Investment Goals - Using One Brokerage Acct to Save for Multiple Purposes

Ted Bozarth

I am starting to get better at making my $ work for me.  I am saving for multiple purposes (3 to be exact) - daughter's wedding, etc.  I use savings goals - I'm a master at them.  Recently I opened a brokerage acct to match each of my savings goals so when the goal reaches a few hundred I transfer it to Fidelity and buy more investments for that goal.  So I have 3 brokerage accounts now.  I'd rather have one and be able to allocate a certain number of shares to each purpose/goal.  My trades and decision-making would be simpler vs buying and selling shares within 3 separate brokerage accounts.  Not to mention if I wanted to buy an index fund with a minimum of $2,500 investment it would be easier of the $ were pooled into one account, etc.  Any ideas out there?

Unknown

First, this is more of a personal finance question than a Quicken question, so far be it from me to offer financial advice.  You're following the best advice already, which is to save for specific goals and to commit to those savings as a priority equivalent to meeting today's needs.

Without prescribing a specific action, you might consider that investments typically are aligned to risks and timeframes.  The further away the goal, the greater the risk of some unknown thing happening, and thus investments that "pay out" at a farther point in the future typically must offer the hope of a greater return to garner receiving your money.  Thus, it may help to collect goals and by extension funds into time/risk groups and investing accordingly, accounting for the total funds in a group against a separate list of goals for that group.

Hopefully, this bit of insight into how investments work can help you decide what to do.

Tom Young

And not to mention the fact that perhaps you're buying the same security 3 different times and incurring three times the commissions that you'd incur with only one brokerage account.

I think "savings goals" are a weak-sauce substitute for having the self control and discipline for saving what you can when you can, and having a definite dollar amount in mind that you want to have by such and such a date. 

Savings goals really have no tangibility.  You mention saving for your daughter's wedding, and maybe you have a "date certain" for that  But if one of your savings goals is $3K for a new transmission for the car because you're worried that transmission is on its last legs and that transmission spills its guts on the road tomorrow, then you're going to find that $3K somewhere, even if the transmission "savings goal" has $50 in it today.  And when that happens you reset the amount that you want to have saved up by such and such a date and soldier on.

That "one" brokerage account becomes your saving pot and you know how much you want to have in it buy whatever date you set.  You can mentally divide that pot into its constituent parts but even if you can somehow "allocate" within Quicken that amount, what practical effect does it have?  "Life happens" and maybe you're going to need the dollars for some event you're saving for before the "allocation" for the event has the needed dollars, or maybe some event comes along "on schedule" but requires more dollars than are in that saving goal, are maybe some event never materializes, but so what?  You adjust.

Off hand I can't think of some way of taking one pot of securities and dividing it up into distinct "tranches" except by not allowing any tranche to share a security with any other tranche, which kind of defeats the purpose.  I might suggest just one savings goal that covers all three events for that one brokerage account with you holding a mental image of how you'd like to see how that pot of money is allocated when you achieve your goal.

K.O. (Win-Premier)

I also do not use the savings goals functionality so if I were going to address the issue of multiple goals in 1 investment account (and I agree 1 account is better than 3) I would just look at it as a percentage.  This assume a single investment strategy.  i.e. you're not taking large risk for 1 goal and small risk for another goal.

There is at least 1 other thread out there requesting/discussing the implementation of Tags in investment accounts.  If Tags were implemented I think you could use the savings goals by tagging investment transactions within the same account.

Best of luck.

q_lurker

Comments so far are on track in my opinion.  The one technique I might add is that using consistent memo descriptions for your transfers in and out of the one brokerage account could allow you to report on additions to the account based on memo.  You might be able to get to -- I've put in $14,000 and $8K came from Goal 1, $4K from Goal 2 and $2K from Goal 3.  You then separately look at the whole account based on those percentages.  That disburses the growth and income in the whole account by the same proportions, which very much be not desirable, especially if the timelines and risk assessment considerations are different.  

I don't know of any way to do what you want in Quicken.  Doing it in a separate spreadsheet might be possible, but still difficult.  

Unknown

You people are kind of missing the point which you won't get if you don't use the savings goal feature.  This is a feature request which I am going to file under ideas because I would like it too.  The feature request is to be able to contribute assets from a brokerage account to a savings goal and not just cash.  Without this if you try and use a brokerage account to make a contribution to a savings goal, the contribution comes out of the cash balance of the brokerage account.  I have 3 CD's in my brokerage account set aside for specific goals.  In order to approximate the desired behavior, I have to create a dummy cash account and make the contributions to the goals from there.  Then I know negative value of that account should be added to the positive value of my brokerage account to get the value of the account available for other purposes.  It would be much easier to just assign the securities to a savings goal.  Anyone saving cash given currently available savings rates and the rate of inflation isn't really saving anything.  To protect against the cost of inflation, even comparatively short-term goals should be placed in investments commensurate with the risk tolerance and time frame of the investor, but Quicken doesn't have a feature that supports this type of savings.

q_lurker

Actually as I think again about this, I think a separate brokerage account might be doable as a "savings goal" format parallel to the cash savings goal accounts.  

Consider, you create one brokerage account (real world) for all these savings and investments - both goaled (daughter's wedding, house down payment, etc.) and long-term (retirement but not the tax deferred IRAs and 401ks).  You likewise create an account in Quicken that ideally ties to and downloads from the brokerage.  All is good, but you want to designate "these shares" for one goal and "those shares" for that goal.  

So now in Quicken you create as many brokerage "savings goals" accounts as needed.  You then transfer X shares of Y security from the main brokerage account to the savings goal account.  Likewise you transfer 2X shares of Y to the second goal and Z-shares of another fund/security to second goal.  

All downloaded transactions come into the main account.  You then need to decide how to allocate results to the goals.  I don't see an issue with this approach with respect to either cash contributions, dividends and interest, or reinvestments coming into the main account.  The should all download into it fine.  The hiccup that will occur if you let it is that Quicken will try to compare the brokerage holding for the account with the Quicken holdings for the account, and it will find discrepancies.  As long as you acknowledge and accept the discrepancies and don't let Quicken do something stupid like add in placeholders, everything should be fine. 

Your savings goal brokerage accounts will fluctuate with the market.  When you need to cash them out, you transfer the shares (all or some) back to the main brokerage account and let the sales record there. Or you delete the original and subsequent Removes (main accounts) and Adds (SG accounts) as necessary still letting sale record to the main account where they do in the real world. 

Impact on various performance measures may become muddied, but c'est la vie.  Deal with it. 

For those who want or expect an existing style Savings Goal account to hold securities, I say "ain't gonna happen".  Quicken has two basic types of accounts:  cash accounts, that can only hold cash, and brokerage accounts that can hold cash and securities.  No way (I predict) to change the structure of a cash only account (Savings goals) to a brokerage setup.  What I just described is effectively the applicable setup for a Savings Goal account holding securities. 

I am not advocating that approach nor have I tried it myself.  I would find it simpler to to simply assess the total value of the brokerage account against the total goals that I had established as I previously noted.  But if someone needs that type of separation, that is a way I would consider.