Poll: Percentage of Smallest Holding in Portfolio?

[phil1ben]

I own no mutual funds. Individual stocks are 20% of my NW. Individual stocks within this group range from just under 1% to 9.9% of the individual stock portfolio.

 

[kcowan]

Am I missing something? The math in many of the responses here doesn't seem consistent with how we generally think about diversification, does it?
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I think the OP was after the smallest % that the investor decides to hold. They have the holding for its performance not its components.

 

[scrabbler1]

I think the OP was after the smallest % that the investor decides to hold. They have the holding for its performance not its components.

That was my take, too. I didn't include the small amount in my local bank's checking account because it is a condition to keeping the hub account open and free of any monthly fees. It doesn't generate any investment earnings. Simply avoiding any fees could be considered "earnings" but I don't consider that in the equation.

 

[splitwdw]

I have a very small percentage (<2%) of our portfolio assigned to "speculation".

If I ignore that, our smallest holding is about 7%.

I'm still in accumulation stage and was advised to have 1 or 2 small holdings in a speculative stock. That's my play money and won't hurt me if it goes south.

 

[kaudrey]

I have a few managed funds as well as individual stocks, all bought in the 80s and 90s in my taxable account, that I am holding until I retire to avoid capital gains taxes. Now I am strictly an index fund investor, so these "legacy" holdings have become a very small part of my portfolio over time.

 

[swakyaby]

My smallest holding is my biggest loser, Vanguard's Precious Metal and Mining Fund, approximately 0.9% of my portfolio. I plan to divest myself of it when I need capital losses to offset capital gains next year.

 

[Ed B]

3% in megacorp company stock which happens to be my only single stock. My 401k matching funds are in the form of company stock so i will have a percentage in it until retirement.

 

[ERD50]

I think the OP was after the smallest % that the investor decides to hold. They have the holding for its performance not its components.

But I guess I don't see the sense in the distinction. I don't buy SPY or BND for being SPY and BND, I buy SPY and BND to get exposure to all their components.

It's not like SPY represents a single holding, it represents all it's holdings. I just don't see how looking at it any other way does anything useful. With that view, I could hold two different S&P500 funds/ETFs and ignore that they really are essentially the same investment? Makes no sense to me.

-ERD50

 

[Sunset]

I have .37% invested in VOO (most of the rest of our portfolio is in other funds, like SPY or EAFE). The reason I put some in VOO is because a few years ago I received a small inheritance from an aunt. We don't need that money, so I wanted to invest/set it aside for my young/future nieces and nephews. Having it "separate" just helps me with the mental accounting to keep the initial investment earmarked along with any growth. There's probably a better way to do it, but that's what I came up with at the time. I have maybe one other fund like this that is also <1% of the portfolio.

I'm open to suggestions if there's a better way to track something like this without doing a bunch of math, lol.

Open an account at a different brokerage, and transfer "IN KIND" the money there. If it's enough, they will even give you a bonus few hundred for the effort.

Then you can diversify it a little more without worrying about mixing it with your other money.

 

[NW-Bound]

Holding 1% of a diversified MF or ETF may not make sense. Suppose that the rest of your stock is in S&P, and the S&P goes up 5%, and this bitty component beats the S&P by 25% and goes up to 6.25%. Then, your entire stock AA goes up 0.99*5% + 0.01*6.25 = 5.0125%.

That extra 0.0125% means $125 for each $1M in your portfolio. Is it worthwhile? I guess it depends on the investor.

As for me, if I buy this MF because I think it is going to beat the S&P or because I want a bit more concentration in a particular sector or if I want to do buy low/sell high with rebalancing, I would not place such a bitty bet.

Of course 1% in individual stocks or specialized ETFs can pack a punch. They can lose 1/2 the value, or double in a year, and that means 0.5% in the value of your portfolio. That is not a small amount when one thinks of living on 3% WR.

 

[GravitySucks]

Cash at less than 1% sometimes up to 2% is my smallest item.

 

[jollystomper]

Chemours, well less that 1% - received some shares when DuPont spun them off 2 years ago. Hindsight is 20/20 , the stock is up around 250% since then. One day it will fund nice seats at an NFL game for us.

 

[RunningBum]

My HSA is less than 1%, in a credit union CD. I've got a couple of other small savings accounts in banks also less than 1%. If you want to combine all cash equivalents as a single investment, or only count non-cash, I've got some between 2-5%. Equity funds only, 5-10%.

