How complex is your portfolio?

[ShortInSeattle]

Hey there.

I just finished reading the Bogleheads Guide to Retirement and the Four Pillars of investing. Both good books. DH and I are building an investing policy statement (good times...) and I'm looking at all the sample "lazy portfolios" out there.

Some are very simple, like the Couch Potato portfolio ala Scott Burns.

Others have 10-15 funds breaking it down further by market cap size and adding in some sectors, but still using indexes.

I don't think the 15 fund portfolios are confusing, but the simpler ones have a certain level of attraction. Managing 3 funds is easier than tracking 15.

I'm wondering if a few of you would be willing to share how finely you decided to slice your pie, and why you made the choice you did.

Thanks in advance.

SIS

 

[MichaelB]

Hey there.

I just finished reading the Bogleheads Guide to Retirement and the Four Pillars of investing. Both good books. DH and I are building an investing policy statement (good times...) and I'm looking at all the sample "lazy portfolios" out there.

Some are very simple, like the Couch Potato portfolio ala Scott Burns.

Others have 10-15 funds breaking it down further by market cap size and adding in some sectors, but still using indexes.

I don't think the 15 fund portfolios are confusing, but the simpler ones have a certain level of attraction. Managing 3 funds is easier than tracking 15.

I'm wondering if a few of you would be willing to share how finely you decided to slice your pie, and why you made the choice you did.

Thanks in advance.

SIS

I've had both over the years. No matter which one I have, the other seems more attractive. After seeing many years of threads reporting YtD results, I am impressed by how little difference there is among the majority of investors here even when the portfolios are different.

 

[pb4uski]

My target is to have about a year of living expenses in cash and another year in short term investments and the rest of my investments are 45% domestic equities, 15% international equities and 40% fixed income. So once you extend those principles out the total AA looks like this:

	Investment portfolio	Total
Domestic equities	45%	41.9%
International equities	15%	14.0%
Fixed income	40%	37.2%
	100%	93.0%
Short-term investment grade		3.5%
Online savings		3.5%
		100.0%

Since the best choices in my defined contribution plan with my former employer (which I keep because it has an attractive annuitization option) and my HSA are large cap value funds, I buy mid and small cap growth funds to offset them. If it were not for that "problem" I would go totally with the Vanguard Total Stock Market Index fund. For international equities I am in the Vanguard Total International Stock Index fund and the Vanguard FTSE All World ex-US Index fund (which I view as similar).

While historically I have used Vanguard Total Bond fund for fixed income. more recently I have used Vanguard Intermediate-Term Investment Grade fund, High-Yield Corporate fund and GNMA fund (75%, 15% and 10%, respectively) as it results in a higher yield (2.68% vs 1.60%) and slightly lower duration (4.8 vs 5.2) than Total Bond.

I am considering adding international bonds to the fixed income mix I have sort of been waiting for Vanguard to introduce its announced international bond fund but my patience is waning and I may just go with another fund.

So while I currently have 11 different funds (including short term investments) I could probably do with half that many if i had better options in my DC/HAS plan and bond yields were higher.

 

[frayne]

Three index funds is all I have.

 

[timeasterday]

I just wanted US stocks, International stocks, and bonds but having a 401k and a Roth IRA requires 5 funds for me.

US Stocks: S&P500 Index in 401k, Extended Market in Roth
Int'l Stocks: International Index in 401k, Global ExUS in Roth
Bonds: PIMCO Total Return in 401k

I basically just picked the 3 lowest-ER funds in my 401k and chose complimentary funds in the Roth. Our 401k doesn't have a total US market fund so my US Stocks combo above accomplishes that.

 

[panhead]

Well Currently my portfolio looks like this:
All Vanguard funds:

S&P500
tax advantaged small cap
total international index
international explorer
intermediate term tax free bond fund
inflation indexed bond fund
total bond market

This is my taxable port, as the tax advantaged accounts are primarily in fidelity and I'm still working on getting them more organized. I'm not thrilled with this and I'm thinking about simplifying it. I think most would say I need a mid cap fund, which is probably true, but I'm thinking of going the other way. Kind of like

S&P500 (sell small cap fund and put it in here)
international index (sell explorer fund and put it in here)
intermediate term bond (I originally started this as a place to keep some cash so this may go away as well as it gets invested int he market
inflation indexed bond
total bond
I also have 1 year in vanguard MM fund

The reasons for dumping the small/midcap is primarily that I'd like the higher dividends the S&P offers, even tho I'm sacrificing organic growth.

 

[rgarling]

For the most part I have 3 equity index funds: Total Stock, Extended Market, Total International. I shoot for about 1/3 in each. About 10 to 20% is in 2 bond-like funds: money market and total bond. I have not retired yet.

