-2017, 07:48 PM   #4329
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Re: General investing questions, newbie queries and thoughts megathread

I have a decent amount I would like to invest, but I'm paralyzed by my options. I've spoke with a financial advisor who recommended several different mutual funds. I ran these by a couple friends in finance who said they were decent options, but I was better off managing my own money and investing in index funds and/or ETFs. This seemed somewhat daunting to me.

I wasn't sure what to do and have put off making a decision, but I really want to sort this out. My inclination is to simply invest in the recommended mutual funds for the short to medium term because I understand that option the best. I don't want to be too hands on with these investments, but I also don't want to be irresponsible with my money and take the lazy option.

Perhaps there's another option I'm not considering. Anything to point me in the right direction would be appreciated. Let me know if I haven't given enough relevant info.
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Old 03-22-2017, 11:56 PM   #4330
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Re: General investing questions, newbie queries and thoughts megathread

It's not daunting. Just call Vanguard and ask for a 3 fund portfolio and you're good to go. They'll guide you through the details.

Google around on the 3 fund portfolio and you'll get a sense of what it is, similar options, and all that. It's essentially exactly what your friends told you to do.

You can go even simpler and just choose a target date fund. For example, say this was retirement money and you expected to retire in 30-35 years. You could put it in a target date 2050 fund that is aggressive now and becomes more conservative as you age. It becomes more conservative as you age because a market crash is actually a big deal then. These sorts of funds are generally composed of index funds.

Last edited by cannabusto; 03-23-2017 at 12:03 AM.
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Old 03-23-2017, 09:44 AM   #4331
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Re: General investing questions, newbie queries and thoughts megathread

Yep, you could easily open a vanguard account and throw it all into a Target Date 2060 fund for now.

Then, go read this book:

https://www.amazon.com/Bogleheads-Gu...dp/1118921283/

After that, you can get more advanced with what you are doing if you want. If you're a reader and want some comfort, devour the book first and that will give you more comfort about what you are doing.

Feel free to post the mutual funds you are getting recommended. My default assumption is that recommendations from an advisor will probably be crappy high fee options compared to index funds, but who knows.
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Old 03-23-2017, 10:40 AM   #4332
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Re: General investing questions, newbie queries and thoughts megathread

+1 to the previous two posts. I know it can be daunting, but it really isn't hard.

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Originally Posted by jalexand42 View Post
My default assumption is that recommendations from an advisor will probably be crappy high fee options compared to index funds, but who knows.
Agreed. Even if the funds are relatively decent having an advisor is an unnecessary expense for someone in OP's position.
Here is a table on what a 2.5% advisor / mutual fund fee would cost an investor over the long term. I think it is pretty eye opening.
http://www.pbs.org/wgbh/pages/frontl...c/tyranny.html
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Old 03-23-2017, 11:23 AM   #4333
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Re: General investing questions, newbie queries and thoughts megathread

When people say "they spoke to their friends in finance", what does this mean? I ask because I know people who are quite successful in corporate finance, but know absolutely nothing about personal finance. Most of these people are successful because they have at least a bit of an inflated ego, and won't say I pay 2% to x to manage my money so I have no idea what looks good or doesn't look good. These are also the same people that "knew" a correction was coming 2 years ago so decreased their contributions downward. Just my 2 cents.
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Old 03-23-2017, 01:32 PM   #4334
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Re: General investing questions, newbie queries and thoughts megathread

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Originally Posted by cannabusto View Post
It's not daunting. Just call Vanguard and ask for a 3 fund portfolio and you're good to go. They'll guide you through the details.

Google around on the 3 fund portfolio and you'll get a sense of what it is, similar options, and all that. It's essentially exactly what your friends told you to do.

You can go even simpler and just choose a target date fund. For example, say this was retirement money and you expected to retire in 30-35 years. You could put it in a target date 2050 fund that is aggressive now and becomes more conservative as you age. It becomes more conservative as you age because a market crash is actually a big deal then. These sorts of funds are generally composed of index funds.
I just converted my Vanguard Roth target date 2055 to the 3 fund portfolio and was very easy to do. You do have to manually balance unlike 401ks. Buy the ETFs until you can afford the admiral shares. Total stock market VTSAX (65%) International Stock VXUS (35%) and total bond BND (5%).
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Old 03-23-2017, 04:33 PM   #4335
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Re: General investing questions, newbie queries and thoughts megathread

Can someone explain Admiral Shares from Vanguard to me like I'm 5? All of the expense ratios for those funds look identical to the index funds I use. For instance, VTI and VTSAX (total US market) both have the same expense ratio. Is VTSAX cheaper by some small fraction that isn't ahown in the 0.05% ER figures?
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Old 03-23-2017, 04:34 PM   #4336
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Re: General investing questions, newbie queries and thoughts megathread

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Originally Posted by Snoop Todd View Post
I have a decent amount I would like to invest, but I'm paralyzed by my options. I've spoke with a financial advisor who recommended several different mutual funds. I ran these by a couple friends in finance who said they were decent options, but I was better off managing my own money and investing in index funds and/or ETFs. This seemed somewhat daunting to me.

