Vanguard Index ETF diversification fee based acct vs winging it

[Silverlocks]

62, retired, living off IRAs. Getting out of a fee-based acct, mainly due to the fact most holdings are Vanguard. Deciding which is best--transfer in kind all holdings, then add 4 Vanguard funds, or liquidate and invest all in Vanguard recommended 4 funds:

Fee Based (not sure why there are so many Vanguard account breakouts):
5% Cash
3% Mutual Fund FPACX FPA Crescent
4% IEF Ishares 7-10 yr treasuries
10% IEI Ishares 3-7 yr treasuries
4% IJH Ishares core S&P mid
10% Mutual Fund MWCIX Metropolitan West
3% PKW Powershares Dynamic
7% SFLNX Schwab US Large
5% SCHD Schwab US Dividend
1% DXJ Wisdomtree Japan Hedged
1% HEDJ Wisdomtree Trust
5% VEU Vanguard All World
7% VUG Vanguard Growth
1% VGT Vanguard IT
3% VCIT Vanguard Intermediate
5% VV Vanguard Large Cap
8% VCSH Vanguard Short Term Corp
19% BND Vanguard Total Bond

vs

14% VTI Vanguard US Stocks
6% VXUS Vanguard Foreign Stocks
45% BND Vanguard Total Bond
5% BNDX Vanguard Foreign Bonds
30% Cash/Short Term

 

[bingybear]

62, retired, living off IRAs. Getting out of a fee-based acct, mainly due to the fact most holdings are Vanguard. Deciding which is best--transfer in kind all holdings, then add 4 Vanguard funds, or liquidate and invest all in Vanguard recommended 4 funds:

Fee Based (not sure why there are so many Vanguard account breakouts):

not sure what you mean about vanguard breakouts. Or do you just mean they uses several vanguard ETFs in the account?

The two portfolios are so different by allocation that it is not reasonable to compare directly. What allocation are you wanting?

 

[samclem]

"Powershares Dynamic" sounds very POWERFUL!

Is this all in IRAs or an after-tax acct? That's a big factor in your next step, due to cap gains considerations.

Just 20% equities, and you're kinda young. . .

 

[Silverlocks]

all in IRAs.
Thank you for compliment "you're kinda young"...lol I am also kinda real skittish....exempt for the fee pd account, this has been sitting doing nothing since Dec. Don't know what I freak out about more....stocks, bonds, or foreign investments. Hence, why I am looking at 30% cash/short term; maybe stupid, but I could sleep better at nite.
I think I know just enough to be dangerous, but last time I was happy with my returns was 4 years ago, when I was the one doing all the diversification.
When I spoke to Vanguard rep, he didn't understand why fee-based advisor had chosen those Vanguard ETFs. He said some were redundant.

 

[Silverlocks]

speaking of cash....what are your opinions on how much total portfolio should be in cash? Some have told me 3-5 years living expenses (for me, $150k-$250k on $1.2m tl)

Elsewhere, I have read max 1 year.

Considering ultra-conservative!

 

[Animorph]

I always try to stay in the market while I'm making changes to my portfolio. If you can make the transfer piecemeal, you could use the 5% cash to purchase replacement shares in your new account while you simultaneously sell them in the old account. Transfer the new cash from the old account to the new account and repeat until everything is transferred.


If that is impractical, I'd sell shares wherever it is cheapest. That may be your fee-based account if that fee covers all commissions. That's what I did when we moved my mom's portfolio. We just told them to liquidate. That makes it very easy, though you will be out of the market for a few days.


For an in-kind transfer you'll need to see which funds Vanguard is willing to accept.

 

[2B]

To Silverlocks,

You have what I would consider an unmanageable mess. The only reason I can see this is that the guy you're paying is using the totally unnecessary complexity to justify the fee. I would definitely recommend you simplify and save the fees you are paying. Putting everything in Vanguard lets you use Admiral shares which match the Vanguard ETFs and probably beat most, if not all, of the other funds. The most complicated investment allocation I would not grump about is Paul Merriman's 10 fund allocation. Google him or PM me for a link if interested.

At your "young age" (same as mine ) you should probably have more than 20% in equities but it really comes down to your risk tolerance. I personally have 45% in equities - 50% V. Total Mkt, 10% V. REIT, 10% V. Sm Cap, 30% V. World Stk - all Admiral. My fixed income is mostly in a CD ladder going out 6 yrs. Cash is intended for this years spending a small emergency fund.

