Am I playing a losing game?

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Topic Author
BullHouse_BearMarket
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Am I playing a losing game?

Post by BullHouse_BearMarket » Thu May 30, 2019 8:44 am

Hello fellow Bogleheads!

My employer recently changed to American Funds for the 401(k) and profit sharing plan. I spoke with the adviser about my desire to be more aggressive with my 401(k) and we developed the following portfolio:

10% American Funds New World R6 (RNWGX) er .62
32% Fidelity Blue Chip Growth Fund (FBGRX) er .72
15% Hartford MidCap R6 (HFMVX) er .75
22% MFS International Growth Fund (MGRDX) er .8
15% PIMCO StocksPLUS Small Institutional (PSCSX) er .79
6% DFA Real Estate Securities I (DFREX) er .19

In addition to these funds and the American Fund Target Date Funds, the following are available:

DFA Emerging Markets Core Equity I (DFCEX) 0.52
DFA International Core Equity I DFIEX 0.30
DFA US Large Company I DFUSX 0.08
Vanguard Mid Cap Index Adm VIMAX 0.05
American Funds Washington Mutual R6 RWMGX 0.29
Vanguard 500 Index Fund - Admiral VFIAX 0.04
American Funds American Balanced R6 RLBGX 0.28
Columbia Emerging Markets Bond Instl 2 CEBRX 0.75
Dodge & Cox Income Fund DODIX 0.43
PIMCO Global Bond Opps (USD-Hedged) Inst PGBIX 0.59
Vanguard Total Intl Bd Idx Admiral VTABX 0.11

A little additional information, I turn 30 next month. I have a Roth IRA, that I max out, that holds the Vanguard Total Stock, Total International Stock, and Wellington. I'm comfortable with being very aggressive because time is on my side.

So my questions, am I playing a losing game trying to outperform the Target Funds with my selections? Would I be better off with a simpler approach by just holding the Vanguard 500 Index and Real Estate Securities (I'm a big fan of the real estate holding)?

I appreciate your insight.

retiringwhen
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Re: Am I playing a losing game?

Post by retiringwhen » Thu May 30, 2019 8:46 am

Yes, yes. :beer

But must ask, why the RE fund? Probably better off with a small bond holding.

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Wiggums
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Re: Am I playing a losing game?

Post by Wiggums » Thu May 30, 2019 8:49 am

Your paying a lot in ERs for that portfolio. I’d go with the vanguard funds.

bloom2708
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Re: Am I playing a losing game?

Post by bloom2708 » Thu May 30, 2019 8:50 am

What is the cost on the Target Date funds?

I note you (him or you together?) picked almost all of the highest cost funds. Cost determines much along with your mix of stocks/bonds.

I would pick the Target Fund if the expense ratio is under .2% or so.

Or this would be fine as well:

Vanguard 500 Index Fund - Admiral VFIAX 0.04
Dodge & Cox Income Fund DODIX 0.43


Put International in your Roth (or taxable).
Last edited by bloom2708 on Thu May 30, 2019 8:59 am, edited 1 time in total.
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Dottie57
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Re: Am I playing a losing game?

Post by Dottie57 » Thu May 30, 2019 8:51 am

Wiggums wrote:
Thu May 30, 2019 8:49 am
Your paying a lot in ERs for that portfolio. I’d go with the vanguard funds.
This.

Advisor selected high ER funds. It benefits one of you. Guess who?

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Stinky
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Re: Am I playing a losing game?

Post by Stinky » Thu May 30, 2019 8:54 am

BullHouse_BearMarket wrote:
Thu May 30, 2019 8:44 am
Would I be better off with a simpler approach by just holding the Vanguard 500 Index and Real Estate Securities (I'm a big fan of the real estate holding)?
If you must play in real estate, then go ahead in a suitably small amount.

Otherwise, given the fund choices you have, just stay in the 500 fund, and get your bond exposure in your IRA.
It's a GREAT day to be alive - Travis Tritt

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ruralavalon
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Re: Am I playing a losing game?

Post by ruralavalon » Thu May 30, 2019 8:56 am

How much do you pay for that advice?

