Portfolio Advice
Portfolio Advice
Hi all,
I started another thread a few days ago discussing my investment advisor fees. I currently pay 1.45% in fees. I would like to discuss the portfolio here and receive some opinions about what options I can consider moving forward. I
Overview: This portfolio contains funds that I would like to use to purchase a home in the future. My ballpark timeline is within the next 3-7 years. However, I am flexible and not committed to purchasing a home at any particular time. I would prefer a more conservative investment allocation.
Portfolio:
- Domestic Fixed Income: (Tickers: SUB, SHM, HYD, VTEB) - 52.74%
- Domestic Equity: (Tickers: USMV, SCHG, VUG, VBK, VBR, VTV) - 28.7%
- Global Equity: (Ticker: EFAV) - 11.5%
- International Equity: (Ticker: IEFA) - 3.56%
- International Fixed Income: (Ticker: EMLC, EMB) - 2.71%
- Cash - 0.76%
Question:
1) Am I paying additional fees inside of these ETF's in addition to the 1.45% management fee?
2) My info indicates this portfolio aims for an annual return between 4-6%. Are there comparable alternatives that I could use on my own without paying 1.45% in fees?
3) Does this fund seem appropriate given my time horizon and risk tolerance?
3) Is there anything else I might be missing or need to know? I'm very inexperienced but ready to learn.
THANK YOU!
PNWpilot
I started another thread a few days ago discussing my investment advisor fees. I currently pay 1.45% in fees. I would like to discuss the portfolio here and receive some opinions about what options I can consider moving forward. I
Overview: This portfolio contains funds that I would like to use to purchase a home in the future. My ballpark timeline is within the next 3-7 years. However, I am flexible and not committed to purchasing a home at any particular time. I would prefer a more conservative investment allocation.
Portfolio:
- Domestic Fixed Income: (Tickers: SUB, SHM, HYD, VTEB) - 52.74%
- Domestic Equity: (Tickers: USMV, SCHG, VUG, VBK, VBR, VTV) - 28.7%
- Global Equity: (Ticker: EFAV) - 11.5%
- International Equity: (Ticker: IEFA) - 3.56%
- International Fixed Income: (Ticker: EMLC, EMB) - 2.71%
- Cash - 0.76%
Question:
1) Am I paying additional fees inside of these ETF's in addition to the 1.45% management fee?
2) My info indicates this portfolio aims for an annual return between 4-6%. Are there comparable alternatives that I could use on my own without paying 1.45% in fees?
3) Does this fund seem appropriate given my time horizon and risk tolerance?
3) Is there anything else I might be missing or need to know? I'm very inexperienced but ready to learn.
THANK YOU!
PNWpilot
- Sandtrap
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Re: Portfolio Advice
Considerations:PNWpilot wrote: ↑Sun Sep 19, 2021 8:17 am Hi all,
I started another thread a few days ago discussing my investment advisor fees. I currently pay 1.45% in fees. I would like to discuss the portfolio here and receive some opinions about what options I can consider moving forward. I
Overview: This portfolio contains funds that I would like to use to purchase a home in the future. My ballpark timeline is within the next 3-7 years. However, I am flexible and not committed to purchasing a home at any particular time. I would prefer a more conservative investment allocation.
Portfolio:
- Domestic Fixed Income: (Tickers: SUB, SHM, HYD, VTEB) - 52.74%
- Domestic Equity: (Tickers: USMV, SCHG, VUG, VBK, VBR, VTV) - 28.7%
- Global Equity: (Ticker: EFAV) - 11.5%
- International Equity: (Ticker: IEFA) - 3.56%
- International Fixed Income: (Ticker: EMLC, EMB) - 2.71%
- Cash - 0.76%
Question:
1) Am I paying additional fees inside of these ETF's in addition to the 1.45% management fee?
2) My info indicates this portfolio aims for an annual return between 4-6%. Are there comparable alternatives that I could use on my own without paying 1.45% in fees?
3) Does this fund seem appropriate given my time horizon and risk tolerance?
3) Is there anything else I might be missing or need to know? I'm very inexperienced but ready to learn.
THANK YOU!
PNWpilot
1. Money needed to purchase a home in 3-7 years (are you shopping now and able to buy if a great deal comes up?) should have the following:
a) liquidity
b) accessibility (immediate)
c) security of principle (huge: what if the value of these funds should drop 30-50% as equities did in March 2020?)
2. Money needed to purchase a home in 3 years should be "outside" of a long term comprehensive investment portfolio, or in funds with minimum volatility at the worse. (lot's of opinions here).
#3 above: given your "time horizon". . . no.
4. The fund ER's and management fee's, are erroding your purchasing power to buy your home and disproportionate to the expectant level of "net" (not gross) annual returns, and volatility (losss of principle). IMHO.
The "elephant in the room" is your time horizon and use of the money (home purchase). Focus on that.
