Portfolio Tinkering

[Ed B]

Hello,

My name is Ed B and I am a portfolio tinkerer.

Does anyone else fight (and often lose) the urge to change investments based on your latest bright idea, the smart-sounding thing you read here or elsewhere, etc. in a quest to squeeze a little extra return, mitigate risk of impending bear attacks, not miss the returns of the on going bull and everything in between? Also, do you succumb easily to temptation of writing run on sentences. [emoji6]

Mentally I understand that settling on an AA and letting it do its work with occasional tending would help alleviate my disease. But the fear of missing out has me studying this stuff almost too much for my own good.

Any community of serious enthusiasts will share lots of helpful info about varying methods, theories, and approaches to maximizing what we do. But I am guilty of being too easily persuaded to tinker based on the the latest smart thing I read.

I know I am not alone but how have some of you overcome this temptation? 12 step program? [emoji23]

 

[REWahoo]

I know I am not alone but how have some of you overcome this temptation? 12 step program? [emoji23]

In my case it was a three step program:

1 - Listen to the latest and greatest hot trend
2 - Change my AA because I don't want to miss out
3 - Realize down the road I would have been better off (often FAR better off) staying where I was.

Rinse and repeat as necessary until it sticks.

Fortunately for me it stuck before I retired.

 

[jebmke]

I have too many other things to do to worry about it.

 

[Dtail]

I moved all of my bond funds to other fixed income substitutes when the 10 yr rate hit 3.10% close to the high. Of course it is now 2.83%.
Nevertheless, I am glad to have different bond subs, but I had the wrong reaction to cause the behavior.

 

[DrRoy]

"The only winning move is not to play."

 

[corn18]

I want to tinker and I can be a very emotional and trend following investor. This is why I wrote an Investment Policy Statement (IPS). Keeps me from tinkering and helps me stay the course.

Rudder amidships, full speed ahead!

Don't just do something, stand there!

My IPS:

Objective: $XM in savings by age 55 (2021).

Asset Allocation (AA): 60% stocks / 40% bonds with 25% of stocks international

Rebalance when AA gets outside of 5% or annually

Invest in very low cost index funds

Do backdoor Roth for myself and wife annually ($6500 me, $5500 wife). Leave in cash in traditional IRA while waiting to roll over to Roth. Wait one week to do roll over to Roth to allow funds to clear. Once in Roth, lump sum investment into total stock market index fund. Funds for backdoor Roths will come from RSU sale, bonus or pension.

Invest maximum allowed in 401k ($24,500) at a rate that maximizes company match. Use 401k to manage 60/40 AA. Invest only in low cost index funds where possible in 401k.

Invest maximum allowed in 401k after tax and do a mega backdoor Roth annually. Lump sum investment into total stock market index fund.

Invest 5% of annual salary allowed into non qualified deferred compensation plan (NDCP) in order to get the company match.

Minimize current taxes by investing only in total stock and international stock index funds in taxable account. Tax free muni bonds up to $50k is also allowed in the taxable account.

Minimize future taxes by concentrating bonds in 401k. Maximize growth in Roth accounts by investing in total stock market index funds.

Restricted Stock Units (RSU): When RSU's vest, sell immediately and invest the money in a lump sum in accordance with my Asset Allocation (AA) in my taxable retirement account.

Bonus: Invest entire bonus each year in a lump sum in accordance with my Asset Allocation (AA) in my taxable retirement account.

Invest a minimum of $75k annually in taxable account. Lump sum investment into total market, total international market or tax free muni's to manage AA. This can be met by RSU, bonus or pension.

Military Pension: Cash savings to be used to refill EF, if required, or save for new car, home repair, etc. If not required for any of these functions by Feb of each year, then invest any amount over $30k in a lump sum into taxable account in accordance with AA.

Mortgage: do not prepay mortgage

Life Ins: Maintain multiple term life policies laddered until age 78. As savings becomes sufficient to maintain DW current lifestyle with low risk, policies will be allowed to end without renewal.

 

[COcheesehead]

Portfolios, like a bar of soap, get smaller with handling.
I hear/read/see all the same crap. I file it away as interesting, but stay true to my allocation. If you look at long term returns, what asset class you are in means far more than the individual asset itself.