Yes, you are playing a loser's trying to beat the market.

You have some very good, well diversified, low cost mutual funds offered in your employer's 401k plan.

Why not use them, such as:
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

chevca
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Re: Am I playing a losing game?

Post by chevca » Thu May 30, 2019 8:56 am

You can't control what the market will return. You can control the fees you pay. While not extreme, those are all high fee funds, IMO. Especially when you have good 0.0something funds available.

I'd say, yes, you're playing a losing game. Have you heard of Warren Buffett's bet he made with a hedge fund manager? Look it up if you haven't. Warren's pick was just the plain old S&P 500.

The real estate fund has a surprisingly low ER. If you want to keep some of that one because you like it, I don't see a problem with that. I'd keep it a low percentage of your portfolio, but looks like that's already the plan you have there.

k3vb0t
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Re: Am I playing a losing game?

Post by k3vb0t » Thu May 30, 2019 8:57 am

Do you believe active management can outperform passive management over 20-30 years?

If so: do you believe the management teams running those specifics funds and charging those specific ERs can outperform passive management over 20-30 years?

If so: then you should feel comfortable with your portfolio.

If not (which nearly 100% of this board think): then yes, you're playing a losing game.

Topic Author
BullHouse_BearMarket
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Re: Am I playing a losing game?

Post by BullHouse_BearMarket » Thu May 30, 2019 8:59 am

Thank you all for the replies. The ERs are absolutely a concern of mine and a cause for this thread.
bloom2708 wrote:
Thu May 30, 2019 8:50 am
What is the cost on the Target Date funds?
The 2060 Target Fund has ER of .44. Seems high to me.
retiringwhen wrote:
Thu May 30, 2019 8:46 am
But must ask, why the RE fund? Probably better off with a small bond holding.
For the Real Estate holding, I am personally a big fan of real estate. I don't plan on holding more than 10%. I understand it may not be the best choice, but a small part of investing is to invest in what you have a personal interest in. I could replace with bonds, but I'm willing to take on the additional risk of real estate in exchange for personal satisfaction.

chevca
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Re: Am I playing a losing game?

Post by chevca » Thu May 30, 2019 9:03 am

BullHouse_BearMarket wrote:
Thu May 30, 2019 8:59 am
For the Real Estate holding, I am personally a big fan of real estate. I don't plan on holding more than 10%. I understand it may not be the best choice, but a small part of investing is to invest in what you have a personal interest in. I could replace with bonds, but I'm willing to take on the additional risk of real estate in exchange for personal satisfaction.
I think that's plenty reasonable.

Ferdinand2014
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Re: Am I playing a losing game?

Post by Ferdinand2014 » Thu May 30, 2019 9:06 am

Yes you are.

You picked the most expensive funds. All bad choices by definition. Pick the lower cost equivalents on your list:

DFA Emerging Markets Core Equity I (DFCEX) 0.52
DFA International Core Equity I DFIEX 0.30
DFA US Large Company I DFUSX 0.08
Vanguard Mid Cap Index Adm VIMAX 0.05
American Funds Washington Mutual R6 RWMGX 0.29
Vanguard 500 Index Fund - Admiral VFIAX 0.04
American Funds American Balanced R6 RLBGX 0.28
Columbia Emerging Markets Bond Instl 2 CEBRX 0.75
Dodge & Cox Income Fund DODIX 0.43
PIMCO Global Bond Opps (USD-Hedged) Inst PGBIX 0.59
Vanguard Total Intl Bd Idx Admiral VTABX 0.11
Last edited by Ferdinand2014 on Thu May 30, 2019 9:12 am, edited 2 times in total.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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goodenyou
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Re: Am I playing a losing game?

Post by goodenyou » Thu May 30, 2019 9:10 am

Yes. I believe so. Read Charley Ellis' great book Winning The Loser's Game. It is a classic.

