DFA (Dimensional) Portfolio Keep or Jettison?

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Girya
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DFA (Dimensional) Portfolio Keep or Jettison?

Post by Girya » Thu Aug 08, 2019 11:07 am

I hope this thread serves to assist me in this question, and also as a healthy conversation of the relative merits and drawbacks of funds by Dimensional Advisors. I recently “broke up” with my AUM advisor, leaving me with a huge basket of DFA funds in a taxable account (and some Bridgeway, and some other alts) to self manage.

I wanted to have a healthy conversation on the relative pros and cons of DFA funds. I think I may be stuck with them for awhile as I don’t want a huge tax hit. There’s a few in Roth’s but mostly these are held in taxable. They are:

DTMIX 8.5%
DFCEX 3%
BOSVX (they are issuing this Bridgeway product for SCV instead of DFA) 16.6%
DFMVX 6.9%
DFESX 5.2%
DISVX 9.2%
DFMPX 17.7%
DFSPX 6.1%
DFUEX 10.5%
DFSIX 9.9%

There’s are the following making up a Roth:
DFXIX 11%
DFGEX 8.5%

There’s also a bunch of silly alt funds in there from Stoneridge, AQR, etc. probably not too hard to figure out who was advising me.

What to keep? What to dump? I don’t think they had me in a bad plan (except the alts) and want to generally retain the IPS with small and value tilts. And frankly too because converting these would be a tax nightmare. I’m inclined to just hold onto it? Reinvest dividends in similar
Style ETFs?

So how would you approach this legacy portfolio?

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Tyler Aspect
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Tyler Aspect » Thu Aug 08, 2019 12:07 pm

What is your current age?

What is your federal and state tax bracket? What is the name of your state?

Your percentages do not line up because they add up to 113.1%. Please fix them so that they add up to 100%.

From what I see your portfolio has a significant tilt to value, and small cap value. Can you talk about why you fired your financial advisor? Is it just to remove the asset under management fee, or are you seeing under-performance of your portfolio comparing to a set of benchmarks?

I suspect your portfolio has too many bells and whistles. A completely boring standard index based portfolio could do better in the long run. No value tilt, no small value tilt, no REIT, no social sustainability, etc.
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Girya
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Girya » Thu Aug 08, 2019 1:50 pm

Age 39, married, live in CO, 35% bracket. Liked and respected advisors, thought they were fiduciary, but felt I could do better without the AUM fee dragging the portfolio down. Tough to figure returns when the alpha seemed to go to them.

The amounts do add up to 100% in the taxable account, I just left the cash portion (the other 6.4%) off the table.

The other amounts are the weighted percentages of those assets in that one Roth; the rest are low cost Fidelity funds.

My point was specifically to ask:

1-What is the thought on DFA?

2-What is the thought on this particular portfolio? This was a Buckingham portfolio and so tends towards a Larry Swedroe tilt....ultimately this is a value and small cap question (I've sold off/am in the process of selling off the weird alt investments).

3-If you were going to keep some/leave some/sell it all/keep it all, which ones and why? If I didn't have gains to deal with it would be simple, but seeing as I do I'm trying to prioritize these within the context of the whole portfolio. Will likely be stuck with some of these for awhile because there's a fair amount of short and long term gains in here......

ExitStageLeft
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by ExitStageLeft » Thu Aug 08, 2019 2:21 pm

What about the funds in taxable suggest they will outperform the market? Any reason why you wouldn't want a total market index soultion?

https://www.portfoliovisualizer.com/bac ... 0&total3=0

That's what I would put all dividends into, and sell off everything else as TLH opportunities arise.

Edit: To answer your #3, I wouldn't sell anything just for the sake of simplifying. But when it's possible to take a loss then sell those, as well as any with small gains so that your net gain is zero. I would prioritize on those with the highest expense ratios.

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by nedsaid » Thu Aug 08, 2019 2:29 pm

Hard to advise you on this. For one thing, what kind of portfolio do you want? Do you want a simple 3 fund portfolio of US Total Stock Market Index, Total Bond Index, and Total International Stock Index? Do you want a Small/Value tilted portfolio? It sounds like you don't like the Alternative investments. You aren't very committed to DFA or the concepts behind it. Sounds to me like writing up an Investment Policy Statement is in order. Sounds to me like you are unsure about what you want. As the late Yogi Berra said, "If you don't know where you are going, how do you know when you get there?"

