Voya Corporate Leaders Trust Fund: Replicating a Buy & Hold Fund From 1935

est1935Imagine that it is 1935, and the US has just survived the Great Depression. You think to yourself – if a company can survive this, it’s got to be pretty solid. So you buy equal amounts of stock from 30 of the largest US companies, and hold them… forever! If a company splits, you just keep the two new companies. If a company gets sold, you just keep the new shares of the purchasing company. If they go bankrupt, you let them. 80 years later, you would have the Voya Corporate Leaders Trust Fund (LEXCX), which has beaten 98% of other Large Value fund peers over the last 5 and 10 years. It’s also beaten the S&P 500 over the last 40 years:

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I found about the fund via this Reuters article, which outlines its interesting history and helps explain some of its holdings. Standard Oil is now ExxonMobil and Chevron. Santa Fe Railway is Berkshire Hathaway. The remnants of retailer Woolworth eventually became Foot Locker.

Let’s be clear, I am not saying people should run out and invest in this fund. I just want to point out that this is a very early predecessor to the first index fund – it is passive, low-turnover, transparent, and (relatively) low-cost. I have no idea how the future performance will hold up, but I view it is another example of the power of less stock-picking and more patience. Even Jack Bogle seems to approve:

Its unique nature has often drawn attention including from Vanguard Group Inc founder Jack Bogle, who said he remembers the fund from his days as an undergraduate around 1950. “It’s not a bad idea at all,” he said.

The expense ratio today is 0.52%, which is lower than average for all funds but somewhat expensive given that the managers don’t seem to do much beyond administrative duties. Given the simplicity of this method, can’t we avoid the middleman costs and do even better?

I’ve written about Motif Investing (review) before, which allows you to essentially create your own ETF (“motif”) of up to 30 stocks with zero management fee. Well, only 21 stocks are left in the Voya fund, so that’s perfect. Motif is a registered brokerage firm that will let you trade all 21 stocks at once for $9.95 a trade. I couldn’t find anything similar in their existing catalog, so for kicks I created my own Community Motif using the LEXCX holdings as of 12/31/2014. I called it Depression Survivors – Blue Chip Stocks Since 1935. Here’s the widget they made for it:

 

 
If you create a custom motif, they have a Creator Royalty program which gets you $1 royalty if someone invests using it. If I get even a dollar I’ll be highly amused. You can build your own motif by tweaking things or adding your own dividend stocks or whatever. Motif Investing still offers a $150 sign-up bonus if you open with $2,000 and make 5 trades.

H&R Block Online Review – 2014 Tax Year Features and Screenshots

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Here is my 2014 review of H&R Block Online DIY tax preparation software, to complement my TurboTax 2014 review and TaxACT 2014 review. I filed my personal tax return using each of the “Big 3″ and I will try to share the overall experience along with their specific strengths and weaknesses.

Price
H&R Block Online comes in Free, Basic, Deluxe, and Premium tiers. Due to having stock sales but no self-employment deductions, I am going with H&R Block Deluxe Online which costs $29.99 for Federal and $36.99 for State (free state options may be available separately). I am reviewing the more popular online software, not the desktop download software which may be different both in user experience and price.

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Tax Situation
Here’s a quick summary of our personal tax situation.

  • Married filing jointly, subject to state income tax
  • Both with W-2 income, as well as some simple 1099-MISC forms.
  • Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
  • Contribute to retirement accounts (401ks and IRAs).
  • Capital gains and losses from brokerage accounts (Schedule D).
  • Itemized deductions (Schedule A), including property taxes and charitable giving.

User Interface and User Experience
In terms of overall visual feel, the 2014 user interface is clean and pleasant. If I was comparing with TurboTax and TaxACT, I would say H&R Block is a little less pleasing than TurboTax and a little more pleasing than TaxACT. All of them are perfectly acceptable, but that is my personal ranking. See screenshots throughout this review.

In terms of user experience, H&R Block also uses a question-and-answer format like other tax prep software, but I actually think they have the best layout for intermediate to advanced users (i.e. you’ve done your taxes online before). Before each major section (Income, Deductions, Credits), it present a long checklist of potential items to enter in. You just tick off the ones you need, instead of repeatedly reading a new screen for each little thing and clicking Yes, No, No, No, Yes, No, etc. It know it may sound insignificant, but it really does speed things up with everything on one screen. Here are partial screenshots to help explain:

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Importing Data From Previous Years
You can pull up all of your old tax information for free from any of the Big 3 providers (H&R Block, TurboTax, TaxACT) as long as you are using Basic, Deluxe, or Premium (no Free). You may need to have the information downloaded in PDF format. You’ll get filing status, dependents, address, DOB, SSN, etc.

Importing W-2 and 1099 Forms Directly From Providers
Similar to TurboTax, H&R Block also automatically imports many W-2 and 1099 forms. You can pull up W-2 data using your employer’s tax ID number (EIN). My data point: the same W-2 that TurboTax imported, H&R Block did successfully as well (TaxAct could not).

H&R Block does not appear to publish a list of all their 1099 import partners, but I would say it is a little smaller than TurboTax and much more than the 6 partners that TaxACT supports. You just start typing the name and it tries to autocomplete if available:

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Here is a partial sampling of eligible financial institutions:

  • ADP Retirement Services
  • Alliant Credit Union
  • Ally Bank
  • Ameriprise Financial
  • Bank of America
  • Betterment
  • Charles Schwab
  • Chase Bank
  • Citibank
  • Discover Bank
  • E*Trade
  • Edward Jones
  • Fidelity
  • Gainskeeper
  • Interactive Brokers
  • Merrill Lynch
  • Navy Federal Credit Union
  • Pentagon Federal Credit Union
  • Scottrade
  • Sharebuilder
  • T Rowe Price
  • TD Ameritrade
  • TIAA-CREF
  • TradeKing
  • USAA, USAA Federal Savings Bank
  • Vanguard Brokerage, Mutual Funds
  • Wells Fargo Bank, Advisors

I’m a fan of automatic import because it both saves time and reduces data entry errors. I did have a couple of hiccups with the import, however. I suspect that the problem is the same as I had with TurboTax – that the file is not ready for electronic import yet even though it is available in physical form. Some patience may be in order?