There is a very good review on The White Coat Investor.
https://www.whitecoatinvestor.com/winni ... -a-review/

Sometimes it requires a personal failure with actively managed high-cost mutual funds to be convinced that low-cost index funds are a better strategy. Although, you could get lucky and pick the actively managed out-performers.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

Topic Author
BullHouse_BearMarket
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Joined: Sun Jul 10, 2016 4:19 pm

Re: Am I playing a losing game?

Post by BullHouse_BearMarket » Thu May 30, 2019 9:14 am

Thank you all for the quick replies. I will try to keep up with responding.
k3vb0t wrote:
Thu May 30, 2019 8:57 am
Do you believe active management can outperform passive management over 20-30 years?
Frankly, no. And that is why my Roth is the way it is. It makes sense that I should keep that mindset with my 401(k). Unfortunately I let myself get caught up in the adviser's advice and just went with it, but now I'm questioning it as I review.
chevca wrote:
Thu May 30, 2019 8:56 am
You can't control what the market will return. You can control the fees you pay. While not extreme, those are all high fee funds, IMO. Especially when you have good 0.0something funds available.

I'd say, yes, you're playing a losing game. Have you heard of Warren Buffett's bet he made with a hedge fund manager? Look it up if you haven't. Warren's pick was just the plain old S&P 500.

The real estate fund has a surprisingly low ER. If you want to keep some of that one because you like it, I don't see a problem with that. I'd keep it a low percentage of your portfolio, but looks like that's already the plan you have there.
I agree completely and appreciate the insight. I'm a big fan of the Oracle of Omaha and have read some of his books. For the RE, thank you for reassuring me that I'm not way off base. The low percentage holding is my plan there.
ruralavalon wrote:
Thu May 30, 2019 8:56 am
How much do you pay for that advice?

Why not use them, such as:
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.
I didn't pay anything for the advise. Free access to an adviser is part of our 401(k) plan. I like your choice in alternative choices. Thank you.
goodenyou wrote:
Thu May 30, 2019 9:10 am
Read Charley Ellis' great book Winning The Loser's Game.
Thank you for the suggestion. I will definitely add that to the list. Maybe I'll get myself a father's day present.
Ferdinand2014 wrote:
Thu May 30, 2019 9:06 am
Pick the lower cost equivalents on your list.
Would you suggest holding all the funds you selected, or just 2-3 of them?

Ferdinand2014
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Re: Am I playing a losing game?

Post by Ferdinand2014 » Thu May 30, 2019 9:14 am

ruralavalon wrote:
Thu May 30, 2019 8:56 am
How much do you pay for that advice?

Yes, you are playing a loser's trying to beat the market.

You have some very good, well diversified, low cost mutual funds offered in your employer's 401k plan.

Why not use them, such as:
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.
+1
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Ferdinand2014
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Re: Am I playing a losing game?

Post by Ferdinand2014 » Thu May 30, 2019 9:17 am

BullHouse_BearMarket wrote:
Thu May 30, 2019 9:14 am
Thank you all for the quick replies. I will try to keep up with responding.
k3vb0t wrote:
Thu May 30, 2019 8:57 am
Do you believe active management can outperform passive management over 20-30 years?
Frankly, no. And that is why my Roth is the way it is. It makes sense that I should keep that mindset with my 401(k). Unfortunately I let myself get caught up in the adviser's advice and just went with it, but now I'm questioning it as I review.
chevca wrote:
Thu May 30, 2019 8:56 am
You can't control what the market will return. You can control the fees you pay. While not extreme, those are all high fee funds, IMO. Especially when you have good 0.0something funds available.

I'd say, yes, you're playing a losing game. Have you heard of Warren Buffett's bet he made with a hedge fund manager? Look it up if you haven't. Warren's pick was just the plain old S&P 500.

The real estate fund has a surprisingly low ER. If you want to keep some of that one because you like it, I don't see a problem with that. I'd keep it a low percentage of your portfolio, but looks like that's already the plan you have there.
I agree completely and appreciate the insight. I'm a big fan of the Oracle of Omaha and have read some of his books. For the RE, thank you for reassuring me that I'm not way off base. The low percentage holding is my plan there.
ruralavalon wrote:
Thu May 30, 2019 8:56 am
How much do you pay for that advice?

