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Old 12-29-2012, 09:07 AM   #41
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We have too many funds:

VAIPX VANGUARD INFLATIO
VWIAX VANGUARD WELLESLE
VGSLX VANGUARD REIT IND
VWITX VANGUARD INTERMED
VINEX VANGUARD INTERNAT
VTSAX VANGUARD TOTAL ST
VGSTX VANGUARD STAR FD
VFSTX VANGUARD SHORT TE
VSIAX VANGUARD SMALL-CA
VBMFX VANGUARD BOND IND
VTSMX VANGUARD INDEX TR
VIVAX VANGUARD INDEX TR
VHGEX VANGUARD HORIZON
FLPSX FIDELITY LOW-PRIC
FNMIX FIDELITY NEW MARK
FIMIX FIDELITY MINNESOT
FSICX FIDELITY SCHOOL S
VBTLX VANGUARD TOTAL BO
VFIRX VANGUARD SHORT-TE
VFIFX VANGUARD TARGET R
VTWNX VANGUARD TARGET R
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Old 12-29-2012, 09:15 AM   #42
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We have too many funds:
+1
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Old 12-29-2012, 10:03 AM   #43
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I'm wondering if a few of you would be willing to share how finely you decided to slice your pie, and why you made the choice you did.
Before I answer the question, I should point out that our biggest asset class is our military pensions. We can do a lot of experimentation while knowing that we'll always have enough money for groceries & property taxes.

I don't know how to account for our rental property. This year it turned a considerable (taxable) profit, but that could be just deferred maintenance or the gap between hurricanes. I don't think you can "rebalance" rental property unless you have a lot of it, and in our case we're holding it mainly for family convenience instead of investment return. I hope to answer that question for good within the next two decades... hopefully our exit strategy is not "probate".

Having fronted those disclaimers:
Frank Armstrong used to call it "diworsification". It's a necessary part of investing, but it's too easily taken to extremes.

I can handle the tracking on a half-dozen assets. More importantly, I can only ignore the tracking on a half-dozen assets without eventually getting bitten by one of them.

I know that some can keep tabs on a portfolio of 30-40 individual stocks, but I think that you have to be hard-wired to stay up with the tracking. Otherwise I'd get a few weeks behind and suddenly I'd have a part-time job updating my portfolio. I found it was a chore just for a dozen individual stocks, let alone a meaningful number.

I've also spent a considerable amount of time over the last 30 years experimenting with different asset classes. You can buy just about anything and claim that you're experimenting with it, but you don't get a real feel for your emotional tolerance on a class until it's at least 10% of your portfolio. There's nothing quite like the thrill of buying on margin, shorting, or selling naked puts, and I don't mean that in a good way. But I didn't really know whether I'd find it worth my time until I tried it and scaled it up. Those criteria of "How do I want to spend my time?" and "Can I sleep at night?" helped me decide to stay away from commodities, most bonds, peer-to-peer lending, IPOs, and all but one individual stock. So I'd say that any asset in a portfolio should make up at least 10% of that portfolio.

Like Clif, I've made angel investments in startup companies. I've spent five years getting into it, and I'll probably spend 5-10 years getting out of it. The process has been hugely educational and it's made me a better investor. The "problem" is that it has not yet been profitable. (Even rental real estate is more liquid than an angel investment.) More importantly I've learned that I have "enough". If I end up sitting on the next Google or Facebook, I don't think it'll make a difference in our lives. Same with the income from selling call & put options-- it's not profitable enough unless you scale it up, and then it's too much risk for the work.

The biggest advantage of all this experimentation is that I won't be tempted to try any of it when I'm in my 70s or 80s. I'm apparently at the peak of my cognition right now, and it's all downhill from here. 25 years from now when some nice young man (or sweet young girl) cold-calls with a can't-miss idea, I can probably say that I've been there and done that.

In our ER portfolio, our top three are the Dow Dividend ETF (DVY), the International Value ETF (EFV), and Berkshire Hathaway. Small cap is close behind, with shares like the iShares small-cap value ETF (IJS), the TSP "S" fund, and angel investments*. These days we try to limit each to 18-28% of the portfolio before rebalancing.

We usually try to keep our cash fairly low at 4-8% of our portfolio just because it's two years of living expenses. Right now we're sitting on an all-time high of 15%, but I suspect we'll have a few opportunities to put some of that to work in the coming year.


