Portfolio Feedback

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Topic Author
Kaione
Posts: 157
Joined: Sun Aug 07, 2022 10:57 pm

Portfolio Feedback

Post by Kaione »

Looking for some feedback on my portfolio setup. This was done by my advisor (0.4% annual fee).

Code: Select all

Symbol	Weight	Expense Ratio	Name
VEA	22.02%	0.05	Vanguard FTSE Developed Markets Index Fund ETF
IVV	16.76%	0.03	iShares Core S&P 500 ETF
VO	13.94%	0.04	Vanguard Mid-Cap Index Fund ETF
IWF	13.05%	0.18	iShares Russell 1000 Growth ETF
DODGX	12.44%	0.51	Dodge & Cox Stock Fund Class
VWO	6.44%	0.08	Vanguard FTSE Emerging Markets Index Fund ETF
VCMIX	5.57%	1.25	Versus Capital Multi-Manager Real Estate Income Fund LLC Class I
VNQ	3.85%	0.12	Vanguard Real Estate Index Fund ETF Shares
SLYV	2.94%	0.15	SPDR® S&P 600 Small Cap Value ETF
VIOG	2.63%	0.15	Vanguard S&P Small-Cap 600 Growth Index Fund ETF
IJH	0.37%	0.05	iShares Core S&P Mid-Cap ETF
Total Weighted Expense Ratio: 0.196

Appreciate any thoughts you guys have.





Edit: Adding more info

This is a taxable account. It is my primary account and the biggest by a very large margin.

I'm 40 years old and high NW.

I am thinking 100% stocks. I've contemplated retirement, but I am not convinced I actually will anytime soon so I'm reluctant to do a bond tent now similar to how people like BigERN suggest (I can retire right now technically). My plan was to withdraw something low (like variable 2.5%) and hope that that would justify 100% stocks instead of a more recommended 70/30. With the goal being that my portfolio grows over time and I can withdraw more (as a result of accepting swings in withdrawl with 2.5% floating percentage each year, though I contemplated doing 1.5% fixed first year + inflation and a floating 1% ontop to capture growth/increased QoL)

I used to always be a buy and hold investor, however during covid I decided to do trading, and thus realized gains on my entire account. I was lucky and came out very ahead in the end even after accounting for the tax hit, but I generally prefer to buy and forget. As a result, I was in all cash by the end of 2021. I re-entered the market after being convinced to go with an advisor (had a lot going on in my life at the time and didn't want to make decisions, was afraid of re-entering after such a run up in recent years).

Because of my entry point and the direction of the market recently, I only have losses (have some gains since I tax loss harvested a few weeks ago).

If I were to sell now and change funds, I'd be in realizing some gains, but it seems like a small deal compared to long term having higher expense ratios.

My advisor seems like a nice guy, but I am fairly skeptical at anyone's ability to post consistent gains over the market, and they seem to have slowly shifting opinions about various allocation percentages (on a very small scale to be fair), so I'm not sure how to even work with them long term, since I shouldn't be selling in the future if the market goes back up anyways just to reallocate based on the latest opinions they have.

I was considering going solo again, and saving the 0.6% total ER, especially because if I withdraw 2.5%, 0.6% is a massive percentage of that and has a material effect on all the retirement success models i've seen. I'd like to be at least decently diversified so I don't always have doubts in my head about my allocation, and can hold long term and forget. I also have some small doubts if I won't screw up (and be tempted to sell to chase trading or something else again), so thats part of what convinced me to go with an advisor, even though the voice in my head told me how its usually just a bad idea and costs dearly long term (was convinced 0.4% is not that bad compared to higher amounts). I could try to negotiate a lower ER with them, but I'm not sure its very fruitful, even if they cut it by half, I think I'd still tell myself I doubt what they offer me is material.

I do want to be in a position to retire any day I want, allocation wise. But I do not want to sacrifice long term gains to hedge that way (especially because i'm lacking confidence if i will retire or not, i've been very unstable on that), so instead i've been thinking to just position for maximum long term, and withdraw a smaller amount to help offset sequence of return risk and give me a bigger dollar withdrawal in the very long term.

Sorry to be overly wordy compared to my original post, but it sounds like I needed to give more context.