Another great question to ask yourself is why you went to Buckingham in the first place? What is it that you needed them to do for you? What do you want us to do for you?
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by nisiprius » Thu Aug 08, 2019 2:36 pm

My personal idea is that the prime directive is "stay the course," and that part of staying the course is just relaxing and not changing whatever you have unless you've done something that's such a glaring mistake that it demands action. There's absolutely nothing about this that is so horrible as to demand any rapid action, so in your situation I'd resist the urge to Do Something. I'd let it ride, and take my time to think it over. I would even (yes, I've literally done this myself) force myself to wait six months, before taking any action.

Like Tyler Aspect, I find that your percentages add up to 113.1%, and if I take out the Roth they only add up to 93.6%, so I'm not sure what to do about that.

I typed the twelve funds and percentages into PortfolioVisualizer and clicked "normalize" which reduces them proportionally to make the total 100%, and got

DTMIX DFA Tax-Managed International Value 7.57%
DFCEX DFA Emerging Markets Core Equity I 2.65%
BOSVX Bridgeway Omni Small-Cap Value N 14.67%
DFMVX DFA Tax-Managed US Marketwide Value II 6.10%
DFESX DFA Emerging Markets Social Core Port 4.59%
DISVX DFA International Small Cap Value I 8.13%
DFMPX DFA Municipal Bond Institutional 15.64%
DFSPX DFA Intl Sustainability Core 1 5.39%
DFUEX DFA US Social Core Equity 2 Portfolio 9.28%
DFSIX DFA US Sustainability Core 1 8.75%
DFXIX DFA Diversified Fixed Income Instl 9.72%
DFGEX DFA Global Real Estate Securities Port 7.51%

I then observed that DFMPX and DFXIX appear to be bonds (fixed income), and the rest all appear to be stocks, so you are at about 75/25. So the only thing I would suggest thinking about carefully now is whether that's the stock/bond allocation you want. Hopefully you talked this over when you were with the advisor, so you've already made a thoughtful decision about that. Make a fresh zero-based decision and see what you think, and if you want something very different from 75/25 you might consider doing something about it.

I also observe that DTMIX, DFCEX, DFESX, DISVX, DFSPX appear to be international stocks, and DFGEX is 65% US, 35% international so... I need a spreadsheet for this... OK. You are at about 50% US stocks, 25% international stocks, and 25% bonds, so 75/25 stocks bonds, and, within stocks, 67% US, 33% international.

You also have a total of four holdings with "social" or "sustainability" in their names, adding up to 28% of your portfolio and thus 55% of your stocks--more than half. I am guessing that this reflects a conscious intention on your part, not a recommendation by your advisor. If so, you may want to preserve that in any portfolio changes you make.

So, the next reality check. Unfortunately I don't know how long you held that portfolio or whether there have been any changes, but I'll post a link so you can play with things in PortfolioVisualizer. Oh, darn it all, the two bond funds have only existed since Jan 2016. Phooey. OK, let's just look at the stocks.

Looking only at stocks, then, the Bogleheadish portfolio is a Taylor Larimore three-fund portfolio but without the stocks. That is, a two-fund portfolio with the same US/International ratio as yours: 67% Total Stock, 33% Total Bond. Here we go.

Portfolio 1, the stocks in your portfolio.
Portfolio 2, 67% Total Stock, 33% Total Bond.

Source

Image

Please ignore the happy bit of luck (happy because it confirms my personal biases) that the simple portfolio actually outperformed your complicated one. You can make out a case for the simple portfolio being better in several ways, but the difference is small and might not persist. The main thing is that the overall risk and return have not been terribly different, your DFA portfolio had broadly the same risk and return as the two-fund. They are more the same than they are different, and there's a case to be made for just not fiddling.

Because your advisor put you into several funds that don't go back very far, it's hard to know what to do if we want to make a fair comparison that includes 2000-2003. That period of time is important, because at that time the stock market in general was going down but small-cap value and REITs were going up. Will something like that happen again? Soon? I don't know. But since your portfolio didn't exist then, and I don't think you were with this advisor then, there's an excuse for leaving it out.

