4 fund portfolio

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Topic Author
VTSE0910
Posts: 30
Joined: Sat Jan 26, 2019 9:32 pm

4 fund portfolio

Post by VTSE0910 »

I am 34 and working to consolidate investments. I have a Roth IRA, Traditional IRA, and several brokerage accounts that I can work with.

I have a 401k and HSA that have an asset allocation set by a former adviser and auto-rebalance. I max them out and generally don't look.

I'm considering transferring a lot of the assets to a 3 or 4 fund approach, 4 fund would match VFIFX with ETFs. I currently have about 8% of the IRAs in alternatives, mostly VNQ and VNQI, but also some gold and utilities. There are a few other funds for factor tilts as well, but a lot of VTI and SCHF. This is a combination of what was set up by a previous adviser and an allocation I set up after reading a book that recommended a different passive approach than the 4 fund, mostly equal weighted S&P 500.

I also have about 10% of my assets in Robinhood and Motif. I like following them and playing around with different techniques with small investments. I also see the chance to get in on early industries with the individual stocks. Electric cars and cannabis are two examples that have done well and have potential but are risky and underweight in major indexes.

I'm also very tax and fee conscious and have learned from a few mistakes how to best optimize that side of things.

Would keeping 80% in a 4-fund (90/10), 10% in alternatives, and 10% as individual investments be reasonable? I enjoy doing some investing on my own, so there is no "hassle"; I do a lot of it on the bus to work.

Or, does that seem like a sure way to screw it up for myself and I really need to just get it all consolidated?
dbr
Posts: 34186
Joined: Sun Mar 04, 2007 9:50 am

Re: 4 fund portfolio

Post by dbr »

VTSE0910 wrote: Sat Feb 02, 2019 10:37 am
Would keeping 80% in a 4-fund (90/10), 10% in alternatives, and 10% as individual investments be reasonable? I enjoy doing some investing on my own, so there is no "hassle"; I do a lot of it on the bus to work.

Or, does that seem like a sure way to screw it up for myself and I really need to just get it all consolidated?
I don't know that you are going to screw it up at all, but what you propose seems pointless more than wrong, if you want an opinion.
Thecallofduty
Posts: 90
Joined: Sat Jan 19, 2019 10:59 am

Re: 4 fund portfolio

Post by Thecallofduty »

If you would like a detailed review it would be best to post what funds you have in each account, the expense ratios, and amount of money in each account. From there maybe someone can give you more detailed feedback.
-thecallofduty
Topic Author
VTSE0910
Posts: 30
Joined: Sat Jan 26, 2019 9:32 pm

Re: 4 fund portfolio

Post by VTSE0910 »

Thecallofduty wrote: Sat Feb 02, 2019 10:44 am If you would like a detailed review it would be best to post what funds you have in each account, the expense ratios, and amount of money in each account. From there maybe someone can give you more detailed feedback.
Fair enough. I do have the list put together, but hesitate to post because I did not create the allocation. Several of the alternatives and tilts are less than 5% of the portfolio, many less than 1%. I may begin by just washing these out into VTI and VXUS.

I also invested a sizable amount into equal weighted S&P 500 following advice that investing in any more diversification than that was accepting lower long term returns. Any opinions on this?
Thecallofduty
Posts: 90
Joined: Sat Jan 19, 2019 10:59 am

Re: 4 fund portfolio

Post by Thecallofduty »

No need for concern. No one is here to critize. Just easier to offer an opinion if the whole portfolio picture is clear.

Any yea in general any holdings less than 10% will likely have no major impact in portfolio performance so best not to hold something if its onky 5%,1% etc.
-thecallofduty
Topic Author
VTSE0910
Posts: 30
Joined: Sat Jan 26, 2019 9:32 pm

Re: 4 fund portfolio

Post by VTSE0910 »

I'm thinking of the following in my IRAs and brokerage.

VTI 50%
VXUS 30%
BND 7%
BNDX 3%
VNQ 5%
VNQI 5%

I'll give up on the equal weight philosophy. I'll likely keep my Robinhood and Motif, but ensure they stay under 10% of the portfolio. They can be my 'play' accounts and the others can be untouchable except to periodically re-balance. I'm OK with the way the 401k is set up. It doesn't have the option for the total market ETFs so the allocation of mutual funds is good for now.
justsomeguy2018
Posts: 1221
Joined: Wed Oct 03, 2018 8:11 pm

Re: 4 fund portfolio

Post by justsomeguy2018 »

VTSE0910 wrote: Sat Feb 02, 2019 2:25 pm I'm thinking of the following in my IRAs and brokerage.

VTI 50%
VXUS 30%
BND 7%
BNDX 3%
VNQ 5%
VNQI 5%

I'll give up on the equal weight philosophy. I'll likely keep my Robinhood and Motif, but ensure they stay under 10% of the portfolio. They can be my 'play' accounts and the others can be untouchable except to periodically re-balance. I'm OK with the way the 401k is set up. It doesn't have the option for the total market ETFs so the allocation of mutual funds is good for now.