I'll edit the original post to include this.
Last edited by Kaione on Mon Aug 08, 2022 10:00 am, edited 2 times in total.
lakpr
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Re: Portfolio Feedback

Post by lakpr »

Overly complicated. The split appears to be 72% US stocks and 28% international stocks, with zero allocation to bonds. If that is your desired allocation, I would suggest a 70% Total Stock Market Index fund and 30% Total International Stock Index fund, and pocket the 0.55% management fee myself (0.4% advisor fee + 0.2% weighted expense ratio of the complicated portfolio - 0.05% weighted expense ratio of my proposed portfolio).

Yes I saw some real estate fund in there, but 4% allocation to it makes no difference in overall returns. Ignored that.
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retired@50
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Re: Portfolio Feedback

Post by retired@50 »

Kaione wrote: Mon Aug 08, 2022 1:29 am Appreciate any thoughts you guys have.
Welcome to the forum. :happy

What led you to the forum?
Are you just checking up on the advice you've been getting from the adviser?

lakpr raises some good points above and shows you the way to simplification if that's something you desire.

If you want to be a true do it yourself investor (it's not for everyone) then spending some time reading the wiki might benefit you. Lowering the expense ratios and advisory fees you pay could have a very large impact on the value of your portfolio if you have a long time horizon.

You could start with the Boglehead Investment Philosophy and see if it resonates with you.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Outer Marker
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Re: Portfolio Feedback

Post by Outer Marker »

lakpr wrote: Mon Aug 08, 2022 5:15 am Overly complicated. The split appears to be 72% US stocks and 28% international stocks, with zero allocation to bonds. If that is your desired allocation, I would suggest a 70% Total Stock Market Index fund and 30% Total International Stock Index fund, and pocket the 0.55% management fee myself (0.4% advisor fee + 0.2% weighted expense ratio of the complicated portfolio - 0.05% weighted expense ratio of my proposed portfolio).

Yes I saw some real estate fund in there, but 4% allocation to it makes no difference in overall returns. Ignored that.
+1. excellet suggestion.
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retiredjg
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Re: Portfolio Feedback

Post by retiredjg »

Welcome to the forum. :happy

Is that your entire portfolio or it is one account? Or is the one account your entire portfolio?

Overly complex, unnecessary overlap, REIT does not belong in a taxable account (if that is what this is), and higher than necessary expenses (in addition to the .4% you are paying) are the things that come to mind.

Certainly not bad for an "advisor" portfolio though. Is this a person or a robo?

Not really enough information to make reliable suggestions other than the general comments above.
exodusNH
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Re: Portfolio Feedback

Post by exodusNH »

Kaione wrote: Mon Aug 08, 2022 1:29 am Looking for some feedback on my portfolio setup. This was done by my advisor (0.4% annual fee).

Code: Select all

Symbol	Weight	Expense Ratio	Name
VEA	22.02%	0.05	Vanguard FTSE Developed Markets Index Fund ETF
IVV	16.76%	0.03	iShares Core S&P 500 ETF
VO	13.94%	0.04	Vanguard Mid-Cap Index Fund ETF
IWF	13.05%	0.18	iShares Russell 1000 Growth ETF
DODGX	12.44%	0.51	Dodge & Cox Stock Fund Class
VWO	6.44%	0.08	Vanguard FTSE Emerging Markets Index Fund ETF
VCMIX	5.57%	1.25	Versus Capital Multi-Manager Real Estate Income Fund LLC Class I
VNQ	3.85%	0.12	Vanguard Real Estate Index Fund ETF Shares
SLYV	2.94%	0.15	SPDR® S&P 600 Small Cap Value ETF
VIOG	2.63%	0.15	Vanguard S&P Small-Cap 600 Growth Index Fund ETF
IJH	0.37%	0.05	iShares Core S&P Mid-Cap ETF
Total Weighted Expense Ratio: 0.196

Appreciate any thoughts you guys have.
Overly complicated to make it look like they're doing something.

E.g., VEU and VWO could be replaced by VEU.

SLYV and VIOG could be replaced by a small cap index.

Unnecessary slicing and dicing for no benefit.
dbr
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Re: Portfolio Feedback

Post by dbr »

Paying .4% for an investment array like that is a rip-off.

It might be worth paying .4% for awhile if one of the deliverables is a clear analysis that a 100% stock allocation is right for you. What is your age? What is the rest of your financial situation? Do you have tax deferred accounts at an employer? Is this a taxable account and all you have? What are your objectives?