I wasn't sure what to do and have put off making a decision, but I really want to sort this out. My inclination is to simply invest in the recommended mutual funds for the short to medium term because I understand that option the best. I don't want to be too hands on with these investments, but I also don't want to be irresponsible with my money and take the lazy option.

Perhaps there's another option I'm not considering. Anything to point me in the right direction would be appreciated. Let me know if I haven't given enough relevant info.
The financial advisors at banks are salesmen who want to put your money into mutual funds with very expensive management fees. They don't actually add any value. You haven't mentioned the specific funds, but just to put it in perspective, if they take a total of 2.5% a year it means they're stealing 40% of your money over 20 years. Then you'd lose about the same percentage of the remaining amount to inflation.

You'd literally be waaaaay better off taking the stock quote page of a newspaper and throwing 20 darts at it and throwing all your money into those stocks.

The Vanguard 2060 target ETF some have mentioned is a good choice. It wouldn't be a bad place to keep your money forever, but you can always start there and transfer your money elsewhere as you learn more. If you don't have any taxable income outside of investments you'll want to get some of that into Canadian dividend paying stocks/funds because their tax treatment is super beneficial.

Last edited by stinkypete; 03-23-2017 at 04:52 PM.
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Old 03-23-2017, 05:12 PM   #4337
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Re: General investing questions, newbie queries and thoughts megathread

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Originally Posted by gangip View Post
Can someone explain Admiral Shares from Vanguard to me like I'm 5? All of the expense ratios for those funds look identical to the index funds I use. For instance, VTI and VTSAX (total US market) both have the same expense ratio. Is VTSAX cheaper by some small fraction that isn't ahown in the 0.05% ER figures?
Generally, if you are using ETF's, there is ZERO difference between those and the Admiral funds in terms of ER.

It basically has to do with the evolution of Vanguard. It used to be that Investor shares were more expensive and Admiral came along with lower ER's, but with a very high minimum purchase. As Vanguard started changing the industry by aggressively lowering ER's, the minimums on the Admiral funds started dropping alot too. At the same time, ETF's were coming on the scene and they generally just started out with the same ER as the Admiral funds.

The only real advantage I know of for using Admiral funds vs. ETF's if you have the choice is that mutual funds obviously price at the end of the day, so you don't have to worry about any bid/ask spread crap. You can also buy fractional shares, which is pretty nice to just buy a round number of something.

I personally have Vanguard Admiral funds in my 401k and I mostly buy all Vanguard ETF's in my taxable account. In some cases, the exact same funds aren't available in all the classes, so you may have no choice but to buy a Mutual Fund to get a specific investment for example.
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Old 03-23-2017, 05:25 PM   #4338
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Re: General investing questions, newbie queries and thoughts megathread

Jalexand, thanks for the response.

So is there no bid/ask spread on the Admiral shares or is it just smaller than their etfs? I remember seeing that the Vanguard indexes have very small spreads, with the exception of VSS which was like 0.07% or something.

Do you just use Admiral shares in your 401k so you don't have an extra $28 in cash floating around all year or something?

Is there any tax benefit for either, or if I buy $10,000 of a total market fund and hold it for 20 years will it end up being the exact same for both the etf and the Admiral?
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Old 03-23-2017, 06:36 PM   #4339
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Re: General investing questions, newbie queries and thoughts megathread

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Jalexand, thanks for the response.

So is there no bid/ask spread on the Admiral shares or is it just smaller than their etfs? I remember seeing that the Vanguard indexes have very small spreads, with the exception of VSS which was like 0.07% or something.

Do you just use Admiral shares in your 401k so you don't have an extra $28 in cash floating around all year or something?

Is there any tax benefit for either, or if I buy $10,000 of a total market fund and hold it for 20 years will it end up being the exact same for both the etf and the Admiral?
No spread period. Mutual funds settle at the end of the trading day when they are re-priced. ETF's trade throughout the day just like a stock.

Our 401k uses Mutual funds to avoid extra trading fees associated with using ETF's. So I can't pick and choose what I want, it's a set slate of options.