 

[REWahoo]

SiS, 90%+ of my portfolio is in three funds: Wellesley, Wellington and a short-term bond fund.

Reason: Like me, it's simple.

 

[Midpack]

There is absolutely nothing wrong with the lazy portfolios with fewer funds, I'd be comfortable with many of them. My portfolio (below) will only get simpler with fewer funds in the years ahead, but it will take years, no rush. The number of funds I have now are only to provide a small & value tilt, shorter bond duration and (leftover) tax efficiency that was helpful during my working years. Since the OP mentioned it, my AA is based on The Four Pillars...

1. Van TM Small-Cap Adm VTMSX
2. Van TM Capital Appreciation Fund Adm VTCLX
3. Van Total Stock Market Index Adm VTSAX
4. Van Value Index Adm VVIAX
5. Van Small-Cap Value Adm VSIAX
   [*]Van Energy Fund Adm VGELX
   [*]Van REIT Index Adm VGSLX
   [*]Van TM International VTMGX
   [*]Van Emerging Mkts Adm VEMAX
6. Van Short-Term Investment-Grade Fund Adm VFSUX
7. Van Total Bond Market Index Fund Adm VBTLX
8. Van Prime Money Market VMMXX

Probably self-explanatory but the colors are major asset classes, italics are sheltered accounts, the rest taxable.

 

[photoguy]

I'm guessing that my portfolio may be on the more complex side. I have about 50 index/mutual funds (35 unique tickers) spread across about 7 accounts. However, it is not as bad as it sounds as many of the funds are basically the same (e.g. investor/admiral/institutional/etf versions of the same fund). Part this is because we have several different employer accounts and the fund choice has been limited. Another issue is that we've been investing about 10years and there are now better fund choices (e.g. vanguard international explorer has been replaced by VSS / vanguard all-world ex-us small cap for new money investments)

Logically, I break it down into the following categories:

cash (MM, I-Bonds, bank)
Bonds

• short term
• int term
• TIPS (we have no tips allocation but would like to increase this slice if yields improve)

US Equities

• Large
• Large Value
• Small
• Small Value
• REITS

International

• Large developed
• large value / developed
• small / developed
• emerging markets

As you can see, our portfolio is organized by size and value slices. Main reason is for diversification as I believe small / value equities are exposed to different risks (e.g. Fama French 3 factor model). Hypothetically, there should also be a return premium (for small/value) but I'm not counting on this as it may not show up for long periods of time.

 

[Tyro]

I just finished reading the Bogleheads Guide to Retirement and the Four Pillars of investing. Both good books. DH and I are building an investing policy statement (good times...) and I'm looking at all the sample "lazy portfolios" out there.

Good books. Not suggesting it's any better, but a short read presenting another way of looking at the big picture can be found here: http://www.biz.uiowa.edu/wmc/?p=1039

Tyro

 

[rescueme]

FWIW, I/DW have a retirement portfolio broken down as follows:

DW: 11 Funds (includes 2 MM funds for current expenses); tend to be conserative in nature.

Me: 17 Funds (includes 3 MM finds for current expenses), tend to be more agressive, but not much more than DW's conserative bent.

Some funds are shared (for instances, Vanguard Health Care - VGHCX, which we both are "overscribed" more than normal), but the total overall AA shows a "balanced" approach for us, both in our mid-60's.

When we were in our accumulation years, we (jointly) ran around 90%+ equities. Today (both in retirement), our target AA is 50/50 (50% equity; 50% bonds/cash).

FWIW...

 

[W2R]

1. Vanguard Total Stock Market Index Fund (VTSAX)
2. Vanguard Total Bond Market Index Fund (VBTLX)
3. Vanguard FTSE All-World Ex-US Index Fund (VFWAX)
4. Vanguard Wellesley Income Fund (VWIAX)
5. TSP "G Fund" Government Bond Fund

 

[Lisa99]

We have basically four funds - all index.

Reason: move to DIY simplicity after spending years losing money with an Ameriprise FA driven account.

 

[calmloki]

Real simple here -

stocks in Roth & IRA 2.1%
income producing rental properties 53.2%
loans receivable, land for sale 24.4%
cash 20.3%

 

[WilliamG]

1. Vanguard Total Stock, Total International Indices
2. Vanguard Wellington
3. Vanguard Wellesley
4. Vanguard Short Term IG, I Bonds, Cash and CDs

 

[scrabbler1]

I own 6 funds, 2 in my IRA and 4 in my taxable accounts. Being an early retiree, I have different investment objectives between the IRA and the taxable accounts. The IRA is more growth oriented, so it has a stock index fund and a taxable, investment-grade corporate bond fund, both with low expense ratios.

