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Is 13 funds across 5 accounts too diversified?
Old 12-06-2013, 01:50 PM   #1
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Is 13 funds across 5 accounts too diversified?

Some of you may recognize me the newbie here to the forum, and I am hoping to get some additional insight into my investing. So far the advice you folks have given has been invaluable.

After finally getting "serious" about the wife and I's financed (I will admit getting married 7months ago also helped force the issue), I have finally tracked down what I think is all of our accounts.

And what I found is we hold 13 positions across 5 different accounts. I feel I am more than diversified but if I were going to change up any elections it would be on the Schwab Roth account that holds 5 positions. A couple of the funds in that portfolio are a bit weak according to Morningstar with only 1 and 2 stars.

We will also be opening an additional traditional IRA by year end and will need to find a fund home for this lonesome $5,500 that you all are welcome to recommend for us. I don't own any vanguard yet so I am open to those funds

POSITIONS

SYM ACNTTYP ALLOC

DODGX FidelityTradIRA 50%
FUSEX FidelityTradIRA 50%
(12.11% of total portfolio)

FLPSX Fidelity401k 25%
OAKIX Fidelity401k 25%
PEGZX Fidelity401k 25%
PRSVX Fidelity401k 25%
(30.366% of total portfolio)

SASMX ADP401k 100%
(3.75%of total portfolio)

AFJDX SchwabRothIRA 11.31%
CGMFX SchwabRothIRA 5.85%
HIINX SchwabRothIRA 13.84%
JAWWX SchwabRothIRA 9.52%
JORDX SchwabRothIRA 18.42%
(45.27% of total portfolio)

SCHA TDAmeritradeBroker 100%
(8.49% of total portfolio)
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Old 12-06-2013, 02:13 PM   #2
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Those are allocations within each area. That is good to know.

It will help to list percentages overall, so they add up to 100 percent. Just a suggestion.
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Old 12-06-2013, 02:26 PM   #3
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[QUOTE=target2019;1387913]Those are allocations within each area. That is good to know.
Overall breakdown of accounts based on non-cash investments:

OVERALL PORTFOLIO POSITIONS

FidelityTradIRA 12.11%
Fidelity401k 30.366%
ADP401k 3.75%
SchwabRothIRA 45.27%
TDAmeritradeBroker 8.49%
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Old 12-06-2013, 02:39 PM   #4
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Sorry guys...I literally just gathered the info. The percentages of account to overall portfolio are posted above.
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Old 12-06-2013, 02:59 PM   #5
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Quote:
Originally Posted by kgtest View Post
AFJDX SchwabRothIRA 11.31%
CGMFX SchwabRothIRA 5.85%
HIINX SchwabRothIRA 13.84%
JAWWX SchwabRothIRA 9.52%
JORDX SchwabRothIRA 18.42%
(45.27% of total portfolio)
Almost there, but the 5 funds in this set don't add up to 100%...(I get 58.94% total?)
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Old 12-06-2013, 03:24 PM   #6
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Made me dizzy looking at all of it but I am a boglehead follower so YMMV. All of my money is in 3 funds and my allocation right now is 50/50 between stocks bonds. Ttl US Stock maret, Ttl Foreign Stock market and Ttl bond market. Thankfully all are in one place which in my case is Vanguard. I love the diversification and simplicity.

I might add a reit later on but that would max out the number of funds invested in at 4 and that's more than enough for me.
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Old 12-06-2013, 04:11 PM   #7
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Almost there, but the 5 funds in this set don't add up to 100%...(I get 58.94% total?)

Aha...the rest of that portfolio is in cash. Sorry.
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Old 12-06-2013, 05:29 PM   #8
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If the 401k's are through your employer (?) I don't see that you could do a lot of combining of accounts given the differing types. You could move all of the IRA's and the TD Ameritrade to a single firm.

As to the number of funds that's a bit of a function of what kind of an asset allocation you are trying to achieve but it does seem like a lot of funds to keep track of IMHO.
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Old 12-06-2013, 08:22 PM   #9
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Not a big problem with the number of funds, especially when the accounts are held in different places and especially 401k's. Whatever you can handle is fine.

What you do want to watch for is your diversification. Make sure that as a whole, your funds are covering pretty much the total U.S. stock market and international markets. Of the funds I recognize, they seem to have a good variety. Now figure out a target asset allocation and pick funds to fit it, rather than just picking "good" funds.

I wouldn't worry about Morningstar stars as much as their gold/silver/bronze ratings. Those are more forward looking. And if you pick low cost index funds you don't have to pay much attention to selecting good funds.
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Old 12-07-2013, 02:45 AM   #10
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Not a big problem with the number of funds, especially when the accounts are held in different places and especially 401k's. Whatever you can handle is fine.