No tax differences in practice for Vanguard funds. In some scenarios, an ETF could be better in a taxable account, because it's treated exactly like a stock. This is very unlikely to matter at all in mainstream VG funds. In a tax friendly account (IRA, 401k, etc.), there is literally no difference for taxes.
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Old 03-23-2017, 09:34 PM   #4340
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Re: General investing questions, newbie queries and thoughts megathread

Ty
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Old 03-24-2017, 05:29 PM   #4341
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Re: General investing questions, newbie queries and thoughts megathread

My HSA offers 6 diversified emerging markets funds. The lowest overhead/OER fund is Vanguard .11%. But the HSA company charges .033% of value per month to invest in that fund. The others are all actively managed and have OERs from 1% to 1.5%. Some without the monthly feel. Would it be better to go with a fee-free actively managed fund with a 1% OER?
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Old 03-24-2017, 06:15 PM   #4342
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Re: General investing questions, newbie queries and thoughts megathread

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My HSA offers 6 diversified emerging markets funds. The lowest overhead/OER fund is Vanguard .11%. But the HSA company charges .033% of value per month to invest in that fund. The others are all actively managed and have OERs from 1% to 1.5%. Some without the monthly feel. Would it be better to go with a fee-free actively managed fund with a 1% OER?
.033% of the account value per month?

check my math but it seems the Vanguard is still a slightly better deal, all other things being equal.

basically Vanguard over a year : (1- 0.00033) ^ 12 - 0.0011 = 0.994 for effective rate of 0.6 %
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Old 03-24-2017, 06:46 PM   #4343
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Re: General investing questions, newbie queries and thoughts megathread

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Originally Posted by Snoop Todd View Post
I have a decent amount I would like to invest, but I'm paralyzed by my options. I've spoke with a financial advisor who recommended several different mutual funds. I ran these by a couple friends in finance who said they were decent options, but I was better off managing my own money and investing in index funds and/or ETFs. This seemed somewhat daunting to me.

I wasn't sure what to do and have put off making a decision, but I really want to sort this out. My inclination is to simply invest in the recommended mutual funds for the short to medium term because I understand that option the best. I don't want to be too hands on with these investments, but I also don't want to be irresponsible with my money and take the lazy option.

Perhaps there's another option I'm not considering. Anything to point me in the right direction would be appreciated. Let me know if I haven't given enough relevant info.
Lazy hands off investing in low cost index funds is the superior option for most people.

I read recently that even the majority of people invested in low cost index funds under perform their benchmark (I think it was by 2-3%) because they can't help but try to market time.

Investing really is one of the few things where laziness pays off.
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Old 03-24-2017, 07:08 PM   #4344
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Re: General investing questions, newbie queries and thoughts megathread

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I read recently that even the majority of people invested in low cost index funds under perform their benchmark (I think it was by 2-3%) because they can't help but try to market time.
2-3% sounds extreme, but it's only natural for joe schmoe to want to pile into the market toward the end of a long seemingly neverending bull market and to want to run away after a crash. They're not even trying to market time, it's just the natural cycle.
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Old 03-24-2017, 07:29 PM   #4345
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Re: General investing questions, newbie queries and thoughts megathread

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.033% of the account value per month?

check my math but it seems the Vanguard is still a slightly better deal, all other things being equal.

basically Vanguard over a year : (1- 0.00033) ^ 12 - 0.0011 = 0.994 for effective rate of 0.6 %
.033% of average investment in that fund per month. VEMIX
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Old 03-27-2017, 05:37 PM   #4346
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Re: General investing questions, newbie queries and thoughts megathread

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It's not daunting. Just call Vanguard and ask for a 3 fund portfolio and you're good to go. They'll guide you through the details.

Google around on the 3 fund portfolio and you'll get a sense of what it is, similar options, and all that. It's essentially exactly what your friends told you to do.

You can go even simpler and just choose a target date fund. For example, say this was retirement money and you expected to retire in 30-35 years. You could put it in a target date 2050 fund that is aggressive now and becomes more conservative as you age. It becomes more conservative as you age because a market crash is actually a big deal then. These sorts of funds are generally composed of index funds.
Thanks for all the replies - very helpful.

I have been recommended Vanguard before and it does indeed seem like what I'm looking for. I will be contacting them for specifics but I had a couple general questions:

1. Is Vanguard the clear best option for this type of investing or are there competitors worth checking out? (Canadian if it matters)

2. Part of my problem is I'm fairly uncertain on a timeline for these investments. I think eventually I will be using some of it as a down payment on a house (likely in the 3-5 year range), however it's possible I'd like to access some sooner or potentially leave it all in there until retirement. Life of a poker player. Does Vanguard have good, flexible options or am I going to have to settle on a timeline beforehand?
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Old 03-27-2017, 05:51 PM   #4347
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Re: General investing questions, newbie queries and thoughts megathread

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Originally Posted by stinkypete View Post

The Vanguard 2060 target ETF some have mentioned is a good choice. It wouldn't be a bad place to keep your money forever, but you can always start there and transfer your money elsewhere as you learn more. If you don't have any taxable income outside of investments you'll want to get some of that into Canadian dividend paying stocks/funds because their tax treatment is super beneficial.
Thanks Pete.

