Portfolio Structuring- REVISED- Please review

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MMRetiredYoung
Posts: 4
Joined: Tue May 09, 2017 7:42 pm

Portfolio Structuring- REVISED- Please review

Post by MMRetiredYoung » Fri May 19, 2017 4:04 pm

I am a first-time poster but have been lurking and read some of the suggested books. You can label me frustrated with investment advisers as I’ve gone through two in three years due to lackluster returns and what I perceive as expensive management fees. I am still working with an adviser but am coming to the conclusion that a passive strategy, net of fees, is the way to go.

Thanks Laura for the detailed guidance of how to supply the information and ask this question.

Emergency Funds: Yes (at least 6 months)
Debt: 0
Tax Filing Status: Single (was Head of Household 2016)
2016 Federal Tax Rate: 33% - 19% effective.
I retired 2017 only income going forward is from investments
Arizona State Taxes: 4.54%
State of Residence Arizona
Age 54
Desired Asset Allocation: 45% stocks/ 55% bonds
Desired International Allocation: Currently have allocated but I unsure go forward as I think if I have a Dow Jones or something similar aren’t I getting enough international exposure?

To start Current Asset Allocation:

% of Total Portfolio
Non-Taxable

Emerging Markets 0.9%
Fixed Income 6.5%
Global 1.6%
Hedging 1.5%
International 3.0%
US Large 1.9%
Cash 0.1%


Taxable

Emerging Markets 2.0%
Fixed Income 24.3%
Global 4.9%
Hedging 16.7%
International 6.1%
US (VTI) 11.7%
US Large 9.2%
US Small/Mid 7.0%
Cash 2.8%
Grand Total 100.0%

Total assets are $4m. 2/3 is managed by an investment firm. 1/3 I manage myself and are the Vanguard Total Stock and a couple other small ETF’s all in taxable. The VTI Vanguard Total Stock I have held for many years and have a large unrealized capital gain on, so unless you convince there is a better answer I have no plans to sell.

My risk tolerance is moderate to conservative as I am 54 and retired. No additional inflows anticipated.

I don’t like paying both the high expense fees and the management fee at the investment firm (1%). I’d like to move away from having 34 funds, I don’t see the benefit. Am I wrong?

I need to generate a consistent annual return from dividends or growth to fund my annual retirement and income needs. My annual budget is less than $90K, and I’d sure like to have some extra so when I need a new car in a few years, or want to take a trip I can. If need I could shrink down to $60K annually. I own my house outright. House maintenance, travel and medical are included in my annual budget. These are after tax numbers.

What suggestions do you have for consistent dividends or returns that I can draw upon while trying to maintain the integrity/growth of my portfolio?

Also should I simplify my portfolio? And if yes, your suggestions for fund names and suggested allocations given my situation would be very appreciated.

ADDITION (based on feedback)
All the money except the $457K in Vanguard VTI is negligible for cost basis. The $457K has an unrealized gain of $186K, which is why I wouldn't want to sell it.

All together the total unrealized gain for the rest is less than $50K for the 34 other funds. So I'm thinking I need to reshape the question?

If you had $3.5 million dollars and given the circumstances of my situation (retired young etc) what specific ETF funds would you invest in? Except for the % international of the total equities, I'm good with my percentages.

Would you still like to see the exact breakdown of the other funds? I have it, along with the gains and expense ratios (which are between .5% and 2%).

I'm not looking to get beaten up by how badly I've managed it so far (and I admit I have), so that is why I hesitated to post that detailed data. And I'm committed to moving forward to less funds, and passive investing! So I'm looking forward.

ALL advice is greatly appreciated!

All the money except the $457K in Vanguard VTI is negligible for cost basis. The $457K has an unrealized gain of $186K, which is why I wouldn't want to sell it.

All together the total unrealized gain for the rest is less than $50K for the 34 other funds. So I'm thinking I need to reshape the question?

If you had $3.5 million dollars and given the circumstances of my situation (retired young etc) what specific ETF funds would you invest in? Except for the % international of the total equities, I'm good with my percentages.

Would you still like to see the exact breakdown of the other funds? I have it, along with the gains and expense ratios (which are between .5% and 2%).

I'm not looking to get beaten up by how badly I've managed it so far (and I admit I have), so that is why I hesitated to post that detailed data. And I'm committed to moving forward to less funds, and passive investing! So I'm looking forward.

ALL advice is greatly appreciated!

I tried to break this down appropriately, please tell me if I’m missing anything.
Last edited by MMRetiredYoung on Sat May 20, 2017 2:21 pm, edited 2 times in total.

