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  • Bye Bye Advisor

    Well I finally did it!!!!! After many years of paying 1% AUM and finally discovering WCI, I pulled the plug and decided the majority of my FA's services were not needed. I am transferring about 1.2 million of retirement funds into my personally managed account at my current brokerage with NO fees. The FA will keep still hold a private non-traded REIT (about 170k) for me which my brokerage cannot transfer over and I am fine with that part. I also have 2 custodial ROTH IRAs for my kids which I will transfer when they reach 18 years of age since my brokerage does not allow for custodial ROTH transfers although Fidelity might so I am going to plan for that soon enough. These past few days have given me a case of cerebral priapism due to the excitement of knowing I am now in control of my finances. I have an embarassingly high number funds/etfs currently accross the four retirement accounts (1 IRA each and 1 SEP IRA each for my wife and I). Thinking about how to simplify those will turn the cerebral priapism into a case of cerebral artery aneurysm and I am afraid White Beard Doc will not be by side to save me so I need help/encouragement about what to do. My risk tolerance is pretty high for a 47 year old and I seem to be fine with an 80/20 or even 90/10 allocation. My taxable account (1.3 million including the REIT) has a bunch of etfs and some individual stocks that I have been selling to buy more VOO, VTI, VGT, and QQQ. The "sunk cost fallacy" was an eye opener for me again thanks to WCI. I have two individual stocks in the taxable account that keep me nervous due to the tremendous price appreciation and how much of the percentage they occupy in my portfolio but I do not want to sell those because why pay taxes when I am in the 35-37% tax bracket? My personal plan would be to have 50% VTI, 10% Technology, 10 % Health Care, 10% Mid Cap growth, 10 % Real Estate and perhaps 10% in Bonds and increase the percentage in bonds by 1 every year as I reduce the others. It all sounds good to me but then I read WCI "150 portfolios better than yours" and I feel like I should just get a lifestrategy or balanced fund. Any and all advice is much appreciated. Thank you.

  • #2
    Congrats! You won't regret the move. Don't forget that if your cerebral priapism lasts longer than 6 hours or becomes painful then you should see your doctor.

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    • #3
      Originally posted by Trigeminal View Post
      Well I finally did it!!!!! After many years of paying 1% AUM and finally discovering WCI, I pulled the plug and decided the majority of my FA's services were not needed. I am transferring about 1.2 million of retirement funds into my personally managed account at my current brokerage with NO fees. The FA will keep still hold a private non-traded REIT (about 170k) for me which my brokerage cannot transfer over and I am fine with that part. I also have 2 custodial ROTH IRAs for my kids which I will transfer when they reach 18 years of age since my brokerage does not allow for custodial ROTH transfers although Fidelity might so I am going to plan for that soon enough. These past few days have given me a case of cerebral priapism due to the excitement of knowing I am now in control of my finances. I have an embarassingly high number funds/etfs currently accross the four retirement accounts (1 IRA each and 1 SEP IRA each for my wife and I). Thinking about how to simplify those will turn the cerebral priapism into a case of cerebral artery aneurysm and I am afraid White Beard Doc will not be by side to save me so I need help/encouragement about what to do. My risk tolerance is pretty high for a 47 year old and I seem to be fine with an 80/20 or even 90/10 allocation. My taxable account (1.3 million including the REIT) has a bunch of etfs and some individual stocks that I have been selling to buy more VOO, VTI, VGT, and QQQ. The "sunk cost fallacy" was an eye opener for me again thanks to WCI. I have two individual stocks in the taxable account that keep me nervous due to the tremendous price appreciation and how much of the percentage they occupy in my portfolio but I do not want to sell those because why pay taxes when I am in the 35-37% tax bracket? My personal plan would be to have 50% VTI, 10% Technology, 10 % Health Care, 10% Mid Cap growth, 10 % Real Estate and perhaps 10% in Bonds and increase the percentage in bonds by 1 every year as I reduce the others. It all sounds good to me but then I read WCI "150 portfolios better than yours" and I feel like I should just get a lifestrategy or balanced fund. Any and all advice is much appreciated. Thank you.
      Congrats! How much of the 1.2M is the two individual stocks and how much gains? Do you have any losses you could use to offset?