The value in an advisor is to have a plan that makes sense for you. Did you get a plan? Anyone can buy a pile of mutual funds, especially one that is all stocks.
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ruralavalon
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Location: Illinois

Re: Portfolio Feedback

Post by ruralavalon »

Welcome to the forum :) .

Kaione wrote: Mon Aug 08, 2022 1:29 am Looking for some feedback on my portfolio setup. This was done by my advisor (0.4% annual fee).

Code: Select all

Symbol	Weight	Expense Ratio	Name
VEA	22.02%	0.05	Vanguard FTSE Developed Markets Index Fund ETF
IVV	16.76%	0.03	iShares Core S&P 500 ETF
VO	13.94%	0.04	Vanguard Mid-Cap Index Fund ETF
IWF	13.05%	0.18	iShares Russell 1000 Growth ETF
DODGX	12.44%	0.51	Dodge & Cox Stock Fund Class
VWO	6.44%	0.08	Vanguard FTSE Emerging Markets Index Fund ETF
VCMIX	5.57%	1.25	Versus Capital Multi-Manager Real Estate Income Fund LLC Class I
VNQ	3.85%	0.12	Vanguard Real Estate Index Fund ETF Shares
SLYV	2.94%	0.15	SPDR® S&P 600 Small Cap Value ETF
VIOG	2.63%	0.15	Vanguard S&P Small-Cap 600 Growth Index Fund ETF
IJH	0.37%	0.05	iShares Core S&P Mid-Cap ETF
Total Weighted Expense Ratio: 0.196

Appreciate any thoughts you guys have.
Those are all good funds wIth low expense ratios (except Versus Capital Multi-Manager Real Estate Income Fund LLC Class I). With that one exception all are managed by excellent, very experienced, very large fund companies. BlackRock (iShares), Vanguard and State Street (SPDR®) are 3 of the top 5 largest asset managers in the entire world. ADV RatingsWorld's Top Asset Management Firms.

The portfolio (11 funds) is too complicated in my opinion. Paying a 0.40% fee is probably unnecessary in my view. The portfolio seems to waver undecidedly between growth and value ideas (that is: [1] IWV iShares Russell 1000 Growth ETF versus DODGX Dodge & Cox Stock Fund Class, a value fund; and [2] SLYV SPDR® S&P 600 Small Cap Value ETF versus VIOG Vanguard S&P Small-Cap 600 Growth Index Fund).

I can't tell if this is supposed to be a tax-efficient arrangement, or is the best that could be done given the limitations of an employment-based plan. It all depends on facts you have not told us.

You need to tell us your tax bracket both federal and state, what sort of accounts you use (traditional IRA, Roth IRA, taxable brokerage account, 401k, etc.), which funds are in each account, and your desired asset allocation (stock/bond mix). Please see: Asking Portfolio Questions.

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Kaione
Posts: 157
Joined: Sun Aug 07, 2022 10:57 pm

Re: Portfolio Feedback

Post by Kaione »

Answering a few of the questions so far:

This is a taxable account. It is my primary account and the biggest by a very large margin.

I'm 40 years old and high NW.

I am thinking 100% stocks. I've contemplated retirement, but I am not convinced I actually will anytime soon so I'm reluctant to do a bond tent now similar to how people like BigERN suggest (I can retire right now technically). My plan was to withdraw something low (like variable 2.5%) and hope that that would justify 100% stocks instead of a more recommended 70/30. With the goal being that my portfolio grows over time and I can withdraw more (as a result of accepting swings in withdrawl with 2.5% floating percentage each year, though I contemplated doing 1.5% fixed first year + inflation and a floating 1% ontop to capture growth/increased QoL)

I used to always be a buy and hold investor, however during covid I decided to do trading, and thus realized gains on my entire account. I was lucky and came out very ahead in the end even after accounting for the tax hit, but I generally prefer to buy and forget. As a result, I was in all cash by the end of 2021. I re-entered the market after being convinced to go with an advisor (had a lot going on in my life at the time and didn't want to make decisions, was afraid of re-entering after such a run up in recent years).

Because of my entry point and the direction of the market recently, I only have losses (have some gains since I tax loss harvested a few weeks ago).

If I were to sell now and change funds, I'd be in realizing some gains, but it seems like a small deal compared to long term having higher expense ratios.