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The Small Stuff

  • When entering charitable donations of physical goods, H&R Block did not provide any assistance as to valuing the object. (TurboTax and TaxACT did.)
  • When entering my 1099-MISC information, H&R Block quickly allowed me to indicate that it was not a business and instead a one-time event. That saved me from answering a lot of unnecessary questions.

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  • Starting in the 2014 tax year, you’ll have to have health insurance or else pay a penalty. I indicated to H&R Block that I had employer-provided coverage for the entire year, and it did not ask for further proof or documentation.

Upselling and Price Change Tricks?
I was not presented with any upsell attempts to their Premium tier and there were no price change shenanigans, which was nice. They also had no need to offer me $40 “audit protection” because it is already included in the price. H&R Block’s “Free In-person Audit Support” is definitely a differentiating factor for the audit-fearing folks out there. In the unlikely event of an audit, an H&R Block Enrolled Agent will help you communicate with the IRS, prepare for the audit, and will attend the audit with you (though they do not provide legal representation).

The only upsell was for their “Best of Both” package, which for $50 lets you have an H&R Block human discuss and review your return with you:

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H&R Block also keeps your past returns for up to 6 years for free, so there is no option to pay more for “data archiving”. Seriously, how much space on a hard drive could it possibly take?

TL;DR Recap
hrb2014_logoH&R Block did my taxes properly and covered the same topics as their competitors. I actually liked H&R Block’s Q&A format a little better than either TurboTax or TaxACT, assuming you have done your taxes online at least once or twice before; it may save you some time.

I would say that H&R Block Deluxe’s value proposition is this: it offers most of the added import conveniences of the similar TurboTax Premium, all at a fraction of the cost ($30 vs. $55 Federal, both $37 State). If you have a lot of stock sales from a specific broker, sign up for a account (they are all free to try; you only pay when you file) and go straight to the 1099 section to see if the H&R Block supports it. H&R Block also offers free in-person audit support, which costs $45 from TurboTax and $40 from TaxACT.

Bottom line: H&R Block Online offers most of the time-saving features of TurboTax for a lower price ($30 vs. $55 Federal, both $37 State), plus it includes free audit support which costs $40+ with other services.

Fidelity IRA Match: Switch and They’ll Match Your Contributions Up to 10%

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Fidelity has released an infographic [pdf] about the power of saving 1% more of your income: To coincide with this, Fidelity started a related promotion to entice folks to move over their IRA assets to them. The Fidelity IRA Match is … [Read the rest]

The Best Credit Cards For Millionaires Who Count Their Miles… and The Rest of Us

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The sales pitch for American Express has always been that their cardholders are wealthy and thus big spenders, which in turn justifies their above-average transaction fees charged to merchants. The theory is a merchant won't mind paying more in fees … [Read the rest]

Big Picture Financial Advice from Jonathan Clements

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Here is some "big picture" financial advice from author and columnist Jonathan Clements. I'd like to collect enough of these tips from notable people and make a compilation post. Clements recently wrote his last column "How to Live a Happier … [Read the rest]

AssetBuilder 2015 Annual Letter: Currency Effects and Interactive Returns Tool

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I enjoy reading articles by Scott Burns (also here) because he sometimes offers a unique perspective on things. He recently released the 2015 Annual Letter for his asset management company AssetBuilder. The whole thing is a good read, but here are … [Read the rest]

TaxACT Review – 2014 Tax Year Features and Screenshots

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Having already done my TurboTax 2014 review, here is my review of TaxACT 2014. (H&R Block is next week.) For all three, I will be comparing the far-more-popular online versions. Price TaxACT come only in two basic flavors: Free and Deluxe. … [Read the rest]

Sling TV Quick Review and Promo: Prepay 3 Months, Get Free Fire TV Stick, Free Roku Stick, or $50 off Amazon Fire TV

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Sling TV is now live and indeed allows you to stream a package of major cable networks live over the internet. I previously wrote about Sling TV from Dish Network when it was announced in January at the 2015 Consumer Electronics Show. Here is the … [Read the rest]

TurboTax Review – 2014 Tax Year Features and Screenshots

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Although I'm still waiting on some 1099 forms (*cough* TD Ameritrade), I've already got most of my paperwork in order for my tax returns. I plan on comparing the three major tax preparation websites again this year: TurboTax, H&R Block, and … [Read the rest]

Tax-Efficiency and Qualified Dividend Income Percentages

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Dividend distributions from mutual funds and ETFs are either qualified or non-qualified, and the difference could have you paying double the taxes. Qualified dividends are taxed at the lower long-term capital gains rate, which varies from 0% to … [Read the rest]

Costs Matter: Vanguard Long-Term Performance Update 2015

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The purpose of Vanguard's commitment to low-cost investing is not just to be cheap, it is to give their clients higher performance. Whenever a money manager charges higher fees for themselves, they will have to compensate by creating that much … [Read the rest]

Costco No Longer Accepting American Express in 2016

Starting in early 2016, you will no longer need an American Express card to pay with a credit card at Costco. Not earth-shattering news (although I do buy a lot of stuff at Costco), but as a credit card geek I thought some of the details that came … [Read the rest]