Does my dividend payout estimate and AA make sense? Numbers provided

[RamStride]

The time has come to make a direct rollover from my TSP Traditional and ROTH to an external brokerage. My plan is to self-managing the investment using options and capturing dividends. I have 3 questions:

1. Using a snapshot in time, I made a quick sample estimate for dividend payout based on the trailing 12-months data I found for the stocks of interest. Did I calculate the dividend payout correctly? The calculated year total amount is $20299 or 2.03% of the invested amount. Any call/put option premium that I may collect will add to that amount and percentage.

2. I talked to BoA/Merrill yesterday to ask about a Rollover but I asked about their management option. Considering the up/down years they say they have averaged 6% for a moderate portfolio and 9% for a more aggressive portfolio with a 0.70% fee. That had me thinking. If I generate ~2% in 'dividends' and BoA/ML can generate 6-9% 'appreciation and dividends', will I be better of having them manage my investment. I feel something is wrong and I am comparing apples with oranges.

3. Any comments/suggestions on the asset allocation and Stock/ETF selection?

 

[engineernerd]

1. Yes, pretty much. Some of the ETFs I own seem to have quite variable quarterly dividends so it's good to check at least a full year's worth.

2. Stock funds experience share-price appreciation as well as dividend payouts, so you are indeed comparing apples with oranges. Your funds have undoubtedly increased quite a bit in price per share since inception.

3. I think 79% stocks is a fine allocation for someone facing a 30-year (or longer) retirement. FIRECalc tends to show good odds of not outliving your money at that allocation.

The four ETFs that make up the biggest percentages of your portfolio seem OK to me. There's a lot of overlap between QQQ's and SPY's top holdings, but then again if you just held a total-market index ETF like VTI you would also have a good bit in those companies.

I think 9% in cryptocurrencies is too much. Personally, I think anything in cryptocurrencies is too much. I think about the people I know personally who are excited about it, and already I'm biased against it just from that.

 

[SnowballCamper]

I hope you keep us updated periodically on your path. I decided to stick with the TSP for two main reasons. 1. rebalancing is super easy and cost free. 2. Ability to use the G fund that eliminates market risk on bond holdings.
I was 25/25/25/25 C/S/I/G for almost a decade but recently went to 27/27/27/19.

 

[MichaelB]

That had me thinking. If I generate ~2% in 'dividends' and BoA/ML can generate 6-9% 'appreciation and dividends', will I be better of having them manage my investment. I feel something is wrong and I am comparing apples with oranges.

Definitely apples to oranges. First, your allocation will also benefit from appreciation, my just dividends. Second, their “6-9%” is just some average. It doesn’t apply to you specifically.

They aren’t promising you’ll get that much, just showing you a number and letting you assume that’s what you’ll get.

 

[pb4uski]

Now is a good time to think about tax efficient placement. Generally, you want your lower yielding assets in the traditional since you will eventually have to pay taxes on withdrawals and higher yielding assets in your Roth since that growth is tax-free when withdrawn.

Just a quick look at your tickers suggests that you have some tilts. Why not just a couple, one for the US stock market and another for international stocks? Or something as simple as VT.

I would suggest that you put your proposed ETF portfolio into Portfolio Visualizer and look at 1, 3, 5 and 10 year returns vs a portfolio of VT vs a mix of a broad based domestic stock ETF and an international stock ETF.

And DIY with Fidelity or Schwab or Vanguard and save yourself the 0.7% AUM fee.

I'm not keen on BND or even bond mutual funds or broad based bond ETFs. The problem with bond funds is if you need cash and bonds are down then when you sell you are selling a small sliver of every bond in the portfolio. I prefer target-maturity bond ETFs from BlackRock or Invesco. You can ladder them and you need cash when bonds are down then just sell the issue closest to maturity and minimize any losses.

 

[engineernerd]

[snip]
And DIY with Fidelity or Schwab or Vanguard and save yourself the 0.7% AUM fee.
[snip]

Yes. Totally agree with this.

 

[RamStride]

Great feedback from all of you. Thanks for taking the time to review this. Based on the comments so far:

I will take a closer look at my plan. Reconsider the amount of crypto exposure, review the degree of overlap between selections with Portfolio Analyzer, and go self-directed with CS whom I also talked to before.

I am not to knowledgeable on how to get into Bonds. I was looking at it this morning but was getting confused how to invest in it. That is why I was looming at the BOND EFT. I'll keep researching this as I tend to agree it needs to be part of the investment.

I appreciate the input on the tax efficiency. I was also looking for more info on that specific topic.

To provide a little more context on my stock/ETF selection, I already invest in SPY, QQQQ, IBIT and ETHA at CS and BoA/ML because of the volatility they each provide, higher average trading volume and higher options open interest for liquidity. That is what I look for when selling call or put premium.

Also, since I am 57.5 I am leaving money in both TSP Traditional and TSP ROTH. This is to cover 2 years of yearly expenses and the yearly gap (shortage) between my pension and expenses since I can withdraw from TSP before 59 1/2 without any penalties other than any taxes owed.

 

[engineernerd]

We have some bond funds but I'm not sure bonds need to be part of everyone's portfolio. A hundred years ago they used to go up when stocks went down, but now all they do is the same thing as stocks, only less enthusiastically (or so it seems to me). And the income they throw off is all taxed as ordinary income.

 

[TheWizard]

We have some bond funds but I'm not sure bonds need to be part of everyone's portfolio. A hundred years ago they used to go up when stocks went down, but now all they do is the same thing as stocks, only less enthusiastically (or so it seems to me). And the income they throw off is all taxed as ordinary income.

Good point.
I own almost zero bonds, just some TIAA Traditional that I'm gradually easing out of.
But I have plenty of secure income without needing routine portfolio withdrawals, so that's different from some folks...