The last thing I will mentioned, based on the fact that you are invested in several "social" and "sustainability" funds, is that Vanguard has exactly one mutual fund in this general category, the Vanguard FTSE Social Index Fund, VTFAX, which is indeed a low-cost (0.14% ER) index fund. It also has two very recently launched "ESG" (environmental, social, and governance) ETFs:

Vanguard ESG U.S. Stock ETF
Vanguard ESG International Stock ETF

I know nothing about any of these, I am just pointing out their existence.
Last edited by nisiprius on Thu Aug 08, 2019 2:59 pm, edited 5 times in total.
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by nisiprius » Thu Aug 08, 2019 2:49 pm

P.S. I'm much too lazy to do this myself, but your homework should include calculating the average expense ratio of your portfolio. Step 1 is to look up the expense ratio for each mutual fund.

Step 2 is to look at a statement, paper or online; for each fund, take the actual number of dollars you have it, and multiply by the expense ratio to get the annual cost in dollars for that fund. Add them up to get your total dollar cost.

Take a moment to look at it. Then divide total dollar expenses by total dollar value of all mutual funds to get overall average expense ratio.

Because DFA funds are generally pretty reasonable in terms of expense ratios, I am going to take a wild guess and say I expect your final number to come out somewhere in the ballpark of 0.25% to 0.50%. If you do this exercise, I hope you'll share the results with us. Then do the same exercise for your simplified portfolio. Calculate both absolute dollar number as well as a percentage.

It is quite likely that you'll find that you can save many hundreds of dollars in annual expenses. How important that is can be debated.
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Tyler Aspect
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Tyler Aspect » Thu Aug 08, 2019 3:44 pm

Girya wrote:
Thu Aug 08, 2019 1:50 pm
Age 39, married, live in CO, 35% bracket. Liked and respected advisors, thought they were fiduciary, but felt I could do better without the AUM fee dragging the portfolio down. Tough to figure returns when the alpha seemed to go to them.

The amounts do add up to 100% in the taxable account, I just left the cash portion (the other 6.4%) off the table.

The other amounts are the weighted percentages of those assets in that one Roth; the rest are low cost Fidelity funds.

My point was specifically to ask:

1-What is the thought on DFA?

2-What is the thought on this particular portfolio? This was a Buckingham portfolio and so tends towards a Larry Swedroe tilt....ultimately this is a value and small cap question (I've sold off/am in the process of selling off the weird alt investments).

3-If you were going to keep some/leave some/sell it all/keep it all, which ones and why? If I didn't have gains to deal with it would be simple, but seeing as I do I'm trying to prioritize these within the context of the whole portfolio. Will likely be stuck with some of these for awhile because there's a fair amount of short and long term gains in here......
DFA is respectable, but their expense ratios are somewhat higher than Vanguard's index funds. Actually I would personally not keep any of the taxable positions. Look for opportunities when the next economic recession happens, to sell them off with losses offsetting gains so that you can minimize taxes.

I am thinking that since you are in high income bracket that you can afford to invest a bit conservatively.

Sample portfolio : 40% US stock, 20% international stock, 40% US bond

US stock: VTI or ITOT
International stock : VEU or IXUS
US bond: BND or AGG

Place US bonds in your 401k account or TSP account if possible. Place international stocks in Roth account if possible.
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by edge » Thu Aug 08, 2019 4:03 pm

I only use DFA for edge case scenarios (e.g. EM Value). I like the construction of their REIT and I use DFGEX. I don't use an advisor so I don't have that overhead.

IMO it doesn't make sense to use them for everything due to costs (which although 'reasonable', are still relatively high) and over-focus on value.

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by typical.investor » Thu Aug 08, 2019 6:08 pm

Girya wrote:
Thu Aug 08, 2019 1:50 pm
3-If you were going to keep some/leave some/sell it all/keep it all, which ones and why? If I didn't have gains to deal with it would be simple, but seeing as I do I'm trying to prioritize these within the context of the whole portfolio. Will likely be stuck with some of these for awhile because there's a fair amount of short and long term gains in here......
Value has likely underperformed in your holding period, and I would not sell them.

The core funds I looked at DFUEX and DFSIX both tilt small. Those can be sold more easily but you'd be changing your AA if you didn't mind cap size as you replaced them.

