portfolio too complicated?

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portfolio too complicated?

Postby Dxbinvestor » Tue Jul 16, 2013 5:50 am

Hi,

Great forum guys, fantastic resource and you guys are just tremendously helpful. So, my question: As a large, but passive ETF portfolio, is this too complicated?

I tried to do something fairly broad and balanced but it seems easy to get carried away with maybe too much stuff.. One problem I have is that I cannot do US traded ETFs. Why? I live in the UAE and have a 30% DWT on US traded securities, even if the underlying issues in an ETF are foreign. So I have resorted to Irish domiciled LSE traded ETFs, mostly denominated in USD. TERs are a bit higher but not enough to justify paying 30% dividend withholding. We have no income taxes in the UAE.

My original intention was to have something like this:

13% - Total US
13% - Total World ex-US
13% - US small cap
13% - World ex-US small cap
13% - Emerging markets
13% - World REITs
7% - Bonds - US Agg, US Corporates, WIP, Emerging market bonds (roughly equal mix)
5% - Developed Europe on a speculative basis because I feel it's undervalued right now

And I did the best I could with what was available in LSE.. but without adding even more complication, this is the best I could do from what I saw available. For example, for world ex-US small cap, all they have available is emerging markets small cap, and then region specific developed small cap.. so I could buy Asia ex-JP, JP, EUR as separate issues, but not all as one ETF.

Developed Market Cap Weighted - 38%
22% -- VWRD - Vanguard World FTSE ETF
11% -- VUSD - Vanguard S&P 500 ETF
5% -- VEUR - Vanguard Developed Europe

Small Cap - 26%
13% -- CSUSS - iShares US Small Cap
7% -- EMSD - SPDR Small Cap Emerging Markets

Emerging Equities - 26%
6.2% -- VDEM - Vanguard Emerging Markets ETF (VDEM and IEMA are basically the same, but IEMA reinvests the dividends)
6.2% -- IEMA - iShares Emering Markets
6.2% -- EDVD - SPDR Emerging Markets Dividend ETF
1.4% -- IGCC - GCC ex Saudi Arabia (just because we live here)

Bonds - 7%
1.4% - USAG - SPDR US Aggregate Bond ETF
2.1% - EMDD - SPDR Emerging Market Bond ETF
1.4% - IGIL - World Inflation Protected
2.1% - LQDE - iShares $ Corporate Bond UCITS

REIT - 15%
15% - GLRE - SPDR DJ Global Real Estate ETF

Also, it is an 8 figure portfolio. I did the math on the TERs and it comes out to quite a lot of money annually (circa $50k/yr in fees at present value). From what I have read, financial advisers say its better to do individual shares once a portfolio gets over a certain size and you can get a decent representation of an index from owning a few hundred stocks within it, and transaction costs are a lot cheaper than $50k/yr in mgmt fees from the ETFs. Thoughts on this??

Finally, most people will say I'm low on bonds. I know the arguments for and against this and have decided that bonds aren't necessary at this stage.

Thanks a lot for the feedback guys!!
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Re: portfolio too complicated?

Postby Chan_va » Tue Jul 16, 2013 7:13 am

Are you looking for feedback on the overall Aa or just the individual components within? If the former, we will need more info on your specific situation, goals etc.

Personally, too complex for me. For example, you have 4 bond asset classes for a total of 7% allocation. I personally don't slice till I can commit 10% to a specific slice.

As for your individual stock q, sure you might reduce transaction costs, but that will be dwarfed by the opportunity cost of your picking the wrong 100 stocks out of 10,000.
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Re: portfolio too complicated?

Postby DoWahDaddy » Tue Jul 16, 2013 10:49 am

I also have a large amount of individual units in my portfolio. It's complicated only in terms of rebalancing and if you are invested across multiple accounts, as I am. But what's important is that you are comfortable how your portfolio is allocated. Some of us are not comfortable with three funds. That's ok. You've got to please yourself. Well, maybe one other person.

My one comment is you may want to revisit the wisdom of having an allocation too small to really matter. For instance, I had a 1% allocation to Africa as I was unable to access that market elsewhere at the time. I determined that having a 25% allocation to international large through small cap and 1% to Africa was not worth any diversification or return benefit, or added expense. So I changed to 26% international. (not exactly correct, but you get the idea.) My smallest allocation is now 2.5%.

If you are able to rebalance to take long term advantage of short term fluctuations, you will likely benefit from that. Whereas most benefits may come from a bond vs. equity rebalance, there are benefits from doing so between U.S. and other countries, REITs and non-reits, and to a lesser extent, large and small companies.