      Comment


      • #4
        "It all sounds good to me but then I read WCI "150 portfolios better than yours" and I feel like I should just get a lifestrategy or balanced fund. Any and all advice is much appreciated. Thank you."
        • You have two preconceived notions with your portfolio design: tilt in your equity holdings and the Stock/bond allocations.
        • I think you need to challenge both of those assumptions. Equities, adding tilt is not diversification. It is intentionally concentrating investments. Is that really what you want to do? The AA stock/bond as a percentage is to reduce volatility. I would suggest you choose an allocation on your own risk profile and change the percentages based on when your risk profile changes. That is not based on age or a 1% increase in bonds each year.
        • Keep it simple with only the components you choose as your target.
        • The taxable account, you need to plan a transition plan that eventually allows you to flush out the old and hit your planned investments. That could include holding the gainers for a step up in basis for heirs or donating appreciated shares. That is more of a tactical tax plan than an investment plan. You could have a two fund portfolio if you so choose.

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        • #5
          You just grew your portfolio by 1%. Congrats! Can be hard to unravel. Our FA had us in 16 different funds in just one account. A ton of overlap. Ended up just ripping the band aid off and selling almost everything and replacing with a few index funds but this was in tax deferred space. Gotta be careful when in taxable.

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          • #6
            Originally posted by childay View Post

            Congrats! How much of the 1.2M is the two individual stocks and how much gains? Do you have any losses you could use to offset?
            Those 2 stocks in my taxable account are now over 25% of that portfolio. The unrealized long term gains on those are $228,000. I have sold a bunch of individual stocks this year to buy index funds and so far my realized short term gain is $2,500 and the long term gain is about $40,000. I still have 2 long term losers I need to sell and I will have available $51,000 to offset.

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            • #7
              If the non traded REITS came from your old "advisor", what you really had was a salesperson. A good fiduciary advisor would never let that happen

              Comment


              • #8
                Congrats on taking control of your finances. No issues with your AA, though can't say I'm a huge fan of factor investing (VGT / QQQ). Small cap is the space where there is a empirical evidence of out performance over long (20+ years) timeframes. If your intent is to hold long term, VGT/QQQ maybe a viable approach. Mine approach has been to strive for simplicity, outside of my 401k, all taxable and retirement accounts hold a combination of VTIAX, VTSAX, and VDADX, and VBTLX only. You will (IMO) garner more specific advice if you provide additional details around your retirement/taxable portfolio's.

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                • #9
                  If charity is included in your goals, you might want to consider a DAF for at least part of the stocks with long-term gains. I agree with you - that % of space in your portfolio from individual stocks won’t make me very nervous.
                  Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10
                    Nothing wrong with holding onto individual stocks with gains if the companies are good. Since you are becoming an indexer simply do not buy more.

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                    • #11
                      I think your AA is fine. Do you have any losers that you could tax loss harvest alongside your gains? Might be a way to move the money and minimize capital gains tax. Also pay attention to potential tax law changes in future and the implications of the changes on your anticipated situation. Remember that capital gains are only 15% right now.

                      Comment


                      • #12
                        Originally posted by Dewangski1 View Post
                        I think your AA is fine. Do you have any losers that you could tax loss harvest alongside your gains? Might be a way to move the money and minimize capital gains tax. Also pay attention to potential tax law changes in future and the implications of the changes on your anticipated situation. Remember that capital gains are only 15% right now.
                        I will offset my gains by selling the remaining losers and hopefully at the end of the year I will have minimal capital gains tax to pay. As far as the bond part, I have some legacy actively managed bonds holdings in those retirement accounts with a few different companies. Any issues with consolidating those into PIMIX (ER 0.62%) as opposed to BND (ER 0.04%)? It takes too much bandwidth for me to dissect different bonds and the Pimco fund has done well in my portfolio for all these years. They both had similar inception dates in 2007 and the annualized return since then has been 7.73% for PIMIX vs 4.07% for BND.
                        ​​​​​​.

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                        • #13
                          You shouldn't necessarily just compare PIMIX and BND returns. I'm not saying that PIMIX isn't a good fund.

                          However, you should do a deep dive and compare the funds. E.g. PIMIX has a substantially higher standard deviation (volatility) than BND. This is due to a significant difference in holdings.

                          What does your IPS say about the fixed income component of your asset allocation? Is it primarily focused on return or safety? Many have the view that they take risk on the equity side and not on the fixed income side. However, there are others who view return levels of fixed income as equally important and willing to the take the risk.

                          Milton Friedman; Profit = the Reward for Risk

                          Just make sure you understand the underpinnings of your strategy.

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                          • #14
                            That is a pretty big difference in ER between those 2. Like was said above, figure out why you’re investing in bonds and then pick a solid fund to meet your needs. It’s hard to go wrong with BND, but I’m not familiar with the other one.

                            Given your age, it may be worthwhile to make your changes now and get simple, clean, and strong.

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