Why not use them, such as:
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.
I didn't pay anything for the advise. Free access to an adviser is part of our 401(k) plan. I like your choice in alternative choices. Thank you.
goodenyou wrote:
Thu May 30, 2019 9:10 am
Read Charley Ellis' great book Winning The Loser's Game.
Thank you for the suggestion. I will definitely add that to the list. Maybe I'll get myself a father's day present.
Ferdinand2014 wrote:
Thu May 30, 2019 9:06 am
Pick the lower cost equivalents on your list.
Would you suggest holding all the funds you selected, or just 2-3 of them?
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.

3 fund portfolio in whatever ratio you desire of U.S. equity, International, Total bond. Lowest fees. You really do not need anything else.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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goingup
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Re: Am I playing a losing game?

Post by goingup » Thu May 30, 2019 9:21 am

One of the few things Bogleheads agree on is that high ERs hurt portfolio returns. Lowering costs for investors was the central theme of Jack Bogle's work.

With that in mind, use low-cost index funds for the core of your retirement portfolio. It really makes a difference as your portfolio grows. For example, a 100K portfolio of .75ER funds will cost you $750 per year. If you use .04ER funds instead, the cost is $40 per year. You can see how impactful that becomes year over year.

I don't think have a few more expensive funds is terrible, but keep the majority low-cost.

Ferdinand2014
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Re: Am I playing a losing game?

Post by Ferdinand2014 » Thu May 30, 2019 9:23 am

Ferdinand2014 wrote:
Thu May 30, 2019 9:17 am
BullHouse_BearMarket wrote:
Thu May 30, 2019 9:14 am
Thank you all for the quick replies. I will try to keep up with responding.
k3vb0t wrote:
Thu May 30, 2019 8:57 am
Do you believe active management can outperform passive management over 20-30 years?
Frankly, no. And that is why my Roth is the way it is. It makes sense that I should keep that mindset with my 401(k). Unfortunately I let myself get caught up in the adviser's advice and just went with it, but now I'm questioning it as I review.
chevca wrote:
Thu May 30, 2019 8:56 am
You can't control what the market will return. You can control the fees you pay. While not extreme, those are all high fee funds, IMO. Especially when you have good 0.0something funds available.

I'd say, yes, you're playing a losing game. Have you heard of Warren Buffett's bet he made with a hedge fund manager? Look it up if you haven't. Warren's pick was just the plain old S&P 500.

The real estate fund has a surprisingly low ER. If you want to keep some of that one because you like it, I don't see a problem with that. I'd keep it a low percentage of your portfolio, but looks like that's already the plan you have there.
I agree completely and appreciate the insight. I'm a big fan of the Oracle of Omaha and have read some of his books. For the RE, thank you for reassuring me that I'm not way off base. The low percentage holding is my plan there.
ruralavalon wrote:
Thu May 30, 2019 8:56 am
How much do you pay for that advice?

Why not use them, such as:
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.
I didn't pay anything for the advise. Free access to an adviser is part of our 401(k) plan. I like your choice in alternative choices. Thank you.
goodenyou wrote:
Thu May 30, 2019 9:10 am
Read Charley Ellis' great book Winning The Loser's Game.
Thank you for the suggestion. I will definitely add that to the list. Maybe I'll get myself a father's day present.
Ferdinand2014 wrote:
Thu May 30, 2019 9:06 am
Pick the lower cost equivalents on your list.
Would you suggest holding all the funds you selected, or just 2-3 of them?
1) Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
2) Dodge & Cox Income Fund (DODIX) ER 0.43%.

3 fund portfolio in whatever ratio you desire of U.S. equity, International, Total bond. Lowest fees. You really do not need anything else. You could fiddle around the edges by tilting real estate ( already in S&P 500 at market cap), add some mid cap to get total U.S stock market (S&P500 correlates something like 99% of Total U.S.) etc., Unnecessary complication as I see it though.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Katietsu
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Re: Am I playing a losing game?