Looks reasonable to me.

Any reason why you have so much in International Equity? Well, or perhaps I should rephrase. How did you settle on 30% for VXUS? I think I am around 15% Intl. Not that either is right or wrong. I know there is a lot of variation/different opinions on that allocation.
Topic Author
VTSE0910
Posts: 30
Joined: Sat Jan 26, 2019 9:32 pm

Re: 4 fund portfolio

Post by VTSE0910 »

I listen to a podcast that tells me US equity is entirely overvalued and I should invest 80% emerging and 20% developed international. So, I took the VFIFX allocation and stole the 10% for REITs from domestic equities.

I also read a book that tells me the real risk in a portfolio is to invest in anything but equal weight S&P500. The perceived lower risk approach of alternatives and bonds is really just a volatility counter, but detrimental over time. International will never outperform over the longterm.

I also was invested in a personal advisory service for a period of time that had me believe that their 30 fund (all low fee ETF) strategy would pay their fee in auto-re-balancing and tax loss harvesting. It may have, but when it took 23 emails and 4 phone calls to properly take the RMD from an inherited IRA, I called it off.

So, I'm trying to strike a balance between those 3 approaches. A lot of this is newish money that came from rolling over a 401k that had very few options as well as a small inheritance. I admit, the last year I've been bouncing all over the place. I don't mind doing some ongoing maintenance, but I am a neurotic engineer so I'm susceptible to poor behavior and general tinkering. I read a book and want to switch to that approach. That's why I tried the management, but it just was not worth the headache. I'm hoping to come up with a strategy and have a 'no touch' rule except to re-balance with new funds. I'm hoping keeping a side brokerage where I can mess with small amounts in options and speculative stocks will satisfy me.
2015
Posts: 2906
Joined: Mon Feb 10, 2014 2:32 pm

Re: 4 fund portfolio

Post by 2015 »

VTSE0910 wrote: Sat Feb 02, 2019 2:43 pm I listen to a podcast that tells me US equity is entirely overvalued and I should invest 80% emerging and 20% developed international. So, I took the VFIFX allocation and stole the 10% for REITs from domestic equities.

I also read a book that tells me the real risk in a portfolio is to invest in anything but equal weight S&P500. The perceived lower risk approach of alternatives and bonds is really just a volatility counter, but detrimental over time. International will never outperform over the longterm.

I also was invested in a personal advisory service for a period of time that had me believe that their 30 fund (all low fee ETF) strategy would pay their fee in auto-re-balancing and tax loss harvesting. It may have, but when it took 23 emails and 4 phone calls to properly take the RMD from an inherited IRA, I called it off.

So, I'm trying to strike a balance between those 3 approaches. A lot of this is newish money that came from rolling over a 401k that had very few options as well as a small inheritance. I admit, the last year I've been bouncing all over the place. I don't mind doing some ongoing maintenance, but I am a neurotic engineer so I'm susceptible to poor behavior and general tinkering. I read a book and want to switch to that approach. That's why I tried the management, but it just was not worth the headache. I'm hoping to come up with a strategy and have a 'no touch' rule except to re-balance with new funds. I'm hoping keeping a side brokerage where I can mess with small amounts in options and speculative stocks will satisfy me.
This is the problem when you get sucked into the world of those who endlessly publish regarding investing, personal finance and microeconomics who profit from stealing your attention and your time and hence your life. It will never end. There is yet another circular debate in the forum about "3% is the new 4%" (when after the 2008 meltdown I thought the debate was 2.5% was the new 4%!). If you are not positioning your financial life in such a way as to escape these and other go nowhere debates you are doomed to have your attention and hence your life continually harvested.

Can you see how "students of investing" saddled with a fear of missing out must by extension have their lives continually stolen by the financial publishing cabal as a result of an addiction to consuming the "wealth of information" always available? The striking opportunity cost found in the almost pathological focus on investing and personal finances does not come without substantial cost to the many other aspects of the complex adaptive system in which you as a human being reside.
Topic Author
VTSE0910
Posts: 30
Joined: Sat Jan 26, 2019 9:32 pm

Re: 4 fund portfolio

Post by VTSE0910 »

Can you see how "students of investing" saddled with a fear of missing out must by extension have their lives continually stolen by the financial publishing cabal as a result of an addiction to consuming the "wealth of information" always available?
I'm definitely coming around to understanding that. I'm in an industry where I'm constantly studying and learning, and trying things that don't work is one of the best ways to find what will. So, it seems that I should be able to do that with investing too.

But, when the approaches are as contradictory as I'm finding, it's a gamble to pick one. And, to try to strike a balance by going with several will at best create a diversified mush to no benefit and at worst, wipe out returns.

And from my personal experience, nothing I've tried has been catastrophic, it's just been a waste of time or fees for no better return than the market. Now that I'm free of the advisory fee, I may let this allocation ride for a while. I may consolidate now. I'll decide in a few weeks. Either way, I'm committed to this forum and a passive approach from now on out.
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