If you haven't read Andrew Hallam's Millionaire Teacher, I suggest you do. Then go for William Bernstein's Investors' Manifesto.

 

[GTFan]

speaking of cash....what are your opinions on how much total portfolio should be in cash? Some have told me 3-5 years living expenses (for me, $150k-$250k on $1.2m tl)

Elsewhere, I have read max 1 year.

Considering ultra-conservative!

Well, holding 30% in cash would be what I would consider way ultra-conservative especially given your age. A couple of years expenses in a high-yield savings account is all you need IMO. But note there have been some recent studies by Kitces and others that have shown that sticking to your AA with yearly (or banded) rebalancing is more efficient over the long term than holding cash as a buffer. Cash is more of a psychological crutch than a way to better returns, in other words, even if you religiously tap it only in down years (and refill in up).

Don't forget that the bond funds often hold 15-20% in cash too.

 

[samclem]

speaking of cash....what are your opinions on how much total portfolio should be in cash? Some have told me 3-5 years living expenses (for me, $150k-$250k on $1.2m tl)

Elsewhere, I have read max 1 year.

Considering ultra-conservative!

I'd recommend only a small amount in cash (maybe 5%). It's a drag on your returns, and you can get better returns on short-term bond funds without incurring much more volatility.

Just to say it: A very small equity allocation does not decrease risk, though it may decrease year-to-year volatility. They aren't the same thing. The typical retirement investor doesn't sell his portfolio every year, so year-to-year ups and downs shouldn't be much of a concern. He's concerned about decades, and a major "risk" is failing to keep up with inflation and to grow the portfolio's real value to support future required spending. A low allocation to equities increases that risk. Play around with FIRECalc a bit before making any final decision on your asset allocation. Given your stated 4.1% withdrawal rate, a portfolio with 20s/80b has run out of money about 45% of the time over a 30 year window. A portfolio set at 60s/40b failed less than 10% of the time. And, aside from the failure rate, the higher stock allocations provide considerably higher average ending values (= more likely to be successful beyond 30 years, more likely to have gained enough money to provide a "cushion" for a big drop, more likey to provide dough for that trip to Europe, etc).
40s/60B and 60s/40b portfolios have, historically, done a great job of recovering from losses in a very reasonable timeframe (less than 5 years), especially when we consider the impact or reinvested dividends. We recently talked about that here.

 

[ReadySkiDaddy]

Vanguard Index ETF diversification fee based acct vs winging it

I am amazed at people who agree to shave 1% off their investments per year to have some "adviser" hold their hand and rebalance, because that's essentially all that an adviser does. If you do have personal finance questions then hire a fiduciary adviser for a ONE time consultation -- not to CONSTANTLY manage your money!

Read this article by Vanguard about what an adviser does. All they do is rebalance (which ANYBODY can do) and prevent you from doing stupid things like attempt to sell all of your stocks after then market crashes (Do you have the descipline to do that?). Notice that an adviser does NOT "time the market", pull your money to safety in advance of a market crash, or anything like that. Therefore any adviser who claims to have helped his clients BEAT the market is selling snake oil. If they really have, then all they are doing is taking on greater risk.
https://pressroom.vanguard.com/cont...Quantifies_the_Value_of_Advice_3.10.2014.html

 

[samclem]

I am amazed at people who agree to shave 1% off their investments per year to have some "adviser" hold their hand and rebalance, because that's essentially all that an adviser does.

?? I think the OP knows this, it's what he said and probably why he posted his question, right?

Read this article by Vanguard about what an adviser does. All they do is rebalance (which ANYBODY can do) and prevent you from doing stupid things like attempt to sell all of your stocks after then market crashes.

If you are lucky that's all they do.

 

[samclem]

I am amazed at people who agree to shave 1% off their investments per year to have some "adviser" hold their hand and rebalance, because that's essentially all that an adviser does.

?? I think the OP knows this, it's what he said in other posts and probably why he posted his question, right?

Read this article by Vanguard about what an adviser does. All they do is rebalance (which ANYBODY can do) and prevent you from doing stupid things like attempt to sell all of your stocks after then market crashes.

If you are lucky that's all they do.