Post by Katietsu » Thu May 30, 2019 9:42 am

This board has a lot of fans of simplicity and hence the recommendations for the three fund portfolio. You have a good suggestion for that approach. If you want to do a bit more research and add real estate, emerging markets or smaller company stocks, you have some great options in your plan. The key though would be to choose an approach you could stick with for decades. At 30, with little experience, it is even harder to do that.

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ruralavalon
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Re: Am I playing a losing game?

Post by ruralavalon » Thu May 30, 2019 9:52 am

BullHouse_BearMarket wrote:
Thu May 30, 2019 8:59 am
Thank you all for the replies. The ERs are absolutely a concern of mine and a cause for this thread.
bloom2708 wrote:
Thu May 30, 2019 8:50 am
What is the cost on the Target Date funds?
The 2060 Target Fund has ER of .44. Seems high to me.
retiringwhen wrote:
Thu May 30, 2019 8:46 am
But must ask, why the RE fund? Probably better off with a small bond holding.
For the Real Estate holding, I am personally a big fan of real estate. I don't plan on holding more than 10%. I understand it may not be the best choice, but a small part of investing is to invest in what you have a personal interest in. I could replace with bonds, but I'm willing to take on the additional risk of real estate in exchange for personal satisfaction.
DFA Real Estate Securities I (DFREX) ER 0.19% is a stock fund, and volatile doing far worse in 2008 than the total stock market. Morningstar, total return (1993-2019), DFREX and VTSMX. It is not a substitute for a bond fund.

I am not against a real estate allocation, using a fund like DFA Real Estate Securities I (DFREX), but it is just not an alternative to a bond allocation.

BullHouse_BearMarket wrote:
Thu May 30, 2019 9:14 am
Would you suggest holding all the funds you selected, or just 2-3 of them?
If the 401k is your only retirement/long-term investing account then I suggest using all three for the broadest diversification (to decrease portfolio volatility, risk).

At age 30 you might consider:
1) 60%, Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) 20%, DFA International Core Equity I (DFIEX) ER 0.30%; and
2) 20%, Dodge & Cox Income Fund (DODIX) ER 0.43%.

If also have an IRA then that opens up other possibilities.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
BullHouse_BearMarket
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Re: Am I playing a losing game?

Post by BullHouse_BearMarket » Thu May 30, 2019 10:13 am

Katietsu wrote:
Thu May 30, 2019 9:42 am
The key though would be to choose an approach you could stick with for decades. At 30, with little experience, it is even harder to do that.
That is the key. Fortunately I learned my lesson early. I started investing on my 18th birthday, and thinking I was special, invested in individual stocks. Some of them worked out great because I bought during the recession (Yum Brands, BoA, VZ, Suncor, BP), but some really backfired and taught me a valuable lesson. My dad then introduced me to the boglehead way and I started my Roth with the 3 fund portfolio. I am definitely about holding and staying the course instead of trying to time the market.
ruralavalon wrote:
Thu May 30, 2019 9:52 am
If the 401k is your only retirement/long-term investing account then I suggest using all three for the broadest diversification (to decrease portfolio volatility, risk).

At age 30 you might consider:
1) 60%, Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) 20%, DFA International Core Equity I (DFIEX) ER 0.30%; and
2) 20%, Dodge & Cox Income Fund (DODIX) ER 0.43%.

If also have an IRA then that opens up other possibilities.
I have a Roth IRA that is about twice the size of my 401(k). In there I hold the Total Stock, Total International Stock, and Wellington. With that in mind, what other possibilities do you suggest?

mhalley
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Re: Am I playing a losing game?

Post by mhalley » Thu May 30, 2019 10:46 am

Another cost to consider is whether you are continuing to pay this advisor. Once you switch to the recommended portfolio, ensure that he is not siphoning money from your retirement for his yacht.

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jakehefty17
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Re: Am I playing a losing game?

Post by jakehefty17 » Thu May 30, 2019 10:53 am

Ignore the high fee funds recommended by the advisor. You have better options.

You don't mention a target allocation. That would be helpful.
Based on your options, I suggest to build your 401k with the following funds.

