Asset Allocation feedback

[inquisitive]

Looking at expense of those funds.... This would be one very expensive portfolio.

I added FSRVX and FSIVX which have very low expense ratios - ~0.18%. The highest is OBCHX with 2.07% which is what I am paying to achieve the diversification I want. Most of the others are around 1%. To get access to New Zealand, Africa through Fidelity requires 3-6% expense ratios. If I leave the company I will definitely switch to an IRA and start getting ETFs.

 

[eta2020]

I added FSRVX and FSIVX which have very low expense ratios - ~0.18%. The highest is OBCHX with 2.07% which is what I am paying to achieve the diversification I want. Most of the others are around 1%. To get access to New Zealand, Africa through Fidelity requires 3-6% expense ratios. If I leave the company I will definitely switch to an IRA and start getting ETFs.

VXUS with expense 0.14 would give you plenty of low cost and broad international exposure which could be tweaked by having bit of VWO, VPL and VGK (for example)

I would say anything with expense higher than 0.10 is EXPENSIVE... SCHD or VTI would be example of great funds which are cheap.

 

[inquisitive]

VXUS with expense 0.14 would give you plenty of low cost and broad international exposure which could be tweaked by having bit of VWO, VPL and VGK (for example)

I would say anything with expense higher than 0.10 is EXPENSIVE... SCHD or VTI would be example of great funds which are cheap.

This is a company retirement plan so I do not have access to ETFs. But it depends on how much diversification one is looking for. VXUS and VGK are close to perfectly correlated and all of the four mentioned above have very strong correlations with each other. The funds I am using have lower correlations than any examples of asset allocation I have come across. If I were to take a large position in FSIVX then I would have to overweight the UK and Japan. All of the low cost international mutual funds have major positions in a few countries. I would prefer to pay higher expense ratios and achieve more diversification than to have low expense ratios and not really be diversified.

 

[robertf57]

It is more diversified than a portfolio that is FSTVX, FSGDX and a bond fund, or one that has an equity division of 70% US, 30% international. If it looks nondiversified because the equity portion is 80% international, the international component cannot be thought of as being homogenous, there is no more relationship between South Africa and India than there is between the US and China.

I do have access to some Spartan funds but have to pay a sales load which I am okay with doing, in fact one of my funds is FSIVX, a spartan international fund.

I think you have some misunderstandings about diversification. Having 10 funds does not add up to diversification. A total market equity fund is quite diversified over the equity universe. Adding another equity fund doesn't necessarily add diversification. The previous morningstar suggestion may give you new inset.

 

[eta2020]

This is a company retirement plan so I do not have access to ETFs. But it depends on how much diversification one is looking for. VXUS and VGK are close to perfectly correlated and all of the four mentioned above have very strong correlations with each other. The funds I am using have lower correlations than any examples of asset allocation I have come across. If I were to take a large position in FSIVX then I would have to overweight the UK and Japan. All of the low cost international mutual funds have major positions in a few countries. I would prefer to pay higher expense ratios and achieve more diversification than to have low expense ratios and not really be diversified.

With such Company 401k I would put 100% with maybe FSTVX and seek international diversification in regular brokerage account or IRA account by buying VXUS, VWO and similar "broad based" index funds.

Don't pick junk in 401k. It will not pay off. Paying more than 0.2 % in fees and picking up specialized index funds is usually mistake on the long run.

 

[DoWright]

Hi All,

I'm new here... I agree with many of the comments that the allocation presented was fairly complicated. I would stick with a more simplistic approach; something like 60/40 or 70/30, or 80/20.

In my book, I discuss various asset allocation options including the idea of migrating your allocation based upon your age; increasing your bond holdings and decreasing your equity holdings as you age. I have not done this myself. As I have gotten older, I haven't adjusted the allocation; I've stayed with my same allocation levels.

I like the earlier comment regarding using the Fidelity's Spartan funds exclusively as they have minuscule expense ratios. If that's an option for you, I'd seriously consider that.

David

 

[samclem]

Everyone has to make their own decisions, but there's no way I'd pay a 2% ER in order to be exposed to some out-of-the-way markets. In addition to the other issues, the accounting standards in some of these spots provide for uncompensated risk. Now, I'm sure Uruguay is poised for a breakout, but I'd be happy to settle for low cost indexes, primarily in developed markets but some developing markets, too.

 

[inquisitive]

To each her own, am going to stick with my revised list of funds (had made some changes, as above). 2% is the highest expense ratio I am paying, most are around 1% and the biggest positions I am getting .09-.20%. To address the point above, I should have clarified, I realize that increasing from 4 to 10 funds by itself does not increase diversification much, but I am adding somewhat unrelated funds, which does increase diversification. I put in all the selections today. I can post the performance and volatility in a year if anyone is interested. I am going to compare it primarily to the gone fishing portfolio below and will calculate it net of expenses so it's a fair comparison. That portfolio has returned 9.9% cagr over the past 10 years. I'll also look at the performance of the lazy portfolios.

Invest Simple with Lazy Portfolios - MarketWatch.com
The Gone Fishin' Portfolio: The Ultimate Index Fund Portfolio - Investment U

 

[easysurfer]

IMO, think asset classes (as in domestic equities, international equities, and bond funds, cash) and not different funds for diversification.