* Yeah, I know angel investments are in a class by themselves. But by lumping them with small cap, I'm forced to sell one to buy the other.
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Old 12-29-2012, 10:34 AM   #44
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I know that some can keep tabs on a portfolio of 30-40 individual stocks, but I think that you have to be hard-wired to stay up with the tracking. Otherwise I'd get a few weeks behind and suddenly I'd have a part-time job updating my portfolio. I found it was a chore just for a dozen individual stocks, let alone a meaningful number.
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I agree completely. My portfolio is all individual stocks, but I get the same relaxed feeling from keeping my tracking numbers up to date that others might get from watching a football game. If I started to feel that this was a chore, I would probably switch to mutual funds.
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Old 12-29-2012, 11:15 AM   #45
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Mostly 4 index funds:

Vanguard Total Stock Index
Vanguard Total International Index
Vanguard Short Term Bond
Vanguard REIT Index


I use Vanguard S&P 500 if I don't have access to total stock index and I also have some Wellington and Vanguard Balanced Index. I think I have too many funds, but I try to keep my allocation consistent and expenses below .2%. Right now I am about at .17%.
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Old 12-29-2012, 12:13 PM   #46
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I guess I'm the odd one out here, with about 75 different holdings (4 funds and the rest individual stocks) across 8 different accounts. It's a lot of work keeping up with it all, but I enjoy it so I just consider it one of my hobbies.
(sheepishly slowly raising my hand) I'm in the camp with braumeister.

I just can't wrap my head around just having a handful of funds, and not being diversified enough into the emerging markets that (IMO) will have a good chunk of growth going forward. And how do you pick just one emerging market fund?

When I accumulate a bit of cash to invest, I'll look around for stocks that look cheap. And when the cash accumulates in my tax-deferred accounts, I'll usually try to lean towards fixed income (like preferreds) over common stock.

And finally, I favor diversification. Since my average investment used to be about $2,000-$2,500 (and has since been upped to about $3,500 per position as the portfolio grows), I've amassed an unconscionable portfolio of 437 ETFs, individual (common/preferred) stocks, REITs, MLPs, and mutual funds among just about every class out there. It helps when everything's arranged in a massive spreadsheet to keep track. Most of the count is in individual stocks/preferreds, with just a little overlap with some Vanguard funds and foreign ETFs.

If I had the $ in cash that I have now, there's no way I'd sit down and come up with a list of 437 today - it's more a victim of slowly growing the portfolio over the years and letting the dividends DRIP as I wait patiently for the day when I can yell FIRE and pull the plug, and then adding a few here and there when cash becomes available.

When I do reach retirement, I don't know if I'll simplify things or not. It is nice having an expense ratio that is dwindling down to just a few basis points on all of those equities, however. And I do pity the fool that inherits such a portfolio and liquidates them all in the same year, and spends 2 days filling out Schedule D1s out the wazoo.
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Old 12-29-2012, 02:33 PM   #47
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But in a taxable account, once you've selected and invested in your chosen funds, changing funds around has expensive taxable consequences (assuming you've had gains!).
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I will simplify in the years ahead, but like audrey mentioned, I have to move slowly to avoid capital gains.
Thanks to all for sharing your wide diversity of investment profiles.
I feel I have too much complexity as a function of numerous incremental decisions/events over the last 20+ years (Current holdings -- TAXABLE: 5 individual stocks, 2 bond MFs, 16 stock MFs; TAX-DEFERRED: 5 IRA stock MFs, 3 TSP stock funds) = 31 total).
I hope to simplify greatly as imminent ER approaches in 2013, but even more importantly adjust AA/rebalance in the process. However I am also concerned about the tax consequences of "change" as mentioned by others. I definitely have to spend some time doing the math, and will also definitely search the Forum archives to learn from others on the most tax-efficient strategies and experience folks have had in moving towards greater portfoilo simplification when you didn't necessarily start out that way.....!
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Old 12-29-2012, 02:51 PM   #48
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Complexity of the portfolio lent little to enhanced performance most of the time.
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Old 12-29-2012, 02:59 PM   #49
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Complexity of the portfolio lent little to enhanced performance most of the time.
I believe that's been shown by research, though I am too lazy to look it up

If you have hundreds of funds, inevitably there will be duplication of stock holdings. That will increase the correlation between them, which defeats the purpose of diversification.
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Old 12-29-2012, 03:01 PM   #50
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I try to keep my portfolio simple.

Pretty much just:

Tot bond, tot US stock, tot Int'l Stock, MM fund.

I have an account of each class in taxable, and a counter part in IRA. When time to re-balance, I try to do so the most I can in IRA to avoid tax consequences.
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Old 12-29-2012, 03:11 PM   #51
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We're at 9 funds:

Vanguard Total Stock Market Admiral Fund
Vanguard Small-Cap Value Admiral Fund
Vanguard REIT Index Admiral Fund
Vanguard European Admiral Fund
Vanguard Pacific Admiral Fund
Vanguard Emerging Markets Institutional Fund
Vanguard FTSE ex-US Small Cap ETF
Vanguard Total Bond Institutional Fund
Vanguard Wellesley Admiral Fund

50/50 between us/intl. About 25% in FI, but about 15% of that is now Wellesley, which we added to our portfolio this last year.