DFA Real Estate Securities I (DFREX) .19 - Decent real estate fund since you want one
DFA International Core Equity I DFIEX 0.30 - Decent international fund - good index
Vanguard Mid Cap Index Adm VIMAX 0.05 - Mid Cap for more market exposure
Vanguard 500 Index Fund - Admiral VFIAX 0.04 - Bingo
Dodge & Cox Income Fund DODIX 0.43 - Best available US bond fund
Vanguard Total Intl Bd Idx Admiral VTABX 0.11 - Depends if you want international bond exposure. It's currency hedged. Considerable.

Your Roth IRA holds Total US Stock, Total International, and Wellington. Keep in mind, bonds are usually best held in a 401k.

At 30 years old and Aggressive Allocation, with real estate, I'd suggest weighting somewhere around:
30% DFIEX
40% VFIAX
10% VIMAX
10% DFREX
10% DODIX

Keep your expenses low and know the indexes you're tracking. You've got good options.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

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greg24
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Re: Am I playing a losing game?

Post by greg24 » Thu May 30, 2019 10:58 am

Use any of these:

DFA US Large Company I DFUSX 0.08
Vanguard Mid Cap Index Adm VIMAX 0.05
Vanguard 500 Index Fund - Admiral VFIAX 0.04
Vanguard Total Intl Bd Idx Admiral VTABX 0.11

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ruralavalon
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Re: Am I playing a losing game?

Post by ruralavalon » Thu May 30, 2019 11:17 am

It's great that you started so young, and learned important lessons early about diversification using a three-fund type portfolio, and staying the course.

BullHouse_BearMarket wrote:
Thu May 30, 2019 10:13 am
Katietsu wrote:
Thu May 30, 2019 9:42 am
The key though would be to choose an approach you could stick with for decades. At 30, with little experience, it is even harder to do that.
That is the key. Fortunately I learned my lesson early. I started investing on my 18th birthday, and thinking I was special, invested in individual stocks. Some of them worked out great because I bought during the recession (Yum Brands, BoA, VZ, Suncor, BP), but some really backfired and taught me a valuable lesson. My dad then introduced me to the boglehead way and I started my Roth with the 3 fund portfolio. I am definitely about holding and staying the course instead of trying to time the market.
ruralavalon wrote:
Thu May 30, 2019 9:52 am
If the 401k is your only retirement/long-term investing account then I suggest using all three for the broadest diversification (to decrease portfolio volatility, risk).

At age 30 you might consider:
1) 60%, Vanguard 500 Index Fund - Admiral (VFIAX) ER 0.04%;
2) 20%, DFA International Core Equity I (DFIEX) ER 0.30%; and
2) 20%, Dodge & Cox Income Fund (DODIX) ER 0.43%.

If also have an IRA then that opens up other possibilities.
I have a Roth IRA that is about twice the size of my 401(k). In there I hold the Total Stock, Total International Stock, and Wellington. With that in mind, what other possibilities do you suggest?
The three funds I suggested in your 401k are (in my opinion) the best way to assemble a three-fund type portfolio with the options available in the 401k. Those are good funds, are well diversified (to decrease risk) and have lower expense ratios (to increase net return).

So you could continue with your three-fund portfolio in your Roth IRA, and also use the three funds I suggested in your 401k. Mirror your desired asset allocation in both accounts.

. . . . .

Its often better to coordinate investments among all accounts, rather than treat each account separately. An investor can treat all accounts together as a single unified portfolio, using only the best funds available in each account. That allows an investor to avoid having to use bad, sub-par, sub-optimal or high expense funds offered in many 401k plans. (The funds I suggested in your 401k plan are good funds. You don't face very difficult choices that too many others have to contend with.)

. . . . .

Since you also have a large Roth IRA you can use an overall portfolio with all index funds, even broader diversification and even lower expense ratios.

An an example to illustrate coordination among two accounts, using the 60/20/20 domestic/intinternational/bonds asset allocation, I offer this:

401k (33% of total portfolio)
33%, Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%

Roth IRA (67% of total portfolio)
27%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
20%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%
20%, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
BullHouse_BearMarket
Posts: 12
Joined: Sun Jul 10, 2016 4:19 pm

Re: Am I playing a losing game?