If you are "not commited to purchasing a home" then take that option off the table and consider that money as going toward a long term portfolio, ie: retirement length span of time. So, it's one or the other.
j
dis laimer: zillions of options on zillions of things with zillions of opinonions.
- retired@50
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Re: Portfolio Advice
Does your current financial adviser know you want a house?
Given the equity investments you're holding, I'm guessing they don't know, or don't care about that particular goal.
Retirement and a house in 3 years are competing goals. You can contribute toward both, but you should have that separation built into the particular mutual funds you choose for each goal.
For retirement, Job #1 is to decide on an appropriate asset allocation that you can live with in good times, and bad. Then, invest for retirement with each paycheck and stick with it.
For a house in 3 years, you need something more conservative, CDs, possibly short term bonds, or something along those lines.
The thing that really helped me gain confidence on investing and retirement planning was reading books on the topic.
Get a library card.
Do some reading.
See wiki for recommended titles: https://www.bogleheads.org/wiki/Book_re ... nd_reviews
Regards,
Given the equity investments you're holding, I'm guessing they don't know, or don't care about that particular goal.
Retirement and a house in 3 years are competing goals. You can contribute toward both, but you should have that separation built into the particular mutual funds you choose for each goal.
For retirement, Job #1 is to decide on an appropriate asset allocation that you can live with in good times, and bad. Then, invest for retirement with each paycheck and stick with it.
For a house in 3 years, you need something more conservative, CDs, possibly short term bonds, or something along those lines.
The thing that really helped me gain confidence on investing and retirement planning was reading books on the topic.
Get a library card.
Do some reading.
See wiki for recommended titles: https://www.bogleheads.org/wiki/Book_re ... nd_reviews
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Portfolio Advice
PNWpilot wrote: ↑Sun Sep 19, 2021 8:17 am
Question:
1) Am I paying additional fees inside of these ETF's in addition to the 1.45% management fee?
You could be. Funds have to pay internal brokerage costs but may also have sources of income. If the turnover is high the cost for making those trades could matter, up to an additional 1% in the worst cases. You have to read the fund annual reports and supplementary information to find all the actual costs and income. Vanguard index funds have near zero extra costs.
2) My info indicates this portfolio aims for an annual return between 4-6%. Are there comparable alternatives that I could use on my own without paying 1.45% in fees?
If you mean expected return at lower cost Vanguard, Fidelity, and Schwab have lots of choices that would be far better.
3) Does this fund seem appropriate given my time horizon and risk tolerance?
It is possible that money to be used to purchase a house on your timeline should just be saved in CDs or high yield savings accounts. Traditionally you would get enough more interest inn extending CDs to five years or something. Right now interest is not to be had. That is unfortunate but a fact with regard to which people just have to suck it up. Sometimes life is a bowl of cherries and sometimes just pits. There are some threads on Multi-Year-Guaranteed-Annuities, but you would have to decide for yourself. Keep in mind that every year that goes by your timeline is getting shorter and should be less risky,
3) Is there anything else I might be missing or need to know? I'm very inexperienced but ready to learn.
You can do some reading and study of the basics by perhaps starting at "getting started" https://www.bogleheads.org/wiki/Main_Page
THANK YOU!
PNWpilot
Re: Portfolio Advice
This is misleading or something has changed. I think you said in your previous thread that the advisor AUM fee was 1% and the expense ratios of the funds are .45%.
An expense ratio is tied to (or "baked into") a fund/ETF. It is not part of your management fee. Different funds have different expense ratios, ranging from about 0.015% to 2% most of the time. A few are extremely high - 3% and up.
The concept of using 15 different positions to save money for a home is very odd, even ludicrous. One or two will do. This approach strikes me as very strange and costly.Overview: This portfolio contains funds that I would like to use to purchase a home in the future. My ballpark timeline is within the next 3-7 years. However, I am flexible and not committed to purchasing a home at any particular time. I would prefer a more conservative investment allocation.
Portfolio:
- Domestic Fixed Income: (Tickers: SUB, SHM, HYD, VTEB) - 52.74%
- Domestic Equity: (Tickers: USMV, SCHG, VUG, VBK, VBR, VTV) - 28.7%
- Global Equity: (Ticker: EFAV) - 11.5%
- International Equity: (Ticker: IEFA) - 3.56%
- International Fixed Income: (Ticker: EMLC, EMB) - 2.71%
- Cash - 0.76%
You would be paying expense ratios for each of those ETFs plus your 1% AUM fee to the advisor. The expense ratios should be much less than .45% though. However, paying an advisor to help you save for a house is costly and will slow the growth of your money a lot.1) Am I paying additional fees inside of these ETF's in addition to the 1.45% management fee?
I suggest you simply save the money using a bond fund (tax-exempt if in a higher tax bracket) and maybe a very small allocation (20%) to total stock market if you want. As the goal becomes closer, lower the stock amount to 0%.
There is no need to pay someone 1% to "help" you do this.