 

[RobbieB]

I pay an expert to tinker with mine. He is worth it -

 

[travelover]

I pay an expert to tinker with mine. He is worth it -

I set an AA when I retired 11 years ago and have only re-balanced a couple of times. My portfolio has about doubled.

 

[Oz investor]

being of contrarian nature , i call it bargain hunting or stock picking , and am currently not seeking any cure for it , unless you call profit-taking curative medicine .

follow trends , not me ( not even AA when one class difficult to find satisfactory quality in )

 

[pb4uski]

....Does anyone else fight (and often lose) the urge to change investments based on your latest bright idea, the smart-sounding thing you read here or elsewhere, etc. in a quest to squeeze a little extra return, mitigate risk of impending bear attacks, not miss the returns of the on going bull and everything in between?....

I know I am not alone but how have some of you overcome this temptation? 12 step program? [emoji23]

Believe in the Force, Luke.

 

[swakyaby]

I am a bit of a tinkerer. My latest thing is I just retired, and also am informed by a trustee that a significant inheritance is on the way. Although I have a pretty good idea what I am going to do, I decided to participate in the complimentary CFP portfolio reviews by both Vanguard and T.RowePrice. I gave them both the same information, so it'll be interesting if their advice is similar or divergent.

 

[COcheesehead]

I am a bit of a tinkerer. My latest thing is I just retired, and also am informed by a trustee that a significant inheritance is on the way. Although I have a pretty good idea what I am going to do, I decided to participate in the complimentary CFP portfolio reviews by both Vanguard and T.RowePrice. I gave them both the same information, so it'll be interesting if their advice is similar or divergent.

If you were happy before the inheritance, why can’t you just deploy the money in the same ratio after the inheritance? It’s the same as having your portfolio grow by that amount.

 

[Ed B]

Lots of good responses. Thanks all.

I think one reason I tinker more than I would prefer is that learning about and executing investments on my road to ER has become a hobby. I study it the way I have researched and studied other hobbies.

I haven't really hurt myself but I am guilty of unnecessary fidgeting with this fund or that ETF.

As an example when I first moved money to the self directed brokerage account a few years ago, I went with about 1/3 VWIAX, 1/3 VOOG and 1/3 VGT. It did well but I got nervous about over exposure to the tech sector.

Then I moved VGT to VTI which isnt 1 to 1 with VOOG but there is a lot of redundancy. Since then I have at times had VOOG, VBIAX, VTI, LMT, WWE, VWIAX, VWELX, BIV, and Core 401K Stable Value, or 401k S&P 500. Not all at once but I have been in and out of a few of them more than once.

Currently I am at a 62/38 thru a combination of VWENX, VTI, BIV and Core 401k Stable Value. This mix may not be optimal but there is a reason for each. I have VWENX because if a bear market is on the horizon I trust the Wellington management group will know how to navigate it better than me. I have VTI because I do agree with owning a broad swath of the US market in a blend rather than purely growth or value lean. I have BIV and Stable value because those funds are earmarked for distributoions over the next 4 years. Of these four BIV is the one I am mulling over.

At some point I need to become comfortable with my choices and consider getting a new hobby, and start treating this more like business....not work but business. [emoji3]

 

[Winemaker]

In 2014 when I retired, I took a 401k with $24,000 to use as my speculation account. The other 99+% of assets follow my overall AA number.

While it has gone as high as $36,000, it is currently at $29,800. While it is fun to tinker, it reminds me that I cannot beat the results of index funds in my AA.

And it won't be different this time.

 

[mrfeh]

I know I am not alone but how have some of you overcome this temptation? 12 step program? [emoji23]

Post this exact same message on bogleheads.org. They'll set you straight.

 

[pb4uski]

I fret more about tax efficient placement than I do about AA or tickers... but I keep my AA pretty tight.

I seem to recall that a very high percentage of investment return is derived from AA and the percentage attributable to stock picking is minimal. The percentage attributable to AA is 90-100%.