Even without gains to stop me, I don't think I'd want to sell everything and replace it. Tilting small value and then abandoning the positions doesn't make any sense to me. If you can replace the exposure at a cheaper expense, that is one thing, but switching out of your tilt is another.

By the way am curious, what was the AUM fee you were paying? And how much of which alts did they have you in? How did they do?

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Trader Joe » Thu Aug 08, 2019 6:18 pm

Girya wrote:
Thu Aug 08, 2019 11:07 am
I hope this thread serves to assist me in this question, and also as a healthy conversation of the relative merits and drawbacks of funds by Dimensional Advisors. I recently “broke up” with my AUM advisor, leaving me with a huge basket of DFA funds in a taxable account (and some Bridgeway, and some other alts) to self manage.

I wanted to have a healthy conversation on the relative pros and cons of DFA funds. I think I may be stuck with them for awhile as I don’t want a huge tax hit. There’s a few in Roth’s but mostly these are held in taxable. They are:

DTMIX 8.5%
DFCEX 3%
BOSVX (they are issuing this Bridgeway product for SCV instead of DFA) 16.6%
DFMVX 6.9%
DFESX 5.2%
DISVX 9.2%
DFMPX 17.7%
DFSPX 6.1%
DFUEX 10.5%
DFSIX 9.9%

There’s are the following making up a Roth:
DFXIX 11%
DFGEX 8.5%

There’s also a bunch of silly alt funds in there from Stoneridge, AQR, etc. probably not too hard to figure out who was advising me.

What to keep? What to dump? I don’t think they had me in a bad plan (except the alts) and want to generally retain the IPS with small and value tilts. And frankly too because converting these would be a tax nightmare. I’m inclined to just hold onto it? Reinvest dividends in similar
Style ETFs?

So how would you approach this legacy portfolio?
I would convert all DFA funds to Vanguard funds.

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by livesoft » Thu Aug 08, 2019 6:33 pm

I am now agnostic on DFA funds. If one has them with large unrealized capital gains, then I would not sell them. I would stop reinvesting dividends in them.

The typical way to unwind a taxable portfolio around here is to

1. Stop reinvesting dividends.
2. Determine the amount of unrealized capital gains both short-term and long-term.
3. Consider donating shares held more than a year with the largest percentage of unrealized capital gains to one's donor-advised fund.
4. Sell all holdings or any lots with losses to realize the capital losses.
5. Sell some holdings with gains to counteract the losses just realized.
6. Decide what to do with the rest. Possibilities are:
a. Sell some of the remaining gains perhaps the lowest percentage of gains first, but maybe not
b. Sequester the portfolio for later gift-giving in life or until one dies to achieve the step up basis.

There is no shame in holding these shares forever. I have shares of Vanguard funds bought more than 10 years ago that I just don't ever think about selling. That's what happens with a long-term portfolio anyways.
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Leif » Thu Aug 08, 2019 7:02 pm

I was in a similar situation. I had a advisor which I purchased DFA funds. I quit the advisor. All my DFA funds are in retirement accounts, so I could sell them without tax consequence if I wanted. I've eliminated some, reduced others in favor of other less expensive funds, and kept others.

I've eliminated my DFA global bond funds in favor of a lower cost US IT bond fund. I've reduced my equity holding in my retirement accounts (and increased my equity holdings in taxable). I like DISVX (DFA International Small Value) because such a diversifier fund is difficult to find outside of DFA. I've Roth converted those shares. Others I've looked for alternatives if I thought the ER was too high and I had a good alternate with a much lower ER.

In general I would say DFA funds are good and relatively low priced. Just they tilt to value and value has underperformed over the last decade. However, I still believe in a value and small tilt, so I guess you can say I'm staying the course (with a few midcourse corrections).

The reason I like my portfolio over a simple 3 fund is that I'm now in retirement and this gives me more options from which to draw funds from my retirement account.
Last edited by Leif on Tue Aug 13, 2019 5:18 pm, edited 1 time in total.

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Girya
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Girya » Thu Aug 08, 2019 7:44 pm

nisiprius wrote:
Thu Aug 08, 2019 2:36 pm

Like Tyler Aspect, I find that your percentages add up to 113.1%, and if I take out the Roth they only add up to 93.6%, so I'm not sure what to do about that.