What you do want to watch for is your diversification. Make sure that as a whole, your funds are covering pretty much the total U.S. stock market and international markets. Of the funds I recognize, they seem to have a good variety. Now figure out a target asset allocation and pick funds to fit it, rather than just picking "good" funds.

I wouldn't worry about Morningstar stars as much as their gold/silver/bronze ratings. Those are more forward looking. And if you pick low cost index funds you don't have to pay much attention to selecting good funds.
Great advice. With the 401ks I am obviously limited to fund selection. I do have a bit of free cash in the Schwab Roth IRA that I could allocate to an index fund and the $5,500.

I like your idea of transitioning from "picking winners' to "targeting allocation". I am learning enough and my spreadsheet is getting built out enough that I think I can comfortably do this.

I extracted the top 25 positions from each one of these funds and ended up with a list of 300 companies/%...and it looks like a nice coverage that's for sure.
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Old 12-07-2013, 05:37 AM   #11
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I was very unclear. Better way to state a portfolio is to show the percentage of a particular asset against the whole (or total portfolio) . The information you present is worth knowing, but to others who comment they'd be interested in knowing what is allocated to FUSEX s&p500.

When you begin to analyze in this way it directs your attention to what's in the fund. For instance, how much large cap do I hold?

Thanks for sharing your investment ideas...
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Old 12-07-2013, 10:48 AM   #12
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And what I found is we hold 13 positions across 5 different accounts.
I wish we had only 13 positions. Due to having multiple retirement and individual accounts we probably have something like 60 positions in 40 funds. However, it's not as bad as it sounds because many of these are the same (or very similar) fund held in two different accounts (e.g. S&P 500 in 401k and Vanguard total US stock in individual).

To see how diversified you are, you can put your portfolio in morningstar's x-ray and it should provide a breakdown by size and value as well as by sector.
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Old 12-07-2013, 11:25 AM   #13
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I was very unclear. Better way to state a portfolio is to show the percentage of a particular asset against the whole (or total portfolio).
Here's what I think we were all hoping the OP would provide. It's not that bad overall but for me:
  • there's too much overlap,
  • the expense ratios are higher than necessary (but I've seen worse),
  • there's no point in any target allocation under 5% of total portfolio and
  • frankly it looks like the choices are a somewhat random collection of funds pieced together over time (I know, because I used to do that 30 years ago).
The aggregate returns for the stock portion aren't much different than if all was held in an S&P 500 index fund. A lazy portfolio would make more sense to me...
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File Type: jpg 13 funds.jpg (82.6 KB, 22 views)
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Old 12-09-2013, 07:01 PM   #14
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Lol. Yes this is a pieced together portfolio.

So if there is room to improve it would be to reduce overlap, expense ratios and target a smaller allocation for one of the funds.

Seems like resonable and sensible advice. However I am very fresh off the boat of investing so I am not sure I would know better.
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Old 12-09-2013, 07:03 PM   #15
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Here's what I think we were all hoping the OP would provide. It's not that bad overall but for me:
  • there's too much overlap,
  • the expense ratios are higher than necessary (but I've seen worse),
  • there's no point in any target allocation under 5% of total portfolio and
  • frankly it looks like the choices are a somewhat random collection of funds pieced together over time (I know, because I used to do that 30 years ago).
The aggregate returns for the stock portion aren't much different than if all was held in an S&P 500 index fund. A lazy portfolio would make more sense to me...
Lol. Yes this is a pieced together portfolio.

So if there is room to improve it would be to reduce overlap, expense ratios and target a smaller allocation for one of the funds.

Seems like resonable and sensible advice. However I am very fresh off the boat of investing so I am not sure I would know better.
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Old 12-09-2013, 07:46 PM   #16
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Just a general thought here that may or may not help in your situation.
Given the difference in costs, you owe it to yourself to check out the possibility of switching out a high cost fund for a more efficient ETF.
The drill is fairly simple.
Start at this site---
ETF Database: The Original & Comprehensive Guide to ETFs
At the search box enter your fund symbol. Equivalent ETF's will be listed.
Next do a comparison chart to see how they compare. Of course you need to check the holdings of the two to insure you are looking at apples and apples.
If the ETF looks superior, make the switch. Of course it is really nice if you can do so for no transaction fee.
It's worth a look.
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Old 12-10-2013, 02:49 AM   #17
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Just a general thought here that may or may not help in your situation.
Given the difference in costs, you owe it to yourself to check out the possibility of switching out a high cost fund for a more efficient ETF.
The drill is fairly simple.
Start at this site---
ETF Database: The Original & Comprehensive Guide to ETFs
At the search box enter your fund symbol. Equivalent ETF's will be listed.
Next do a comparison chart to see how they compare. Of course you need to check the holdings of the two to insure you are looking at apples and apples.
If the ETF looks superior, make the switch. Of course it is really nice if you can do so for no transaction fee.
It's worth a look.
With that advice you gave me a lot to chew on.