My advisor seems like a nice guy, but I am fairly skeptical at anyone's ability to post consistent gains over the market, and they seem to have slowly shifting opinions about various allocation percentages (on a very small scale to be fair), so I'm not sure how to even work with them long term, since I shouldn't be selling in the future if the market goes back up anyways just to reallocate based on the latest opinions they have.

I was considering going solo again, and saving the 0.6% total ER, especially because if I withdraw 2.5%, 0.6% is a massive percentage of that and has a material effect on all the retirement success models i've seen. I'd like to be at least decently diversified so I don't always have doubts in my head about my allocation, and can hold long term and forget. I also have some small doubts if I won't screw up (and be tempted to sell to chase trading or something else again), so thats part of what convinced me to go with an advisor, even though the voice in my head told me how its usually just a bad idea and costs dearly long term (was convinced 0.4% is not that bad compared to higher amounts). I could try to negotiate a lower ER with them, but I'm not sure its very fruitful, even if they cut it by half, I think I'd still tell myself I doubt what they offer me is material.

I do want to be in a position to retire any day I want, allocation wise. But I do not want to sacrifice long term gains to hedge that way (especially because i'm lacking confidence if i will retire or not, i've been very unstable on that), so instead i've been thinking to just position for maximum long term, and withdraw a smaller amount to help offset sequence of return risk and give me a bigger dollar withdrawal in the very long term.

Sorry to be overly wordy compared to my original post, but it sounds like I needed to give more context.

I'll edit the original post to include this.
dbr
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Joined: Sun Mar 04, 2007 8:50 am

Re: Portfolio Feedback

Post by dbr »

Kaione wrote: Mon Aug 08, 2022 9:59 am
I am thinking 100% stocks. I've contemplated retirement, but I am not convinced I actually will anytime soon so I'm reluctant to do a bond tent now similar to how people like BigERN suggest (I can retire right now technically). My plan was to withdraw something low (like variable 2.5%) and hope that that would justify 100% stocks instead of a more recommended 70/30. With the goal being that my portfolio grows over time and I can withdraw more (as a result of accepting swings in withdrawl with 2.5% floating percentage each year, though I contemplated doing 1.5% fixed first year + inflation and a floating 1% ontop to capture growth/increased QoL)

Good for you. Of note you managed this analysis yourself and got nothing from what you are paying the advisor, right?


My advisor seems like a nice guy, but I am fairly skeptical at anyone's ability to post consistent gains over the market, and they seem to have slowly shifting opinions about various allocation percentages (on a very small scale to be fair), so I'm not sure how to even work with them long term, since I shouldn't be selling in the future if the market goes back up anyways just to reallocate based on the latest opinions they have.

They have nothing to offer you.

I do want to be in a position to retire any day I want, allocation wise. But I do not want to sacrifice long term gains to hedge that way (especially because i'm lacking confidence if i will retire or not, i've been very unstable on that), so instead i've been thinking to just position for maximum long term, and withdraw a smaller amount to help offset sequence of return risk and give me a bigger dollar withdrawal in the very long term.

One job an advisor can do is to bring this to specifics and ensure you are doing the right things to achieve this. Apparently this advisor has nothing to offer in this department. That is not a surprise.

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retiredjg
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Re: Portfolio Feedback

Post by retiredjg »

I think you need to get the two REIT funds out of taxable no matter what else you decide to do. They are one of the most tax-inefficient things you can put in taxable.
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ruralavalon
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Location: Illinois

Re: Portfolio Feedback

Post by ruralavalon »

Kaione wrote: Mon Aug 08, 2022 1:29 am Edit: Adding more info

This is a taxable account. It is my primary account and the biggest by a very large margin.

I'm 40 years old and high NW.
retiredjg wrote: Mon Aug 08, 2022 10:17 am I think you need to get the two REIT funds out of taxable no matter what else you decide to do. They are one of the most tax-inefficient things you can put in taxable.
+ 1.

Also for improved tax-efficiency consider eliminating Vanguard FTSE Emerging Markets ETF (VWO) ER 0.08%, and using only Vanguard FTSE Developed Markets ETF (VEA) ER 0.05% for your international stock allocation.

