Poll:Lumper or Splitter?

[tulak]

I'm debating if I should simplify my portfolio and this made me wonder how other people manage their portfolios? If you choose to vote, it'd also be great if you added why you chose one of these options.

Of course, I know there are many here that are neither lumper or splitters. I added a poll option for you so you don't feel left out. I also suspect that there are some here that are somewhere in between. Such as holding a chunk in Wellesley/Wellington. I'd tend to think that would still fit in the lumper category, but I'll let you decide on how to answer.

For those that aren't familiar with the terms, a lumper is somebody who invests in US/Intl Total Stock/Bond Indexes and Splitters are those that slice and dice their portfolios by overweighting with other asset classes, such as Value/Growth, REITS, Small Cap, etc.

I've always been a splitter, but lately I've been thinking if I should be come a lumper. I've tracked my portfolio performance to Vanguard's Life Strategy Growth Fund. That fund is 80/20, with a 60/40 US/Intl Equity split. The 20 is split in a US/Intl Total Bond fund.

My portfolio has a different assets, but similar equity/bond exposure and for the last decade, it's tracked within about 1%. This makes me wonder if I should even bother with a slice/dice portfolio.

What has me concerned is:

1. Total US is large-cap heavy and that has done really well over the last 10 years. If US large-cap starts to lag, then it could be that a slice/dice portfolio might perform better.

2. I've held a 50/50 US/Intl equity mix and I still managed to track to a fund with a 60/40 mix. In a period where Intl has lagged the US. This goes back to #1: I might be dealing with recency bias.

3. Volatility. In all the modeling I did ages ago, a slice/dice portfolio appeared to have less volatility. At least that's what the math says. But I'm wondering how much this really matters?

Should I be concerned about anything else?

 

[RunningBum]

Lumper. Most of my equities are in taxable. I don't want to be taking the tax hit to be selling to keep things in balance. I also don't want the effort to slice and dice when I'm not seeing an advantage to it. I think the fees on the slice and dice funds are higher, aren't they?

To your point 1, Total US IS large-cap heavy because the value of large caps make up the bulk of the market. If you want to track the total market, you will be large-cap heavy. If you would rather slice/dice to weigh one group over another, you could still use Total US as your core and also buy the funds in the group you want heavier, rather than buying all the sectors with more in some than others. If you want to totally leave out some groups this won't work, but that means your goals are totally different, so of course your method has to be different.

 

[pb4uski]

Lumper.... go to funds are Total Stock and Total International Stock (over 50% in just those two tickers). Usually Total Bond for fixed income but currently parked in VMMXX while rates are rising.... plus some Total International Bond... those 4 tickers are 77% of total.... most of rest is PenFed CDs and some emerging market equities and fixed income.

 

[Red Badger]

Lumper.

Equities are 90% total domestic market & 10% total international.
Bonds are 1/2 TIPS and 1/2 total bond market.
Short term are some lumpy CD's (varying amounts/varying duration) that go out about a year.

Happy to keep a simple 4 fund portfolio and just ride the market ups and downs.

 

[nash031]

Lumper, but I have probably a dozen individual investments across my accounts. TSP itself is 5 different funds, but I weight those to make them close to VTSAX, VTIAX, and my desired bond allocation. Outside TSP, most of my investments are VTSAX and VTIAX, with small individual stock allocations in my Roth IRA.

But on the whole, I manage my AA across all of my accounts, and make my AA adjustments inside my IRA or TSP, and by adjusting my contributions to achieve a desired end (e.g. I've been buying more international and more bonds during the current domestic stock run-up).

 

[Retch The Grate]

Lumper, everything is in Vanguard Total Stock Market, except for one IRA that is in the S&P500 that I need to switch over at some point.

 

[big-papa]

Splitter: Lots of Mid and Small Cap Value plus a touch of EM and Int'l small cap. Bonds are intermediate treasuries. Then TIPs/Ibonds to generate an inflation adjusted income stream on top of SS.

