Please Review this Portfolio Proposal

[bUU]

Quote:

Originally Posted by aja8888 If this is what you posted at Bogleheads, I can't find it there.

I'm sorry you're having such a hard time following the discussion.

[aja8888]

Quote:

Originally Posted by bUU I'm sorry you're having such a hard time following the discussion.

About as hard a time as I am having following your investment proposal from your FA. You come across as a real wise guy sometimes (I'll be the first to say it).

[bUU]

I've been called worse than "wise".

Search on Active Share and Mutual Fund Performance - Antti Petajisto. That's what we're discussing now. If you buy into Petajisto's research, then you apparently buy into the portfolio. If you don't buy into Petajisto's research, then the portfolio is irrelevant. While I'm very skeptical and unlikely to find merit in Petajisto's research, I'm withholding judgement until I have firm proof that I can present cogently to others.

[travelover]

Quote:

Originally Posted by aja8888 About as hard a time as I am having following your investment proposal from your FA. You come across as a real wise guy sometimes (I'll be the first to say it).

You are not the first.

[Gatordoc50]

Quote:

Originally Posted by bUU I've been called worse than "wise". Search on Active Share and Mutual Fund Performance - Antti Petajisto. That's what we're discussing now. If you buy into Petajisto's research, then you apparently buy into the portfolio. If you don't buy into Petajisto's research, then the portfolio is irrelevant. While I'm very skeptical and unlikely to find merit in Petajisto's research, I'm withholding judgement until I have firm proof that I can present cogently to others.

If you decide that the research is valid, then choosing an actively managed fund may be appropriate. But why would you then choose multiple active funds? Like previous posters, I believe your FA is trying to get the benefit of index diversity for you and the benefit of active management for himself.

[bUU]

Except he knows that he's not getting anything more than he's already got. Regardless, I'm sure he'll have a chance to explain all these things when I meet with him next. Hopefully he'll have reasonable explanations, and if not, that's still actionable data for me.

[redduck]

Quote:

Originally Posted by bUU I apologize if you've seen this message on other forums, but I'm seeking feedback from various sources. I recently received a proposal from a financial adviser. Putting aside that he didn't map out how we'd get from where we are to where he proposed we go, could you please assess his recommendations based on: a) placement of each investment for tax efficiency b) the quality of the funds he's proposing c) overall asset allocation for folks 5-10 years from retiring Non-Retirement Accounts 2% Artisan Small Cap Fund Investor Shares 3% Baron Partners Fund Retail Shares 2% Baron Small Cap Fund 2% Calvert Short Duration Income Fund Class Y 2% Hartford Capital Appreciation Fund Class I 3% Hartford Dividend and Growth Fund Class I 1% Hartford Small Company Fund Class A 3% Loomis Sayles Strategic Income Fund Class A 4% Nuveen High Yield Municipal Bond Fund Class I 3% Pioneer Mid-Cap Value Fund Class Y 2% Royce Dividend Value Fund Service Class 1% Royce Global Dividend Value Fund Service Class 4% Royce Opportunity Fund Investment Class 3% Third Avenue Focused Credit Fund Institutional Class 3% Third Avenue Real Estate Value Fund Institutional Class 1% Wasatch Long/Short Fund Investor Class 2% Wasatch World Innovators 39% TOTAL Non-Retirement Accounts Retirement Accounts 1% ALPS | Red Rocks Listed Private Equity Fund Class I 1% Artisan Mid Cap Fund Investor Class 2% Artisan Mid Cap Value Fund Investor Shares 1% Baron Partners Fund Retail Shares 1% Baron Real Estate Fund Retail Class 3% BlackRock Equity Dividend Fund Investor A Shares 1% Bridgeway Small Cap Growth Fund 2% Bridgeway Small Cap Value Fund 3% &nbspelaware Small Cap Value Fund Class A 2% &nbspodge & Cox International Stock Fund 1% &nbspodge & Cox Stock Fund 0% Fidelity Contrafund Fund 4% Goldman Sachs Growth Opportunities 3% Hartford Growth Opportunities Fund Class I 1% Hennessy Gas Utility Index Fund Investor Class 2% ING Corporate Leaders Trust Series B 1% ING Senior Income Fund Class A 3% Invesco Charter Fund Class A 3% Invesco Convertible Securities Fund Class Y 3% Ivy Small Cap Growth Fund Class A 2% Matthews Asia Dividend Fund Investor Class 4% Prudential Jennison Utility Fund Class A 2% Putnam Voyager Fund Class Y 1% T. Rowe Price Health Sciences Fund 2% The Hartford Healthcare Fund Institutional Class 3% Third Avenue Focused Credit Fund Institutional Class 1% Vanguard Developed Markets Index Fund Investor Shares 2% Wasatch Emerging Markets Small Cap 2% Wasatch International Growth Fund 1% Wells Fargo Advantage Discovery Fund Class A 61% TOTAL Retirement Accounts