Post by BullHouse_BearMarket » Thu May 30, 2019 1:04 pm

You all have really given me a lot of helpful advice and I appreciate it. That is why I love this forum.
ruralavalon wrote:
Thu May 30, 2019 11:17 am
Since you also have a large Roth IRA you can use an overall portfolio with all index funds, even broader diversification and even lower expense ratios.
I won't quote your entire response, but all of it was great. Thank you for taking the time to break down a unified portfolio fund. I think that may be the best way to go. Do you have a suggestion on how to re-balance once my 401(k) exceeds the size of my Roth? I am contributing much more to the 401k, although unfortunately not able to max out yet.
jakehefty17 wrote:
Thu May 30, 2019 10:53 am
At 30 years old and Aggressive Allocation, with real estate, I'd suggest weighting somewhere around:
30% DFIEX
40% VFIAX
10% VIMAX
10% DFREX
10% DODIX
This looks like a nicely balanced portfolio. Although, I may exclude the International fund since I own the Total International in my Roth. Thank you for taking the time to break that down for me. My target allocation is still 90/10, maybe 85/15 since I'm not 20 anymore.
mhalley wrote:
Thu May 30, 2019 10:46 am
Another cost to consider is whether you are continuing to pay this advisor. Once you switch to the recommended portfolio, ensure that he is not siphoning money from your retirement for his yacht.
Great point and I will look into that. As I understand it, there is no cost and the service is included, but as I always say, "trust but verify."

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jakehefty17
Posts: 119
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Location: New York

Re: Am I playing a losing game?

Post by jakehefty17 » Thu May 30, 2019 1:24 pm

BullHouse_BearMarket wrote:
Thu May 30, 2019 1:04 pm
This looks like a nicely balanced portfolio. Although, I may exclude the International fund since I own the Total International in my Roth. Thank you for taking the time to break that down for me. My target allocation is still 90/10, maybe 85/15 since I'm not 20 anymore.
Glad to help.

There's all sorts of ways to meet your target asset allocation by shifting assets across multiple accounts. Normally I'd suggest allocating bonds in your 401k (Pre-Tax), but your choices are somewhat limited. The higher ER blurs the "optimal" decision. In any case, both are acceptable options.

From the wiki, here's some suggested reading for you:
https://www.bogleheads.org/wiki/Asset_a ... e_accounts
https://www.bogleheads.org/wiki/Tax-eff ... _placement

I listed all the funds I'd consider from your 401k options, the good news is you can certainly build a low-cost diversified portfolio.

Now you just have to fiddle with your options until your satisfied with a long-term plan. Have fun!
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

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ruralavalon
Posts: 15973
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Am I playing a losing game?

Post by ruralavalon » Thu May 30, 2019 2:15 pm

BullHouse_BearMarket wrote:
Thu May 30, 2019 1:04 pm
You all have really given me a lot of helpful advice and I appreciate it. That is why I love this forum.
ruralavalon wrote:
Thu May 30, 2019 11:17 am
Since you also have a large Roth IRA you can use an overall portfolio with all index funds, even broader diversification and even lower expense ratios.
I won't quote your entire response, but all of it was great. Thank you for taking the time to break down a unified portfolio fund. I think that may be the best way to go. Do you have a suggestion on how to re-balance once my 401(k) exceeds the size of my Roth? I am contributing much more to the 401k, although unfortunately not able to max out yet.



jakehefty17 wrote:
Thu May 30, 2019 10:53 am
At 30 years old and Aggressive Allocation, with real estate, I'd suggest weighting somewhere around:
30% DFIEX
40% VFIAX
10% VIMAX
10% DFREX
10% DODIX
This looks like a nicely balanced portfolio. Although, I may exclude the International fund since I own the Total International in my Roth. Thank you for taking the time to break that down for me. My target allocation is still 90/10, maybe 85/15 since I'm not 20 anymore.
mhalley wrote:
Thu May 30, 2019 10:46 am
Another cost to consider is whether you are continuing to pay this advisor. Once you switch to the recommended portfolio, ensure that he is not siphoning money from your retirement for his yacht.
Great point and I will look into that. As I understand it, there is no cost and the service is included, but as I always say, "trust but verify."
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
ruralavalon
Posts: 15973
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Am I playing a losing game?