For each fund, we divided the compound annual policy return for the entire period by the compound annual fund return. We found that, on average, about 100 percent of the return level is explained by the return to asset allocation policy. Thus, the average fund's return to asset-mix policy is about the same as the return to the benchmarks for the asset classes.

https://www.cfapubs.org/doi/sum/10.2469/faj.v56.n1.2327

 

[frayne]

I'm a set and forget kind of guy. Screw the latest and greatest soup de jour thing to come down the pike. But if you want to go all in on N. Korea bit coins, it sounds like a absolutely fabulous idea.

 

[Ed B]

In 2014 when I retired, I took a 401k with $24,000 to use as my speculation account. The other 99+% of assets follow my overall AA number.

While it has gone as high as $36,000, it is currently at $29,800. While it is fun to tinker, it reminds me that I cannot beat the results of index funds in my AA.

And it won't be different this time.

Great example. Thanks.

 

[Texas Proud]

In 2014 when I retired, I took a 401k with $24,000 to use as my speculation account. The other 99+% of assets follow my overall AA number.

While it has gone as high as $36,000, it is currently at $29,800. While it is fun to tinker, it reminds me that I cannot beat the results of index funds in my AA.

And it won't be different this time.

I was going to say the same thing... get an account that you can tinker with and leave the rest alone... my tinker account is larger than winemaker, so you can make it a bit larger if you want, but not where it would affect your overall ability to RE...


BTW, one of the things that I recently did was make a fake portfolio showing what actually happened due to my tinkering... I 'short' what I sold and hold long what I bought... if you do that for the exact same amount your portfolio is net zero... if you made a smart move then it will go positive, but if you made a stupid move it goes negative...


My last major move was about $45K and I am up almost $6K more than if I had stuck to what I had... sold VMW and BABA, bought PANW and CRM... almost all of the change is due to BABA... VMW and my 2 purchases are up about the same so it would not have made any difference...

 

[swakyaby]

If you were happy before the inheritance, why can’t you just deploy the money in the same ratio after the inheritance? It’s the same as having your portfolio grow by that amount.

I did say I have a pretty good idea what I will do, but since there are 2 life changes, and I do have the complimentary sessions with CFPs, I am open to hearing their educated opinions.

 

[Ed B]

I fret more about tax efficient placement than I do about AA or tickers... but I keep my AA pretty tight.

I seem to recall that a very high percentage of investment return is derived from AA and the percentage attributable to stock picking is minimal. The percentage attributable to AA is 90-100%.



https://www.cfapubs.org/doi/sum/10.2469/faj.v56.n1.2327

That's an interesting article. Thanks.

 

[copyright1997reloaded]

In general, no.

I've owned Apple since 2000, Analog Devices since 1990 (takeover of Linear Technology), Dow Dupont since 2004, Baxter since 1989 (and as a result Cardinal Health and Edwards Life Sciences) , Honeywell since 2003, Abbot labs (and Abbv due to a spinoff) since 2004 and so on. I have occasionally added on to positions in times of market distress when I have felt that the fundamental long term characteristics of the company remained positive. These things (in my non tax deferred accounts) as well as 'boring' index funds (SP500, Total Stk Mkt Index), Asia Pacific, Europe, etc. represent the vast majority of my holdings - buy them and keep them.

Having said that, I also like to buy and sell securities. Besides picking up things on sale, I will occasionally trade shorter term. While I don't use a strict keep it seperate (in terms of accounts), that is a good idea. In my case, I have my 'don't touch' list of securities which I have some nice long term games, but I would need some serious thought in terms of selling them....basically only if I thought they were fundamentally damaged in terms of future value.

 

[marko]

I'm not a portfolio tinkerer at heart. I usually 'set and forget', fairly confident that I've matched my risk/reward profile.

HOWEVER! Back in 2014 something was bugging me and I decided to make some slow, methodical changes--a bit at a time--and took on more risk.

I kept my old portfolio tracker running against my new one. I'm up over 20% vs where I'd be had I not made those changes. A substantial dollar amount in my case.

I still move minor amounts (2%) during a year if I see something sliding up or down but otherwise I'll likely keep where I am for a bit.

 

[pb4uski]

What was the change?