It's a good start.

[Midpack]

So what did you think of this https://pressroom.vanguard.com/nonin...anagement.pdf?

[M Paquette]

Quote:

Originally Posted by redduck It's a good start.

Yah. My first thought was "Did the advisor run out of funds?"

If I had a day or so where I was totally bored, I would have pounded the portfolio into Morningstar's X-Ray tool, looked at the resulting stock mix and bond weightings, and duplicated the whole thing (tuned for similar weightings) by starting with a total stock market fund or ETF, and a total bond market fund or ETF. Add in one international, one small cap value (which tend to be rich in REITs and other such 'nontraditional' goodies), perhaps a shorter duration bond fund, and tweak. Five funds, way less expenses, and much easier to manage come rebalancing time.

Alas, it's probably not complex enough for the 'sophisticated investor'. (I LOVE that term. http://www.forbes.com/2009/03/24/acc...net-worth.html )

[Htown Harry]

Quote:

Originally Posted by bUU Pretty much. Someone on another forum was nice enough to enter the portfolio and backtracking it to 2000. I'm not sure it means anything, but it's a pretty graph. (Attached.)

One potential issue is that all three lines start at the same point.

If these funds average a 4.9% front end load, shouldn't the portfolio value line start 4.9% below the indexes at year zero?

[Russman]

I concur with the other responses. Seems like far too many funds to keep track of. Don't see how anyone can actually manage it either. Clearly an overkill attempt at diversification. Like someone mentioned before, the expenses to buy these funds and manage them over time will surely add up....

[bUU]

Quote:

Originally Posted by Midpack So what did you think of this https://pressroom.vanguard.com/nonin...anagement.pdf?

I sent it to him to see what he says. Of course, remember that it actually implicitly ratifies Active Share: "... combined with careful qualitative judgment regarding the health of the investment manager’s firm and the depth of its analytical team, active share can be a useful addition to the investor’s toolkit of portfolio evaluation measures." I suspect that that is probably where he'll hang his hat.

Quote:

Originally Posted by Htown Harry One potential issue is that all three lines start at the same point. If these funds average a 4.9% front end load, shouldn't the portfolio value line start 4.9% below the indexes at year zero?

Among the non-retirement picks only two out of the 17 had loads.

[target2019]

Quote:

Originally Posted by M Paquette Yah. My first thought was "Did the advisor run out of funds?" If I had a day or so where I was totally bored, I would have pounded the portfolio into Morningstar's X-Ray tool, looked at the resulting stock mix and bond weightings, and duplicated the whole thing (tuned for similar weightings) by starting with a total stock market fund or ETF, and a total bond market fund or ETF. Add in one international, one small cap value (which tend to be rich in REITs and other such 'nontraditional' goodies), perhaps a shorter duration bond fund, and tweak. Five funds, way less expenses, and much easier to manage come rebalancing time. Alas, it's probably not complex enough for the 'sophisticated investor'. (I LOVE that term. The Sophisticated Investor Farce - Forbes.com )

Also of note is the amount of stock overlap in that mess of 48 funds. I think the premium M* tool would show the stock overlap.

Your approach of starting from an indexed array of the total market, and then tilting to the amount of risk necessary for the expected outcome, makes a lot of sense.