 

[SecondCor521]

2.70% in an age-based option inside an Idaho 529 if you want to include my kids' college accounts. 6.66% in VBTLX if you don't.

 

[kcowan]

But I guess I don't see the sense in the distinction. I don't buy SPY or BND for being SPY and BND, I buy SPY and BND to get exposure to all their components.

It's not like SPY represents a single holding, it represents all it's holdings. I just don't see how looking at it any other way does anything useful. With that view, I could hold two different S&P500 funds/ETFs and ignore that they really are essentially the same investment? Makes no sense to me.

-ERD50

OK so my smallest individual holding is 0.14% but it is direct as I do not break down my funds that way since I have no control over them. Why would I say it is a holding if it can disappear overnight without any input from me? The idea behind holding 2 different ETFs is diversity. I agree that if they have many of the same holdings, it makes no sense.

 

[sengsational]

Ignoring cash, because that's completely uninteresting.

0.047% is my smallest holding.

 

[Taxman59]

I have 3 individual stocks with ~1.5%. They are the ones next in line for sales. Two of them already had a partial sale and the other was a long term hold that just never justified any additions, so will be on the chopping block when I get the next "cash call" from the checking account!

 

[Cobra9777]

As noted in a related thread, we have 13 ETFs plus a cash account in the portfolio. Ignoring cash, about 55% is in 3 ETFs (VTI, AGG, and VNQ). So the remaining 11 are all single-digit percentages. Four of them are international stocks and bonds, with some specific developed/emerging strategies that I shift around from time to time. They also come in handy for tax loss harvesting. The rest are various tilts like high-dividend (VYM and others) on the equity side and corporate (LQD, HYG) on the fixed income side. The lowest is 2% with a few at 3%.

 

[Kishinev]

3% in VNQI Vanguard Global ex‐US Real Estate. Started at 5%, I didn't loose money in it, it's just that other holdings have done much better lately

 

[dallas27]

5% in vwo, which is emerging equity. Technically I hold to boost my overall emerging exposure to a total of 10% because i have much larger index holdings that are partially emerging(veu,vss).

Just finishing up a semester course about emerging markets investing, and have now decided to equal weight my vwo positions with other assets. 6 asset portfolio total, so 1/6 of portfolio is now vwo. About 1/4 in total is in emerging, abother 1/4 in DM, and 1/2 US.

 

[euro]

I have 0.1% in a Global Bond Fund that has been going sideways for 10 years. I keep meaning to sell it, but somehow never get around to it...

 

[OldShooter]

I gave $100K to the Schwab robot as test porfolio a year or two ago. The robot likes to take tiny positions. As % of our total portfolio these are ridiculous; as % of the robot's portfolio (shown) they are merely silly.

Vanguard Global ex-U.S. Real Estate Index Fund ETF Shares 1.7%
Schwab U.S. REIT ETF™ 3.6%
Schwab International Small-Cap Equity ETF™ 3.9%
Schwab Emerging Markets Equity ETF™ 3.9%
-Cash- 6.0%
Schwab Fundamental International Small Company Index ETF 6.3%
Schwab U.S. Small-Cap ETF 6.8%
Schwab Fundamental Emerging Markets Large Company Index ETF 7.2%
Schwab International Equity ETF™ 9.3%
Schwab Fundamental U.S. Small Company Index ETF 10.8%
Schwab U.S. Large-Cap ETF 11.2%
Schwab Fundamental International Large Company Index ETF 12.5%
Schwab Fundamental U.S. Large Company Index ETF 16.7%

 

[ERD50]

I gave $100K to the Schwab robot as test porfolio a year or two ago. The robot likes to take tiny positions. As % of our total portfolio these are ridiculous; as % of the robot's portfolio (shown) they are merely silly.