 

[Cobra9777]

I guess I'm a splitter. 60% of the portfolio is Total Stock, Total Bond, Total International Stock, and Total International Bond. The rest falls mainly into three categories: (1) real estate... mix of individual rental properties and VNQ (REIT), (2) high-dividend equity like VYM and two others, and (3) corporate bond ETFs (LQD and HYG). We like owning real estate in addition to stocks/bonds, plus all three boost income such that we rarely sell shares.

I've tracked results against a 50/20/30 benchmark (VTI/VXUS/BND) and performance is sometimes better, sometimes worse, but never by a significant amount. In fact, I just compared the two portfolios in Portfolio Analyzer. Over the last 7 years, our portfolio outperformed the benchmark, but only by 38 basis points (CAGR). Other stats are nearly identical. Certainly a case could be made for simplification, but at this point, we sort-of like the income and many of the funds are in taxable with very significant embedded CGs.

 

[Splash]

Historically I've been more of a splitter. While accumulating our nest egg, I enjoyed choosing where to invest new money, especially my annual bonus which was invested after tax so there was no investment choice limitations.

Now that we are retired, I plan to move to more of a lumping strategy. I will use re-balancing and Roth conversions to transition to this to strategy.

 

[38Chevy454]

I guess I fall into the splitter category, but even though I have some sector and other specific funds, they are all widely held diversified funds. No individual stocks owned directly. Did have some company stock in 401k, but sold that when I moved those funds to IRA. I do hold a lot of what OP would consider lumper type in my accounts though.

 

[Kwirk]

Lumper. I'm lazy and would rather think about other things.

 

[PatrickA5]

Lumper. 95% of our retirement portfolio is in Life Strategy Moderate. I do it for simplicity. It's easy to tell if I've lost money by just looking at one ticker - especially today.

 

[Midpack]

I’m a splitter with value, small and (intl) emer mkts tilts - but it hasn’t made a big difference. So I’d be comfortable as a lumper and expect to slowly simplify in the decades ahead. I’ve already gone from 11 funds to 9.

 

[Badger]

Between the two of us it is mainly Wellesley, Wellington, MM, and then a few individual stocks to play with. I would sell the stocks but they are taxable and I don't want to take the tax hit. Unless there is an unforeseen catastrophic event they will go to the children anyway at a different basis.


Cheers!

 

[racy]

Splitter.
51% bonds: Short term corp, Inter-med term corp, Wellesley, hi-yield.
44% stocks: US Stk market, Sm Cap, Int'l Sm Cap, Healthcare, REIT, Wellesley
5% farm land trust deeds & mortgage dependent promissory notes

Why? I enjoy it. But, as I get older & mental competency declines I'll get lumpier. (I trust someone will let me know when that point arrives).

 

[mrfeh]

Poll is somewhat confusing, as I don't usually see the term "splitter" for somebody that tilts their portfolio from the standard 3 fund boglehead prescription...

Anyway, we tilt to small value. Otherwise quite vanilla: 40 US, 20 ex-US, 40 total bond.

 

[Scuba]

Splitter, but moving more towards lumper as we simplify our portfolio. Transition will take several years as we have significant unrealized capital gains.

 

[tulak]

Thanks for the responses. So far it looks like there are a few more lumpers than splitters, but not a big difference.

Poll is somewhat confusing, as I don't usually see the term "splitter" for somebody that tilts their portfolio from the standard 3 fund boglehead prescription...

The term splitter comes from The Four Pillars of Investing by Bernstein. Or at least that's where I got it from. I'm not sure if he originated the term or took it from somewhere else.

There are more references out there using the same terminology. For those that are interested, I found a good summary about Lumpers vs Splitters here: Kevin On Investing: Lumpers vs. Splitters

But I think most people around here are already familiar with the concepts.

 

[big-papa]

Not too surprised by the poll results. This debate goes on endlessly over at Bogleheads with the simplicity crowds (2 or 3 fund portfolio) vs. everybody else including slicer/dicers, tilters, factor geeks, etc.

Heck, there was recently an epic 1000+ posting thread, which is finally beginning to slow down, about whether holding market weight international makes any sense. And it's not like it was the first time it was ever discussed.