For better tax-efficiency eliminate Dodge & Cox Stock I DODGX) ER 0.51% because it is an actively managed fund with a turnover rate of 10%, and use a more tax-efficient stock index fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Kaione
Posts: 157
Joined: Sun Aug 07, 2022 10:57 pm

Re: Portfolio Feedback

Post by Kaione »

dbr wrote: Mon Aug 08, 2022 10:06 am Good for you. Of note you managed this analysis yourself and got nothing from what you are paying the advisor, right?
No, the retirement stuff has been on my own.
Topic Author
Kaione
Posts: 157
Joined: Sun Aug 07, 2022 10:57 pm

Re: Portfolio Feedback

Post by Kaione »

ruralavalon wrote: Mon Aug 08, 2022 10:44 am
Kaione wrote: Mon Aug 08, 2022 1:29 am Edit: Adding more info

This is a taxable account. It is my primary account and the biggest by a very large margin.

I'm 40 years old and high NW.
retiredjg wrote: Mon Aug 08, 2022 10:17 am I think you need to get the two REIT funds out of taxable no matter what else you decide to do. They are one of the most tax-inefficient things you can put in taxable.
+ 1.

Also for improved tax-efficiency consider eliminating Vanguard FTSE Emerging Markets ETF (VWO) ER 0.08%, and using only Vanguard FTSE Developed Markets ETF (VEA) ER 0.05% for your international stock allocation.

For better tax-efficiency eliminate Dodge & Cox Stock I DODGX) ER 0.51% because it is an actively managed fund with a turnover rate of 10%, and use a more tax-efficient stock index fund.
My biggest uncertainty is regard the allocations in general, if I should be in so many individual funds versus just 1-2. So if I get rid of my financial advisor, I have two routes: 1) Maintain the current allocations and just replace them with cheaper ER ones, or 2) Get 1-2, maybe 3 funds.

I've been leaning towards #2, mainly because I'm not sure on what basis this allocation is better than anything else.

While I'm willing to do 100% stock allocation (curious if my logic is sound in the above post on 100%), I feel relatively clueless on what proper diversification means within stocks. Do I go just US? Do I go total global stock market? Do I try to diversify against specific currencies? Do I pick a percentage for US and a percentage for the rest? I'd like to be able to make a choice now that I can leave for 40-60 years, so I don't realize another tax hit if I was overly specific/personalized in my choice here. But mainly, I want the peace of mind to not second guess my decisions later, because I feel thats the biggest way I'll lose and there will come a time where I'll doubt myself (like if I went all in on US growth only, or value, etc).

So to recap, how do I properly diversify? I don't know how to evaluate that. I don't want to over diversify at the cost of long term gains either.

Appreciate any help you guys can give. Am I correct in selling these in exchange in an aversion to 0.2% expense ratio?
dbr
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Joined: Sun Mar 04, 2007 8:50 am

Re: Portfolio Feedback

Post by dbr »

I would start here: https://www.bogleheads.org/wiki/Three-fund_portfolio

Note the discussion does not resolve the proportions between US and International stocks. This has been an issue of much discussion on the Forum and my take is that there is a solid consensus that the fraction International of all stocks should be between 0% and 50% or perhaps more. Vanguard seems to have landed at 40% in their Target Date funds based on no clear reasoning you can actually read in one place.

I advocate deciding on the stock/bond asset allocation based on need, ability, and willingness to take risk, a thoughtful process you can find in a couple of Larry Swedroe's books or someone might reference some reading. I would start here:

https://www.bogleheads.org/wiki/Risk_an ... troduction

Lots of people make other bond selections than total US bond market index. I myself am almost entirely intermediate TIPS funds. There is unending discussion about bonds. I feel there are far more options in bonds than good reasons to distinguish among them. Swedroe has a book on bonds that might or might not help and Rick Ferri's book on asset allocation is good if you don't get sidetracked into portfolios that are too complicated.
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retiredjg
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Re: Portfolio Feedback

Post by retiredjg »

1. Decide on what you want your stock to bond ratio to be. I suggest no less than 20% bonds, even for younger investors. That is more conservative than many suggest these days, but I think that is the influence of the very long bull market we've just been through.

2. Decide what percentage of stocks you want in US vs foreign. Recommendations run from 0% international up to the market weight at about 50%. If you just don't know, I suggest you choose something between 20% and 33% (1/3rd of the stocks in international).

3. Find the funds to fit this allocation, starting with your work plan which is likely to be the most inflexible of all your accounts. Then fill in the rest of the portfolio around that in other accounts.


If you want help with this, consider posting your information in the format we use to help people with their portfolio questions. See link at the bottom of this message.
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