Can you explain the last sentence a little? Your assumption is correct, so are you saying I should try to target Canadian dividend paying stocks / funds down the road, or that this is something I should mention to Vanguard when trying to come up with a strategy?
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Old 03-27-2017, 06:30 PM   #4348
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Re: General investing questions, newbie queries and thoughts megathread

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Thanks for all the replies - very helpful.

I have been recommended Vanguard before and it does indeed seem like what I'm looking for. I will be contacting them for specifics but I had a couple general questions:

1. Is Vanguard the clear best option for this type of investing or are there competitors worth checking out? (Canadian if it matters)

2. Part of my problem is I'm fairly uncertain on a timeline for these investments. I think eventually I will be using some of it as a down payment on a house (likely in the 3-5 year range), however it's possible I'd like to access some sooner or potentially leave it all in there until retirement. Life of a poker player. Does Vanguard have good, flexible options or am I going to have to settle on a timeline beforehand?
Vanguard is the clear leader. They transformed the market by not being greedy. We have benefited however, and now there are other companies that have followed suit with low cost indexing options. Those would be fine options too...Schwab for example. In some cases Schwab has actually intentionally undercut Vanguard's pricing.

Honestly, most people wouldn't advice you to go investing money you think you might need short term. You really should try to figure out your goals / timeframe. The other thing (and you should talk to someone Canadian like Pete) is that you NEED to take advantage of whatever tax-advantaged investing options you have available for retirement purposes. I assume those are like the US and your money will be locked up until retirement to get those tax benefits.


Quote:
Originally Posted by Snoop Todd View Post
Thanks Pete.

Can you explain the last sentence a little? Your assumption is correct, so are you saying I should try to target Canadian dividend paying stocks / funds down the road, or that this is something I should mention to Vanguard when trying to come up with a strategy?
If Pete was willing, you should just have him give you some general advice in terms of overall goals / strategy.

Also...you will probably want to mostly work this out on your own or with smart people here or on the Bogleheads forum. Mentioning things to Vanguard might not get you great answers unless you are dealing with significant cash and get more than their front line folks. Generally with Vanguard you're just getting assistance if you already sort of know what you are doing.
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Old 03-27-2017, 06:33 PM   #4349
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Re: General investing questions, newbie queries and thoughts megathread

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Thanks Pete.

Can you explain the last sentence a little? Your assumption is correct, so are you saying I should try to target Canadian dividend paying stocks / funds down the road, or that this is something I should mention to Vanguard when trying to come up with a strategy?
Basically any gains from investments fall into 4 categories:

Capital gains (Gains from buying stocks and then selling at a higher price)
Eligible dividends (Gains from dividends paid by Canadian companies)
Ineligible dividends (Gains from dividends paid by foreign companies)
Interest income (Interest from bonds and cash deposits)

Basically the last two categories are taxed at the full rate, capital gains are taxed at 50% of the full rate, and eligible dividends are complicated but ideally you want as much of your investment income to be as eligible dividends as possible unless you're making $100k+ from investments annually. (So if you're investing ~1.5-2 million or more you're actually going to want to start avoiding dividends)

You can play around with Capital gains/Eligible dividends/Ineligible dividends numbers on https://simpletax.ca/calculator to see how they're taxed.

So assuming you're investing around a million or less, Canadian stocks that pay a high dividend (ETFs like Vanguard's VDY and preferred share funds like ZPR, CPD for example) are super preferable from a tax perspective. Avoiding high dividend paying foreign stocks is a good idea too.

That all changes quickly if you have employment income or significant rental income or similar so it all depends on your individual situation. In that case you'd want to try to avoid dividends in favour of capital gains.


In the end these considerations might make something like a 0.5-1% difference on your average annual return, so it's significant but not worth nitting it up over when you're getting started. Your #1 priority should be to get invested in a balanced portfolio with low management expenses.

Last edited by stinkypete; 03-27-2017 at 06:49 PM.
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Old 03-28-2017, 11:57 AM   #4350
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Re: General investing questions, newbie queries and thoughts megathread

Just set up an HSA through my company (w/ BOA). They contribute $500/year, awesome. However, the investment options (through something called Bell Banks) are not awesome due to really high fees.

Questions:
- Can I set up a second HSA with a different provider to get access to better investment options, and put my discretionary contributions in there (while keeping the BOA one for company contributions)?
- Should I? Do fund options differ between providers?
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