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just got rid of financial advisor .... best way to simplify a complex portfolio

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  • just got rid of financial advisor .... best way to simplify a complex portfolio

    So I recently went from a 1% AUM advisor to doing things on my own. I had been very hands off with the money when I was paying the 1% fee.  Now, I'm looking a bit more.

    Some questions: 1) Should my IRA's ever have plain cash in them? Can't see a reason, there's 1-2 K there.

    2) How to simplify funds. We have lots of positions scattered across Roth, Traditional, taxable account, etc.

    I've kept things simple in my TSP & work 401K (just target retirement, to be easy).

    I've got: EFA, SCZ, SCHE, RWX (eafe, eafe small, emerging markets, dow jones respectively).

    AQR futures, small cap momentum

    DFA DFAPX  (investment grade bond); DFA large value, micro cap

    Gateway fund

     

    We haven't hit my wife's IRA & roth IRA.  You get the idea.

    I can't buy more DFA now that I don't have an advisor, so I'm inclined to just let that ride.  And, I think I could just let this ride for a good 3-6 months absent something dramatic in the market.  But I could certainly simplify a lot.

    Thoughts?

     

  • #2
    Maybe the ira cash was used to pay fees?

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    • #3




      1) Should my IRA’s ever have plain cash in them? Can’t see a reason, there’s 1-2 K there.
      Click to expand...


      If your former advisor was deducting their fee from your IRAs, the cash position was probably created for that purpose.

      That said, now that you have no fees, I'd deploy the cash.

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      • #4
        Cash is an asset class, and can be held to stabilize a portfolio-much like bonds.  In fact, in a scenario of rising interest rates, cash might be a better holding for an intermediate term than true domestic long term bonds (which can drop impressively in price).

         

        If your advisor was offering only portfolio management, then I'd agree it is hard to justify a 1% aum fee for that alone.  I'd hope the advisor was providing support in the aspects of financial planning such as estate plans, insurance evaluations, asset protection, retirement planning, educational planning, tax management and more.  If the advisor was not, I'll bet you can find a fee only planner that can do all that plus manage the money for the same price or less.

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        • #5
          If you are going to keep cash I would keep it somewhere other than tax protected accounts.  You have lots of funds and the good news is in your tax protected accounts you can sell them and incur no capital gains taxes.  This will allow you to sell and simplify into perhaps a 3 fund portfolio.  Your taxable account will be harder to fix.  If you have significant gains you might want to hold the funds..  I have done this with some funds that I would not buy now because the gains are too high.

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          • #6
            Another general question:

            I have about 5% of total portfolio in Berkshire Hathaway. Hadn't realized it was 5% until I did the math.  My advisor overall counselled against individual stocks, but didn't push hard on BRK.  I also have some IBM I was given (1%) - and I'm generally keeping it, or donating it to charity.  (My cost basis is from the 1970's/80's).  Both of these in my taxable investment account.

             

            What do you all think about the Berkshire Hathaway?  The IBM?  Part of me is sentimental about IBM, a bigger part is not - hence why it's been my go to for charity donations.

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            • #7
              I would keep the Berkshire.  POF has some also.  IBM in the taxable account.  Donating some and tax loss harvesting are some ideas.  As long as you are otherwise diversified you should be ok with this.  My brother who worked for IBM his entire career learned the hard way about a lack of diversification and company loyalty.  The stock cratered on him in 1987.

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              • #8
                Cash is almost always a drag on your portfolio. In a taxable account maybe put all dividends and interest into cash and re-balance with that. In tax deferred accounts, cash has no value. Keep your taxable accounts in stocks and snag LTCG rates, if possible. Bonds go into tax deferred. Take your risk in Equities, not futures or derivatives. Learn about tax loss harvesting. Learn about taxes in general, they will be your biggest expense over your lifetime. Learn about behavioral finance, your own mind is probably your greatest enemy.

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                • #9


                  What do you all think about the Berkshire Hathaway?
                  Click to expand...


                  You've had it since the 1970s / 1980s? Celebrate!

                  And yes, deploy the cash. Inflation will erode its value.

                  I helped someone near and dear to me move from a very complex looking portfolio with 40-some positions down to something very close to a three-fund portfolio (detailed here). I don't think you need to do that necessarily, particularly if you're happy with the asset allocation overall. But I'm sure you'll want to do some tweaking and simplifying.

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                  • #10
                    Man, I wish my BRK was from 1970's/80's. I bought that in the late 1990's / early 2000's time frame.  So still substantial gain.  It's one of those stocks that represents a well diversified value tilt, but even Warren Buffet has said he expects it to underperform. If I want to lower my overall percentage, I think charity is probably the way to go... thoughts?

                    The IBM was a gift from my grandmother - so no step up cost basis. That's the portion with a 70's/80's cost basis.   I don't really feel a need to keep some shares for my kids, so I'll probably continue to give it to charity. My wife wants me to keep it for the kids so we may compromise.

                    I'll relook at your link, POF - I remember reading it when I first started on WCI.

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