Vanguard Global ex-U.S. Real Estate Index Fund ETF Shares 1.7%
Schwab U.S. REIT ETFâ„¢ 3.6%
Schwab International Small-Cap Equity ETFâ„¢ 3.9%
Schwab Emerging Markets Equity ETFâ„¢ 3.9%
-Cash- 6.0%
Schwab Fundamental International Small Company Index ETF 6.3%
Schwab U.S. Small-Cap ETF 6.8%
Schwab Fundamental Emerging Markets Large Company Index ETF 7.2%
Schwab International Equity ETFâ„¢ 9.3%
Schwab Fundamental U.S. Small Company Index ETF 10.8%
Schwab U.S. Large-Cap ETF 11.2%
Schwab Fundamental International Large Company Index ETF 12.5%
Schwab Fundamental U.S. Large Company Index ETF 16.7%

Interesting. It's far more funds than I use, but I see the logic to it, I'm not sure I'd say it is silly.

Looks to me like they are diversifying across a number of market segments, which is fine (whether you need to or not is questionable, but it's a reasonable approach).

REITS, Emerging/INTL, small cap, large cap. And for good measure, take a few positions in each. So yes, the divisions get pretty small by the time you divide an asset class a couple times. But I don't think that's a problem, might be a slight advantage to my very simplistic approach. At this point I'm nearly all: BRK to reduce divs in my taxable account while I do ROTH conversions, plus some SPY, IWM; BND (along with some SPY & IWM) and a European Fund in an IRA. Plus a couple 'left-overs' from earlier days. So my simple approach isn't that much simpler, and I have less diversification (whether it is needed or not).

-ERD50

 

[OldShooter]

... might be a slight advantage to my very simplistic approach. ... So my simple approach isn't that much simpler, and I have less diversification (whether it is needed or not). ...

Well, here's the rest of the story:

In the past few years I have become fond of setting up small ($100K) test portfolios and using them as benchmarks. Playing with real money eliminates the problems of comparing total return to nominal return, quotes from various sites that aren't in agreement, and bogus benchmarks from fund companies. It's hard to argue with real dollars.

So ... my first benchmark was 65% total US market and 35% total international market, started on Jan 1 of 2015. No rebalancing. I call this one my "couch potato" (CP) portfolio.

I started the robot account on April 1 of 2015 and it has never outperformed the CP on a cumulative basis. Cumulative performance of the CP for 9 quarters to the end of 2Q17 is 19.9% and the robot is at 15% for its equity holdings (no drag from the cash it insists on holding). 4Q16 was the only quarter where it outperformed the CP and then by a massive 0.1%! For reference the ACWI All Cap total return was 19.7% for the period.

After looking at a number of professionally managed portfolios it is my suspicion that they are complicated because the professionals want their customers to believe that investing is complicated, not because the complication brings any financial benefits.

For example, though I am too lazy to research the proportionality math, holding large cap international, small cap international, emerging markets, etc. as the robot does just smells to me a lot like a total international fund.

I'll probably close the robot fund next April after it has run for three years. It has not shown me anything impressive over the admittedly mild swings we have seen in the last 9 quarters, so I am thinking that it never will.

Back to our regularly scheduled program: I don't think you need to feel like this complicated robot portfolio offers any significant advantage compared to much simpler approaches.

 

[ERD50]

Well, here's the rest of the story:
...

So ... my first benchmark was 65% total US market and 35% total international market, started on Jan 1 of 2015. No rebalancing. I call this one my "couch potato" (CP) portfolio.

I started the robot account on April 1 of 2015 and it has never outperformed the CP on a cumulative basis. Cumulative performance of the CP for 9 quarters to the end of 2Q17 is 19.9% and the robot is at 15% for its equity holdings (no drag from the cash it insists on holding). ...

....

Back to our regularly scheduled program: I don't think you need to feel like this complicated robot portfolio offers any significant advantage compared to much simpler approaches.

And the 'rest of the story is interesting as well. Though I wonder if over a longer time period, some rebalancing among these sectors might produce some alpha? Big if on that, but I would not rule it out.

After looking at a number of professionally managed portfolios it is my suspicion that they are complicated because the professionals want their customers to believe that investing is complicated, not because the complication brings any financial benefits.

I agree. How can you impress someone with something simple? But I won't go so far as to think there is anything outright 'wrong' with their approach, unless it is really increasing costs. Maybe some of those sectors have some high ERs associated with them?

Oh, and after looking at your quoting of my post, I realize my wording was ambiguous.

I said "might be a slight advantage to my very simplistic approach"


I meant "they might have a slight advantage over my very simplistic approach"

Bottom line, I'm not going to defend them, but I'm also not going to be too critical either (unless they charge 1% AUM for this!).

-ERD50