Grt2bOutdoors
Posts: 17138
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Portfolio Structuring Help (first post)

Post by Grt2bOutdoors » Fri May 19, 2017 5:06 pm

Welcome! Your requirement is pre-tax or after tax?
Who is managing the hedging portion? Hedging is another word for"let me bleed you dry in fees, while I guess which way the market is going as I gaze into my crystal ball". That is too much to be hedging, 20% or 800k, that is 20% of your total income right there.

Consider 3 fund portfolio - VTI, Vtiax, total bond or an intermediate bond index fund in proportion you prefer.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

MMRetiredYoung
Posts: 4
Joined: Tue May 09, 2017 7:42 pm

Re: Portfolio Structuring Help (first post)

Post by MMRetiredYoung » Fri May 19, 2017 5:12 pm

Thanks Grt2BOutdoors. I modified my original post to reflect after tax. I agree about the hedging and the ER, why I am heading down this road.

When you mention the three funds, how would you deal with an annual draw?

Grt2bOutdoors
Posts: 17138
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Portfolio Structuring Help (first post)

Post by Grt2bOutdoors » Fri May 19, 2017 6:16 pm

Take dividends and have directed to money market fund, that is roughly 2-2.5%. Use market returns to rebalance, in non taxable account - taxation is not issue, in taxable, take advantage of tax loss harvesting when available. There are numerous posts on taking withrawals when retired, search forum. Also search early retirement forum, don't have web address.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Lafder
Posts: 3553
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Portfolio Structuring Help (first post)

Post by Lafder » Fri May 19, 2017 11:41 pm

Welcome here!

You will get more perspective and more feedback if you take the time to list the specific holdings and expense ratios, as well as extra management fees, instead of just the category of your holdings.

Great job making your total % add to 100.

It would also help you to list your cost basis on your taxable holdings and any capital loss or gain to see what the tax hit would be to make changes. It will also allow you to see if there are losses that can be sold at the same time as gains to cancel the gains.

You have a nice amount of money, if your expenses are within reason. You are on the right track to minimize your management fees so more of your own money can be spent on you instead of fees :)

lafder

MMRetiredYoung
Posts: 4
Joined: Tue May 09, 2017 7:42 pm

Re: Portfolio Structuring Help (first post)

Post by MMRetiredYoung » Sat May 20, 2017 2:19 pm

Thanks Gr82bOutdoors,

This was a great link for withdrawal strategies: viewtopic.php?t=160476. I thought I'd share it.
I didn't find as much good information on early retirement.

Thanks Lafder,

All the money except the $457K in Vanguard VTI is negligible for cost basis. The $457K has an unrealized gain of $186K, which is why I wouldn't want to sell it.

All together the total unrealized gain for the rest is less than $50K for the 34 other funds. So I'm thinking I need to reshape the question?

If you had $3.5 million dollars and given the circumstances of my situation (retired young etc) what specific ETF funds would you invest in? Except for the % international of the total equities, I'm good with my percentages.

Would you still like to see the exact breakdown of the other funds? I have it, along with the gains and expense ratios (which are between .5% and 2%).

I'm not looking to get beaten up by how badly I've managed it so far (and I admit I have), so that is why I hesitated to post that detailed data. And I'm committed to moving forward to less funds, and passive investing! So I'm looking forward. (I did add this in the original post to try and garner some additional feedback.)

ALL advice is greatly appreciated!

Lafder
Posts: 3553
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Portfolio Structuring- REVISED- Please review

Post by Lafder » Sat May 20, 2017 10:11 pm

Yes I would like to see the detailed holdings, ERs, and cost basis. If you have any with losses they can be sold at the same time as some with gains. As you look at ERs, some will be more obvious to get rid of first due to expenses. It will help you get all of the info in one place which can form the framework and then roadmap to decide what to make changes on.

I prefer Mutual Funds to ETFs since I find the buy and sell orders easier and you can fund similar holdings with similar expenses.

I prefer a 3 fund portfolio myself. Have you read this? viewtopic.php?f=10&t=88005

It is a great discussion of the benefits of a 3 fund portfolio. As you read it through, most questions you can think of will be asked and answered.

lafder
Last edited by Lafder on Mon May 22, 2017 9:47 am, edited 1 time in total.

maniminto
Posts: 85
Joined: Wed Jan 04, 2017 4:50 pm

Re: Portfolio Structuring- REVISED- Please review

Post by maniminto » Sat May 20, 2017 10:27 pm

What is the split between taxable and tax deferred investments for the $4M assets?

MMRetiredYoung
Posts: 4
Joined: Tue May 09, 2017 7:42 pm

Re: Portfolio Structuring- REVISED- Please review

Post by MMRetiredYoung » Sun May 21, 2017 4:44 pm

Thanks for the question maniminto, 15.5% in not taxable holdings.

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