The taxable account(s) are more income oriented, so I have more in bond funds including one which provides most of my monthly income needed to cover my expenses. I also have 2 muni bond funds which are holdovers from my working days when I was in a higher tax bracket. I have been draining them in the last 4 years but they are handy to have around, one of which acts as my first-tier emergency fund in case my monthly dividends are not enough (which is rare but it has happened). Both muni funds have checkwriting privileges which is handy. I also have a stock mutual fund (another holdover from my working days) which acts as an inflation guard and spins off quarterly dividends in case I need to tap into them at some point.

 

[Gotadimple]

Add another book to round out the two you've read: Rick Ferri, All About Asset Allocation. See our FAQ's and links above for more suggestions.

Includes a good discussion of why you want an asset allocation and sample portfolios for simple allocations, or slice and dice depending on your age and where you are in the spectrum of accumulation or decumulation.

My allocation is 55/45 (bonds/cash) as I am retired, before retirement my allocation was 70% stocks, 30% bonds/cash. Your allocation will vary based on retirement income streams. All are invested in index mutual funds or ETF Funds.

30% Core stocks
10% Mid-cap/small cap stocks
10% International (held in taxable brokerage account)
3% Asia
3% World International
4% Small Cap/Emerging Markets
5% REIT
10% Intermediate Bonds and US Treasuries
6% Intermediate Corporate Bond
4% US Treasuries
5% Hi Yield Bond
7% TIPS
3% Emerging Market Bond
11% Short Term Bond
9% Cash including high yield savings account

-- Rita

 

[Huston55]

Good books. Not suggesting it's any better, but a short read presenting another way of looking at the big picture can be found here: http://www.biz.uiowa.edu/wmc/?p=1039

Tyro

While I agree with much of this approach (deferring SS, floor/ceiling approach, etc), it does place significantly more AA in equities/REITs (~70%-90%), making it seem like a riskier portfolio.

It seems to be essentially a buckets approach.

 

[Animorph]

Currently 35 different funds in 19 different allocation slices. Many active, some index. I use a spreadsheet to sum them up across accounts and keep everything in balance. Gives me something to do. But actually, nothing bad would happen if I ignored it for a year.

 

[audreyh1]

Mine is far more complex than I would like. IMO you can do very well (be adequately diversified) with 3 to 5 funds.

When I first set mine up, I did the careful slice-and-dice - various foreign and US categories, small-cap, mid-cap, large-cap, REIT, different bond funds. I think I went overboard, and a retirement portfolio really doesn't need to be that complex. But in a taxable account, once you've selected and invested in your chosen funds, changing funds around has expensive taxable consequences (assuming you've had gains!).

My portfolio has done pretty well over the years and the diversification has helped the performance, IMO, because it has done well compared to the balanced funds I use as benchmarks. So the complexity is not the end of the world, but it does mean a big spreadsheet and tracking lots of distributions to get everything rebalanced.

Fewer funds is better (provided they are well chosen).

 

[Meadbh]

I think we need a definition of complexity. Does it mean the type and diversity of assets, or the number of funds and other products, or the number of institutions involved?

On the one hand, I include "alternative" investments such as income real estate, precious metals, venture capital and a target return fund (hybrid), but on the other hand, the only conventional funds on the list are a corporate bond fund and an emerging market index. All other equities are individual. And no, I am not going to list them all. But asset allocation to equities is now only approximately 40% of my portfolio. And what about leverage? I do have a few mortgages on investment real estate. Debt is no more than 5% of assets.

Yeah, I suppose that's complex.

 

[ShortInSeattle]

You are all awesome, thank you! These posts are like presents under the tree.

We let FIDO actively manage our taxable account this year, and they are doing fine, but I'm ready to take the reins and save the fee. Fortunately they've done a nice job of harvesting capital losses so the rebalancing into my AA shouldn't be too painful, tax wise.

I'll check out the link and the other recommended books. I admit I am leaning towards a portfolio of 5 funds or so, but I find myself wondering if 10 would be more precise... Ad therefore better.... Probably not worth the hassle in the long run.

One more question if you are still feeling generous with the knowledge...

1) Do any of you bother with tax loss harvesting? Selling after a sizeable market loss and rolling into a similar fund? Is it worth it?

 

[ShortInSeattle]

[edited to remove duplicate text] - Ignore.

 

[MDJO]

Seven mutual funds, mostly in index funds (Vanguard 500, Schwab 500, Schwab small cap index, short term muni bond fund, etc) I keep a small portion of my overall portfolio, about 10%, to pick individual stocks and/or bonds to try and beat the indices. So far I have only proven to myself that I can't beat them....but it is fun to try, and I haven't lost money (yet). AA is 65% stock, 20% bond, 15% cash (holding more cash than usual, looking for good opportunities)