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  • Simplifying Investments

    Every time I read a post from WCI, PoF, and other investment savvy people I do my best to mimic what they do in efforts to reach FIRE status.  Today I was looking at a PoF post on his drawdown plan in early retirement and in the post he had a very simple spreadsheet showing his various investment vehicles.  He had attached % in each account, type of acct, and ERs.  I decided to try to replicate his and was overwhelmed by how diversified some of my accts are.

    For example, my Roth IRA with Schwab was set up by one of their agents.  I wasn't too savvy when I created it so I basically said I wanted low cost ETFs.  Today as I tried to make my spreadsheet I realized that this account is made up of 18 ETFs with ERs that range from 0.03% up to 0.44%.  My 401K is similarly diverse with 13 different allocations and a variety of low ERs.  This was done based on recommendations by my partnership's financial division.

    For someone still trying to figure out what's best in the investment world who has a generic IPS (I have literally cut and pasted one from WCI and PoF but still haven't figured out how to decide precisely how I'd like to have my assets allocated), is it worth trying to simply some of these retirement accounts into fewer allocations?  Or should I be glad that there are so many different investments in each retirement vehicle?  What do those of you with more knowledge do?

     

     

  • #2
    It's super sliced-and-diced, including small bits of gold, int'l real estate, int'l bonds, junk bonds...those tiny percentages *probably* won't significantly affect your portfolio going forward.

    That being said, my own portfolio gets a little bit into the weeds, with small amounts of int'l small stock and emerging market bonds. I can handle, analyze, and adjust the complexity. Honestly, I did it just for fun. It's maybe 5% of my portfolio.

    Will it be superior to simply using the broader-class index funds? I don't know. I don't advocate people do it, especially since some of those "niche" holdings don't have very low-cost options. But VTSAX has exposure to mid (20%), small (10%), and real estate (4%), VTIAX has exposure to emerging markets (15%) and real estate (4%), VBTLX has exposure to short (39% < 5 yr) and long-term (30% > 20 yr), so you can argue that you can get exposure to almost every subclass you'd want for no more than 0.11%.

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    • #3
      Across all of my investment accounts, if you don't count duplicates like different class shares and ETFs of the same thing, and if you don't include money market for minimal cash balance, I am only in three different funds.

      I consider myself moderately sophisticated, but I am by no means an expert.  That said, my advice would to be in a handful of low-cost funds that you like and understand.  And if you have no understanding at all, make it your hobby to develop some basic understanding.

      That handful might be a few or a dozen, but IMO you should understand what something is before you put money in it.  You could be in just one fund like Vanguard Total Stock Market or Vanguard 500, or one of their Schwab equivalents, and be plenty diversified, that's the easy part.  Knowing what each option is, and picking one or a few from the many thousands of options is the hard part.

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      • #4
        I think that you have too many small, niche asset classes for the amount invested. Like ITF, for example. Do you really need $100 in an intermediate term bond etf? What is the target percent for ITF? When will you add to it or rebalance away from it? Etc, etc.

        I would recommend that you start with a basic allocation, of anywhere from three to five funds, depending on your IPS. If I were young and starting, I might advise starting with the portfolio I am using with my son:

        https://www.whitecoatinvestor.com/forums/topic/roth-ira-for-an-18-year-old-critique-welcome/

        It's comprised of four equity ETFs (total US stock, US small value, developed markets foreign, and emerging markets) that are available in low cost index funds and ETFs on Vanguard, Fidelity, and Schwab platforms. If bonds are part of your allocation, add a fifth fund or ETF for the bond piece in the appropriate percentage.

        Later, like 5-10 years from now, if you want to further diversify small slices to emerging markets bond, reits, low vol, or whatever, do it around the core 4 or 5 funds.

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        • #5
          I find the chart confusing because the columns have no labels.  If the first column is your total position and all is tax advantaged then just sell off all the small positions and do a simple portfolio with 3 funds or so.  I say that when I have more funds and individual stocks in my portfolio.  I have been doing this a while. Complexity is ok for me.

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          • #6
            PoF's portfolio already looks too complex for me.  Just go with target date funds and pay the 9 or 10 bps or do the Boglehead three fund portfolio and allocate according to your risk tolerance.

            • Vanguard Total Stock Market (VTSMX)

            • Vanguard Total International (VGTSX)

            • Vanguard Total Bond Market (VBTLX)

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            • #7
              I like the three fund model. Theres so much overlap and things are mostly covered in a total US/intl account, the benefit is just almost zero to be overly sliced and you end up paying for it.

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              • #8
                I've got my 2 kids invested thusly. VTSAX. VTIAX.VBTLX.

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                • #9




                  PoF’s portfolio already looks too complex for me.  Just go with target date funds and pay the 9 or 10 bps or do the Boglehead three fund portfolio and allocate according to your risk tolerance.

                  • Vanguard Total Stock Market (VTSMX)

                  • Vanguard Total International (VGTSX)

                  • Vanguard Total Bond Market (VBTLX)


                  Click to expand...


                  Hearing you say that makes me feel much better with my Vanguard target date fund that makes up 100% of my retirement accounts. I've felt a little ashamed of it since reading this blog.

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                  • #10
                    I am a fan of simplicity in investing/portfolio tracking, so I am letting you know my bias upfront.  My first suggestion would mirror what others have posted, establish an asset allocation.  A good asset allocation will provide both discipline in fund selection/changes and a benchmark with respect to rebalancing.  It appears that you allowed others to make decisions; the good thing is that you stuck with lower costs/indexing so it is by no means an insurmountable/costly issue.  My goal of investing simplicity has taken many years of effort and mistakes made along the way, but is has advantages in terms of low cost and ease of tracking, which is where I use several excel worksheets.  As I am still building wealth, I look to the worksheets a quarterly snapshots maintained over an almost 20 year period.  First worksheet is a what I have, how much, and value.  In turn this drives other calculations including cost, how much I have contributed, how much of a match I receive, the value increase/decrease of the portfolio versus the prior quarter and overall increase.  The second worksheet, and tied to the first via some macros is more granular.  It focuses upon the individual fund performance over time and the dollar amount of value added to the portfolio and overall. The last is recent creation, that records the entire portfolio value quarterly based upon a couple of differing buckets (a. US equity, international equity, bonds, cash and b. taxable, non-taxable, deferred taxable).  The values are then turned in two pie charts.  My intent is to use the information to have a holistic view of my asset allocation to potentially rebalance.

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                    • #11


                      Today I was looking at a PoF post on his drawdown plan in early retirement and in the post he had a very simple spreadsheet showing his various investment vehicles.
                      Click to expand...


                      It's not overly complicated, but it could be simpler, actually. I recommend the Three Fund portfolio, but I do slice and dice a bit more than is necessary.

                      One thing that keeps me out of a true Three Fund portfolio is the fact that I want to avoid duplicating funds held in the taxable account in my other accounts, making tax loss harvesting easy without fear of a wash sale.

                      The good news for the OP is that the messy portfolio is in a Roth IRA, so it can all be exchanged into simple stuff without tax consequences.

                       

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