Link to Asking Portfolio Questions
Re: Portfolio Advice
Do you want to say this is your portfolio or is this a taxable account you are using to save money in to purchase a home?
Your 401K and IRA investments are part of your portfolio.
Your 401K and IRA investments are part of your portfolio.
Re: Portfolio Advice
Thank you for your reply. To clarify, this is a taxable account I am using to save money for a future home purchase.
Re: Portfolio Advice
Sorry, I am paying an AUM fee of 1% and expense ration of funds are .45%. I am still learning the lingo!
Re: Portfolio Advice
I genuinely appreciate everyone's reply.
I genuinely feel very disappointed that I have chosen to invest my money in this manner. It appears that everyone I speak to (except my advisor) believes this to be a poor choice for our current goals of saving for a home.
I genuinely feel very disappointed that I have chosen to invest my money in this manner. It appears that everyone I speak to (except my advisor) believes this to be a poor choice for our current goals of saving for a home.
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Re: Portfolio Advice
I agree that this portfolio is very unnecessarily complex for your stated goal of saving for a home purchase. I agree that 1 or 2 funds would be sufficient.
Whether and how much of the money dedicated for the down payment should be invested depends on your expected purchase date. If it's further away and flexible, then you can afford to invest more in stocks. If it's closer and inflexible, then you need to be more conservative with the money, possibly not even investing any of it in stocks or bonds.
For a 3 year time horizon, I wouldn't be comfortable with much in stocks (maybe up to 20%). For 7 years, I might be comfortable with 20-30%.
I would get away from this advisor ASAP and never go back. Move the funds to a low-cost provider like Fidelity, Schwab, or Vanguard. Call them first to see if you can transfer and hold these ETFs at the destination brokerage (probably can because they are ETFs, which are generally very portable). See if the destination brokerage would reimburse any account closing fees or other fees you may incur to close the account with the advisor. I would try to make a plan to sell the ETFs you don't want to hold as tax efficiently as reasonably possible.
What are the UNrealized gains or losses in each ETF? If you provide that information, forum users can advise about a tax-efficient selling strategy.
Whether and how much of the money dedicated for the down payment should be invested depends on your expected purchase date. If it's further away and flexible, then you can afford to invest more in stocks. If it's closer and inflexible, then you need to be more conservative with the money, possibly not even investing any of it in stocks or bonds.
For a 3 year time horizon, I wouldn't be comfortable with much in stocks (maybe up to 20%). For 7 years, I might be comfortable with 20-30%.
I would get away from this advisor ASAP and never go back. Move the funds to a low-cost provider like Fidelity, Schwab, or Vanguard. Call them first to see if you can transfer and hold these ETFs at the destination brokerage (probably can because they are ETFs, which are generally very portable). See if the destination brokerage would reimburse any account closing fees or other fees you may incur to close the account with the advisor. I would try to make a plan to sell the ETFs you don't want to hold as tax efficiently as reasonably possible.
What are the UNrealized gains or losses in each ETF? If you provide that information, forum users can advise about a tax-efficient selling strategy.
Re: Portfolio Advice
It is disappointing when you learn that a person or position that you looked to for advice turns out to be simply a salesperson. This "advisor" has done you no harm other than sell the product s/he sells and charge you 1% for the favor.
It is not much different from buying a car or any other item sold by a sales force.
The ETFs mentioned are probably fine (in fact much better than many advisor generated accounts) but the complexity is completely unnecessary. However, what kind of salesperson would stay in business if they told you "you don't need me - just go save money in a high interest savings account"?
Your trust in the financial services industry (just like most of the rest of us have had at some point) is the source of your disappointment. Get past that. Realize that giving away 1% of your portfolio is a very poor choice. And realize that this is not very hard to do on your own if you learn a little bit and follow some simple guidelines.
Think about this. If your portfolio makes 5% in a year and you give away 1%...you have given away 20% of your profits. That is a very high cost. That puts the supposedly tiny 1% in a different perspective, doesn't it?
This is a good place to start your financial education. https://www.bogleheads.org/wiki/Getting_started
It is not much different from buying a car or any other item sold by a sales force.
The ETFs mentioned are probably fine (in fact much better than many advisor generated accounts) but the complexity is completely unnecessary. However, what kind of salesperson would stay in business if they told you "you don't need me - just go save money in a high interest savings account"?
Your trust in the financial services industry (just like most of the rest of us have had at some point) is the source of your disappointment. Get past that. Realize that giving away 1% of your portfolio is a very poor choice. And realize that this is not very hard to do on your own if you learn a little bit and follow some simple guidelines.
Think about this. If your portfolio makes 5% in a year and you give away 1%...you have given away 20% of your profits. That is a very high cost. That puts the supposedly tiny 1% in a different perspective, doesn't it?
This is a good place to start your financial education. https://www.bogleheads.org/wiki/Getting_started
Link to Asking Portfolio Questions