I always debate if I should go with a total international instead of splitting it over 3 funds, but I think there's a bonus to be had and it's not that much more work.
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Old 12-29-2012, 03:23 PM   #52
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More slices allows you to weight the components a little more equally, or in a way that reduces the portfolio volatility for a given expected growth. It also gives you more opportunities to rebalance between them. You can also rebalance between a truely active fund and an index or different active fund within the same slice.

Or you can just look at it as indecisive.
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Old 12-29-2012, 05:58 PM   #53
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53 different holdings between mutual funds, individual bonds & stocks, collectibles, & rental properties. With after tax accounts, regualr IRA's, Roth IRA's, 40k, & HSA, each with different pruposes, hard to see how it could be less than 20-25.
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Old 12-30-2012, 08:20 AM   #54
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My portfolio consists of 16 stocks +/- and 4-5 bonds. But that's not what I am posting about.

Ever hear of Harry Browne's Permanent Portfolio strategy? Too simple to fathom. But the current issue of AAII Journal has an article on it. The article backtests the Permanent Portfolio to show it gaining over 10% per year over the last 10 years, 9.5% per year over the last 40 years, and only losing 2% in 2008 (think about that). The Permanent Portfolio's worst annual loss would have been 5% in 1981.

And this is what you are supposed to put in your Permanent Portfolio:
25% in a total market index stock fund
25% in a long-term treasuries bond fund
25% in physical gold bullion
25% in cash

And leave it alone, except for rebalancing whenever one of your 4 asset categories rises to be 35% or more of your portfolio or drops to be less than 15% of it.

The historical performance is really impressive. Could it really be that simple?!
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Old 12-30-2012, 08:51 AM   #55
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actually while the permanent portfolio fund was down in 2008 the homegrown do it yourself one was up.

the only problem going forward is those long term treasuries were in a bull market for 36 years. now at these levels rates will eventually turn around.

with the wind no longer at its back and the bonds acting as a big weight performance will be very different.

i still think it is a great way to bullet-proof one's portfolio but i think gains will be a fraction of what they were.

to bad as i like the permanent portfolio concept alot and have used it off and on for decades.
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Old 12-30-2012, 12:01 PM   #56
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the only problem going forward is those long term treasuries were in a bull market for 36 years. now at these levels rates will eventually turn around.
The media has been warning about the bond market, saying that it will NOT replicate the performance of decades past and that a slight increase in rate could cause a 10% drop in value.

The question is "What to do?" - high yield corporate bonds? High dividend stocks? Emerging market bonds? Gold? Arts/Paintings? Timber? Real estate?
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Old 12-30-2012, 01:29 PM   #57
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pick an asset class and most of us here can argue pro or con for it.

there is no answer.

the reality is everything good ends and everything bad ends so as long as you stick to your plan eventually you should be okay.

this is why i like my newsletter. it takes the pressure and constant thinking about this stuff off my shoulders.

i can freely spend my time worrying about other stuff instead of my next move.
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Old 12-30-2012, 10:02 PM   #58
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Over 60% of our portfolio is in the top four funds. Our cash position is as low as it has been in a while. Like many of you we use our HSA as a tax deferred investment.

Vanguard Institutional Index Fund Institutional Shares
Vanguard Total Bond Market Index Fund Institutional Shares
Vanguard Total International Stock Index Fund Institutional Shares
Vanguard Extended Market Index Fund Institutional Shares
Cash
MegaCorp Stock (unavoidable)
Vanguard Short-Term Bond Index Fund Admiral Shares
Vanguard Wellesley Income Fund Admiral Shares
PIMCO Total Return Fund Administrative Class
Vanguard Inflation-Protected Securities Fund Institutional Shares
Individual Stocks (my playspace)
JPMorgan Equity Index Fund Class A (HSA)
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Old 12-31-2012, 01:53 AM   #59
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I've amassed an unconscionable portfolio of 437 ETFs, individual (common/preferred) stocks, REITs, MLPs, and mutual funds among just about every class out there.
!!
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Old 12-31-2012, 04:59 AM   #60
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And finally, I favor diversification. Since my average investment used to be about $2,000-$2,500 (and has since been upped to about $3,500 per position as the portfolio grows), I've amassed an unconscionable portfolio of 437 ETFs, individual (common/preferred) stocks, REITs, MLPs, and mutual funds among just about every class out there. It helps when everything's arranged in a massive spreadsheet to keep track. Most of the count is in individual stocks/preferreds, with just a little overlap with some Vanguard funds and foreign ETFs.
What I love about this forum no matter how foolish I feel for having a 60+ page tax return and complex portfolio. I can always count on somebody to beat the pants of me in the dept. We have a winner MooreBonds

Tell you heir/executor that he should be really thankful that you didn't kick the bucket in 2010, if you had they would have had to figure out the cost basis for all 437 positions in taxable accounts. With DRIPs that would have been a nightmare.
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