You were right it was worth a look. I have been looking a bit into ETF's and I purchased the SHA as you can see in that little TD broker account I have. I also contemplated using TIRA to buy some more of SCHA but since it hasn't been up and up since my monitoring I think I might snag one from this list. Thank you for pointing this DB out.

The Web's Best ETF Screener | ETF Database

With this reasoning, I would want to take a look at the losers (high fee) of the below funds and swap them with something similar in ETF. But I am not a fan of these as it is. They say to buy low, so naturally I would want to look at some ETF's that would be projected to rise right?

The funds I can trade into an ETF, the rest of the funds are sitting in 401k. The TIRA DODGX and FUSEX are contenders but both are solid with low fees and expense and I just bought them >30days ago.

Sooo..that narrows my candidates down to the funds within TD Ameritrade and Schwab brokerage accounts...

AFJDX
CGMFX
HIINX
JAWWX
JORDX
SCHA

I did a breakdown of asset % in relation to the entire portfolio and realized I am probably too diversified.

So if I were to loose some higher fee, thinner assets I would ditch
CGMFX JAWWX and
JORDX assets which currently account for 15% of my portfolio and the majority of my portfolios international and largecap equity positions.

- IWO (which I like because it is health-car sector),
- SPYG (which overlaps other assets in my portfolio a bit but so does JORDX so it's kind of a wash).

This worries me a little because I would be eliminating some international /foreign diversification at the cost of leveling out my large blends a little and getting into the ETF world.

Is it a bad idea to have 15% of a portfolio in ETF's at my age of 32 during a high-growth, high risk time in my investing?

I could increase this more if I use that cash in my Schwab account (19%) so I would be almost 50/50 Stocks and Mutual Funds / ETFs.

I have plenty more cash to pump into the market, but I want to be sure I do things right and take small baby steps.

Please feel free to provide advice and correct me. I included a better snapshot of the portfolio asset breakdown.
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Old 12-10-2013, 08:58 AM   #18
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My suggestion is to simplify your portfolio by:

1. eliminating the funds with expense ratios over 0.5% because they will cost you tens of thousands of dollars over the course of your life. Find index funds or ETFs with low expense ratios. Managed funds rarely beat index funds.

2. Develop an asset allocation strategy for your age and follow it using the index funds and ETFs. An example would be 40% large cap, 30% international, 20% small/mid cap, 5% REIT and 5% commodities. Keep in mind if you buy sector ETFs or funds that they will overlap with your index funds, so don't over do it. Allocation between funds or ETFs is not important, but between asset classes is. Once older you may want to consider bonds in your allocation, but they're too dangerous today thanks to the artificially low rates.

3. As much as you can, set up your five accounts to to follow your asset allocation. It will be easier to manage and keep track of.

4. Keep your expenses low! I know I already said that, but it's important.

5. Rebalance your portfolio to match your planned asset allocation at least twice a year.

6. Be sure to keep an emergency fund of at least 8 months living expenses on hand for emergencies. This is not for investing, but to keep you from having to sell your investments when you have an emergency in a down market. Keep it in a savings account for easy access.

7. Don't buy any new funds until they've done their year end capital gains distribution or you'll take a tax hit in taxable accounts. In a 401k or IRA it doesn't matter.

Good luck!
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Old 12-10-2013, 09:24 AM   #19
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kgtest: Your spreadsheet in post #17 adds up to about 66% instead of 100% I thought I had your portfolio accurate using your earlier info in my spreadsheet with post #13. Where did I go wrong?

And how are you holding cash? I assumed a basic sweep Schwab money market fund, which had a ridiculously high ER. That might be an expense leak you could easily fix.
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Old 12-10-2013, 11:23 AM   #20
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kgtest: Your spreadsheet in post #17 adds up to about 66% instead of 100% I thought I had your portfolio accurate using your earlier info in my spreadsheet with post #13. Where did I go wrong?

And how are you holding cash? I assumed a basic sweep Schwab money market fund, which had a ridiculously high ER. That might be an expense leak you could easily fix.
For the sake of cash in my portfolio, I am holding it in a Schwab Bank Sweep. For the cash "emergency fund" I am holding that in a regular credit union and it's a tad more than 8mos living expenses and it is not included in my numbers here.

I am not sure where you went wrong. To get those % I simply took the asset total and divided it into my overall total portfolio assets. It was very late when I put it together so I will have to take a second look at my calculations today.
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