Good luck.
Me: 75/25 stocks/bonds | Son: 45/45/10 matchbox/hotwheels/thomas & friends
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Re: portfolio too complicated?

Postby rfburns » Tue Jul 16, 2013 9:32 pm

Too complicated? It is for me.
Keep the REIT. Choose one bond fund. Choose one EM fund. Skip Small Caps. Use S&P 500 with Developed Europe.
A 5-fund world portfolio. Simple beats complicated most of the time.
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Re: portfolio too complicated?

Postby Default User BR » Thu Jul 18, 2013 1:07 pm

rfburns wrote:Simple beats complicated most of the time.

Based on what?


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Re: portfolio too complicated?

Postby Default User BR » Thu Jul 18, 2013 1:14 pm

What's too complicated for one person might be fine for another. If I were going to do one thing, it would be to add small-value to a market portfolio. For a more intense approach, I'd consider Trev's Ultimate Buy and Hold.


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Simplicity

Postby Taylor Larimore » Thu Jul 18, 2013 1:30 pm

Default User BR wrote:
rfburns wrote:Simple beats complicated most of the time.

Based on what?
Brian


Invest with Simplicity is # 9 in the Boglehead Philosophy

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: portfolio too complicated?

Postby inbox788 » Thu Jul 18, 2013 1:37 pm

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Re: portfolio too complicated?

Postby rfburns » Thu Jul 18, 2013 9:36 pm

Default User BR wrote:
rfburns wrote:Simple beats complicated most of the time.

Based on what?
Brian

Human behavior perhaps?
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Re: portfolio too complicated?

Postby baw703916 » Thu Jul 18, 2013 11:04 pm

rfburns wrote:
Default User BR wrote:
rfburns wrote:Simple beats complicated most of the time.

Based on what?
Brian

Human behavior perhaps?

It's not the portfolio's fault if the investor screws up.
Brad
Most of my posts assume no behavioral errors.
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Re: Simplicity

Postby Default User BR » Fri Jul 19, 2013 1:21 am

Taylor Larimore wrote:
Default User BR wrote:
rfburns wrote:Simple beats complicated most of the time.

Based on what?

Invest with Simplicity is # 9 in the Boglehead Philosophy

I'm taking the word "beats" to mean "provides better risk-adjusted return" not "easier".


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Re: portfolio too complicated?

Postby Default User BR » Fri Jul 19, 2013 1:23 am

rfburns wrote:
Default User BR wrote:
rfburns wrote:Simple beats complicated most of the time.

Based on what?

Human behavior perhaps?

On what do you base the assertion? What evidence do you have that it's true for Bogleheads?


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Re: portfolio too complicated?

Postby YDNAL » Fri Jul 19, 2013 7:48 am

Dxbinvestor wrote:My original intention was to have something like this:

13% - Total US
13% - Total World ex-US
13% - US small cap
13% - World ex-US small cap
13% - Emerging markets
13% - World REITs
7% - Bonds - US Agg, US Corporates, WIP, Emerging market bonds (roughly equal mix)
5% - Developed Europe on a speculative basis because I feel it's undervalued right now

Welcome to the Forum, Dxbinvestor ! (I know, you already have 5 posts at this juncture)

Why is this your "original intention" ?

I consider most important decisions to be: (1) to save as much we can, (2) Equity/Fixed split [Ability & Need to take risk], and (3) diversification at the lowest possible cost. Are you doing these things ?
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: portfolio too complicated?

Postby rfburns » Sat Jul 20, 2013 2:45 pm

Default User BR wrote:
rfburns wrote:
Default User BR wrote:
rfburns wrote:Simple beats complicated most of the time.

Based on what?

Human behavior perhaps?

On what do you base the assertion? What evidence do you have that it's true for Bogleheads?
Brian

I have no evidence of what is true for Bogleheads, but I suspect Bogleheads as a group do slice and dice more and put more effort in to their portfolios than most. My comment was more for the everyman and the studies in human economic behavior that show complexity can become overwhelming. Sometimes leading to more frequent trading or holding a declining fund too long.
disclaimer: I do slice and dice, but I'm anxious to get to a 3-fund or single fund as retirement nears.
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Re: portfolio too complicated?

Postby mickens16 » Sat Jul 20, 2013 6:05 pm

rfburns wrote:I have no evidence of what is true for Bogleheads, but I suspect Bogleheads as a group do slice and dice more and put more effort in to their portfolios than most.


I don't have any evidence either, but even with a slice and dice portfolio, I would suspect most Bogleheads' portfolio to be easier to manage than most people. For example, most people who are new to this forum typically have 10-20 different funds that they just picked, probably out of a magazine. Slice and dice portfolios have maybe 5-8 funds at the most.
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