Post by ruralavalon » Thu May 30, 2019 2:16 pm

BullHouse_BearMarket wrote:
Thu May 30, 2019 1:04 pm
You all have really given me a lot of helpful advice and I appreciate it. That is why I love this forum.
ruralavalon wrote:
Thu May 30, 2019 11:17 am
Since you also have a large Roth IRA you can use an overall portfolio with all index funds, even broader diversification and even lower expense ratios.
I won't quote your entire response, but all of it was great. Thank you for taking the time to break down a unified portfolio fund. I think that may be the best way to go. Do you have a suggestion on how to re-balance once my 401(k) exceeds the size of my Roth? I am contributing much more to the 401k, although unfortunately not able to max out yet.
When that time cones, simply start also using the other two funds in your 401k:
2) DFA International Core Equity I (DFIEX) ER 0.30%; and
3) Dodge & Cox Income Fund (DODIX) ER 0.43%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

mptfan
Posts: 5286
Joined: Mon Mar 05, 2007 9:58 am

Re: Am I playing a losing game?

Post by mptfan » Thu May 30, 2019 2:20 pm

BullHouse_BearMarket wrote:
Thu May 30, 2019 8:44 am
So my questions, am I playing a losing game trying to outperform the Target Funds with my selections?
Yes.

michaelingp
Posts: 164
Joined: Tue Jan 17, 2017 8:46 pm

Re: Am I playing a losing game?

Post by michaelingp » Thu May 30, 2019 2:44 pm

BullHouse_BearMarket wrote:
Thu May 30, 2019 8:59 am
but a small part of investing is to invest in what you have a personal interest in.
If by "personal interest" you mean you have the time and skills to analyze and compare certain investments better than all the other investors who have devoted their education and career to it, by all means go for it. But if "personal interest" just means something you've got a hunch is going to be great, then I, like a lot of folks on this board have learned the hard way that it is not "a small part of investing". It is a way to lose money to the professionals who pretty much hold all the cards. Good luck!

To put it another way, I don't understand the idea that a poor investment strategy or approach is OK as long as you only put a small amount of your portfolio in it.

Mr.BB
Posts: 941
Joined: Sun May 08, 2016 10:10 am

Re: Am I playing a losing game?

Post by Mr.BB » Thu May 30, 2019 7:05 pm

Instead of trying to "beat the market" try to "beat the system". As pointed out in earlier posts, the one things you do control is expense ratios. Add up what you will put into the recommended funds from your advisor, future contributions, etc and the funds expense ratios into the calculator that is linked up below. Then use the Vanguard 500 Index fund with the 0.04% Expense ratio and add in all the future numbers and years you will be investing and see how much money you will be make by not investing in those other funds.

http://www.begintoinvest.com/expense-ratio-calculator/
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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Leif
Posts: 2610
Joined: Wed Sep 19, 2007 4:15 pm

Re: Am I playing a losing game?

Post by Leif » Thu May 30, 2019 7:15 pm

Looks like most of your funds are at the higher end of the ER range. That would make me wonder if the advisor is compensated based on the funds ER.

I would stick with funds that start with the word "Vanguard". I would also keep DFREX. You can control for aggressiveness with the allocation between equity and bonds. I guess it is good you want aggressive since I don't see any good choices for a core bond fund. I guess the Dodge & Cox income fund, which benchmarks the Agg.

Or maybe go with all equities in the 401k and put your bonds in a separate IRA account.

mortfree
Posts: 1665
Joined: Mon Sep 12, 2016 7:06 pm

Re: Am I playing a losing game?

Post by mortfree » Thu May 30, 2019 7:50 pm

80% Vanguard 500
20% Dodge and cox income.

The enemy of a good plan is the dream of the perfect plan. Or something like that.

Keep it simple. Really.

70:30 or 75:25 would also work

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