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Old 03-16-2016, 09:39 PM   #41
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WOW! That's a lot of funds!


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Old 03-16-2016, 09:46 PM   #42
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Originally Posted by pb4uski View Post
Has he ever used M*'s Instant X-Ray tool to assess his portfolio?
"No, I have a guy who handles all that for me. No, I don't want to read a book about this stuff." Trust and outsourcing can be very expensive.
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Old 03-17-2016, 08:42 AM   #43
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Way too complicated for me. I'm guessing that he has more tickers than I have had in my lifetime. Has he ever used M*'s Instant X-Ray tool to assess his portfolio?
Where can I find that?
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Old 03-17-2016, 09:13 AM   #44
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I didn't look up each of those friend's funds, but with that many there just has to be significant overlap/duplication, above and beyond additional loads and fees.
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Old 03-17-2016, 09:33 AM   #45
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Originally Posted by Moleskin Moyer View Post
Where can I find that [Morningstar X-Ray]?
Here's a link to "Instant X-Ray", which is free and doesn't require an enrollment into Morningstar: Instant X-Ray

It asks for the ticker symbols for each holding (a 5 character alphabetical code. E.g. The one for Oakmark International Small-Cap Fund 8509 is O A K E X). If he doesn't have them, he can find them by entering the fund name in the search area of the Morningstar main page (Morningstar €“ Independent Investment Research), or just using Google.

Without a dollar value or percent of total portfolio for each fund, it's not possible to do an analysis of the portfolio (his total expenses, the degree of overlap of his various funds, how his portfolio is weighted (to large/small, growth/value, Domestic/International, stocks/bonds, etc)).

If he gets serious about this, it's well worth the few dollars to sign up with Morningstar and have access to the Premium tools and the reports from their analysts. I think it's about $25 per month, and there's a 14 day free trial period. He could quit after 1 month if he gets the answer he needs--that would be an incredible bargain compared to what he's paying now.
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Old 03-17-2016, 12:58 PM   #46
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The list of funds shows that the portfolio cannot be 100% equities, but has some bond funds in it as well. Therefore, the return of this portfolio is very unlikely to have outperformed the S&P500 index fund. In other words, the portfolio cannot be an "aggressive growth" portfolio.

A better comparison would be to a Vanguard Target Retirement or LifeStrategy fund of index funds with about the same ratio of stocks:bonds as this portfolio.

The M* Instant X-ray would show the ratio of stocks:bonds for this set of funds as long as one put in the dollar amounts of each of the funds. Of course, even better would be to put in the transactions over the years, but that's not going to happen.

In any event, a truly valid comparison would get complicated fast and would be unlikely to convince a non-believer in switching to a low-cost passively-managed portfolio of index funds.

Then add to all that, tax efficiency if any of these funds are held in a taxable account. Taxes can be an additional cost that is quite stealthy since one rarely pays the taxes by cashing in fund shares.

And one more thing: Since this portfolio appears to be held at Fidelity, the Fidelity "Analysis" tab will run something they call "Guided Portfolio Summary" which is the same thing as the Morningstar X-ray analysis. Fidelity clients should not have to type anything in and just click a few buttons to get the analysis.
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Old 03-20-2016, 11:09 AM   #47
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=RATE(7,-1800,-130000,243000) = 8.28% Not so hot.
I used pb4uski's example to run my numbers and my friend's. You guys can troubleshoot me.

For simplicity's sake I assumed my friend had all equities and no direct holdings or bonds. The time period is January 1, 2009 through December 31, 2015. A period of six years. In that time period I contributed on average $1192 a month into my taxable accounts. I averaged my numbers because my contributions fluctuated with my finances and the availability of funds. On January 1, 2009 I started with $128,574. On December 31, 2015 I had $513,458. I contributed $14,304 annually in that time period.

For my friend I assumed the same time period based on his input. A period of six years, and he contributed $1200 annually. He started with $130,000 on January 1, 2009. On December 31, 2015 he had $243,000.

Rates of return:

Mine: =RATE(6,-14304,-128574,513458) = 19% rate of return
Friend's: =RATE(6,-1200,-130000,243000) = 10% rate of return
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Old 03-20-2016, 12:14 PM   #48
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You might take a look at portfoliovisualizer.com which allows one to backtest a portfolio with monthly (or other) contributions. That would seem to be more fair than what you have done.

For one thing, you cannot compare a portfolio with bond funds to an all-equity portfolio unless you want to reach the conclusion that equities outperform bonds over the long term.
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Old 03-20-2016, 12:42 PM   #49
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For one thing, you cannot compare a portfolio with bond funds to an all-equity portfolio unless you want to reach the conclusion that equities outperform bonds over the long term.
I will gently disagree with this. It is true in fully analytical terms, but if I'm willing to go 100% equities, and accept the volatility, then I can take the view that it is 'fair' to compare that portfolio to my friend's portfolio, and make an informed choice.

But probably more conventional to find out what AA the friend and his FA agreed on (if that was even done), and then match that with the same blend of total bond, total market passive index funds. That should be pretty easy to do.

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Old 03-20-2016, 03:02 PM   #50
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Quote:
Originally Posted by Moleskin Moyer View Post
I used pb4uski's example to run my numbers and my friend's. You guys can troubleshoot me.

For simplicity's sake I assumed my friend had all equities and no direct holdings or bonds. The time period is January 1, 2009 through December 31, 2015. A period of six years. In that time period I contributed on average $1192 a month into my taxable accounts. I averaged my numbers because my contributions fluctuated with my finances and the availability of funds. On January 1, 2009 I started with $128,574. On December 31, 2015 I had $513,458. I contributed $14,304 annually in that time period.

For my friend I assumed the same time period based on his input. A period of six years, and he contributed $1200 annually. He started with $130,000 on January 1, 2009. On December 31, 2015 he had $243,000.

Rates of return:

Mine: =RATE(6,-14304,-128574,513458) = 19% rate of return
Friend's: =RATE(6,-1200,-130000,243000) = 10% rate of return
Only problem that you have is that January 1, 2009 to December 31, 2015 is 7 years, not 6 years.

Assuming those are the right dates, then the returns are 15.5% and 8.6% for you and your friend, respectively.
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Old 03-21-2016, 09:26 AM   #51
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Only problem that you have is that January 1, 2009 to December 31, 2015 is 7 years, not 6 years.

Assuming those are the right dates, then the returns are 15.5% and 8.6% for you and your friend, respectively.
Thanks for the catch! And thanks everybody for the assist in getting to understand my investments more. I learned something to help me measure my progress.

As for my friend I emailed him the numbers and the math behind them. I have yet to hear back. The news has got to be hurting him pretty badly. But I hope it spurs in him the impetus to modify his investment tactics.
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Old 03-21-2016, 10:11 AM   #52
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Thanks for the catch! And thanks everybody for the assist in getting to understand my investments more. I learned something to help me measure my progress.

As for my friend I emailed him the numbers and the math behind them. I have yet to hear back. The news has got to be hurting him pretty badly. But I hope it spurs in him the impetus to modify his investment tactics.
Good luck with your portfolio. And don't get too hung up on measuring progress--returns ebb and flow over time, just keep contributing and tracking your portfolio against applicable benchmarks.

Your friend's "advisor" will have all sorts of excuses reasons for his portfolio's performance. This, together with the predisposition most of us have to avoid believing something that is painful, may be enough to keep him on his present path. All you can, or should, do is give him the tools to see things clearly for himself, and it sounds like you've done that.
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