Hey sorry you might have missed this bit, the rest of that account is cash and some NVIDIA stock which we inherited; I'm donating that to a DAF slowly year by year. Cash sitting there until I figure out what my final IPS is going to be. Right now I'm disinclined to change much of anything until I can get to an allocation different enough from this that I feel it is incumbent upon me to change it.

In answer to other questions, the AUM fee was 1%. As I said, they were professional and easy to interact with, but I felt the fees were too high and I had gained enough confidence in my investing knowledge to feel I could go without. And the move into the alts shook my confidence a bit; those fees were 1.5-2%/year on top of the AUM fee.

Plus I knew I had the Bogleheads here to bounce things off off :sharebeer

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Girya
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Girya » Thu Aug 08, 2019 8:29 pm

nisiprius wrote:
Thu Aug 08, 2019 2:49 pm
Because DFA funds are generally pretty reasonable in terms of expense ratios, I am going to take a wild guess and say I expect your final number to come out somewhere in the ballpark of 0.25% to 0.50%. If you do this exercise, I hope you'll share the results with us. Then do the same exercise for your simplified portfolio. Calculate both absolute dollar number as well as a percentage.

It is quite likely that you'll find that you can save many hundreds of dollars in annual expenses. How important that is can be debated.
The weighted average expense of this portfolio is 0.39%. I know full well I could get that down by using Vanguard, Fidelity or iShares funds but I'm wondering whether the tax consequences of selling out of funds with gains from a taxable account would overwhelm the savings?

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by riplip » Mon Aug 12, 2019 6:00 pm

Just following up on this as I am in a very similar situation. Have you decided how you are going to proceed?

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by ExitStageLeft » Mon Aug 12, 2019 6:17 pm

Girya wrote:
Thu Aug 08, 2019 8:29 pm
...
The weighted average expense of this portfolio is 0.39%. I know full well I could get that down by using Vanguard, Fidelity or iShares funds but I'm wondering whether the tax consequences of selling out of funds with gains from a taxable account would overwhelm the savings?
If the ER of any one fund as a percentage of the annual return is greater than your LTCG tax rate then it makes sense to sell and take the tax hit. At least that makes sense to me, who has no taxable account of any significance. Do any of the funds in taxable meet that criterion?

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by zip605 » Tue Aug 13, 2019 3:37 pm

When I retired I took my pension in a lump sum and had an advisor company invest. They would send my several sheets of sold/buy confirmations every month. They advised there was no AUM but I eventually felt that commissions and ERs were taking a bite out of earnings. Plus the large data dump every month made it hard to understand where I was heading.

I moved everything to another advisory company and they put me in 14 different DFA funds, with an AUM of 1%. This was a mostly passive situation, with just a few sells/buys to adjust the portfolio drift. After a while I came to realize that for being so passive, I was paying a lot (1%) for the privilege of DFA funds. The AUM was more than enough to pay for a quite nice yearly vacation.

So then I found an advisor who would handle DFA funds, for a fixed fee much smaller than the 1% I had been paying. He helped me with some withdrawals and Roth conversions. When I started with RMDs, he helped some more. Eventually I decided that since I was not contributing any more to retirement, I could handle the paperwork for distributions on my own. So I quit that advisor and went off on my own.

I didn’t need a DFA approved advisor to sell DFA funds I already owned so I saved that fixed advisor fee. The problem I ran into was what funds should I sell in order to meet my RMD requirements. With 14 different funds at various sums, it became tedious to pick funds and amounts to maintain allocation percentages. Plus who wants to add up all those commissions. Do I sell the high gainers, or sell off the losers? How much of each fund? Maybe a 1% AUM advisor would/should do that work but hey, that’s a vacation that I could be taking.

So I just sold off everything and converted to the 3 fund portfolio, not necessarily with all vanguard funds. A one time hit with commissions but life is so much simpler. I don’t care if the 3-fund doesn’t fare as well as the DFA portfolio. It’s close enough. My heirs will have it easier too. They won’t need a highly compensated advisor to sort out my investments. RMDs are amazingly simple as the stock gains quite nicely make up the bulk of the distribution. If not, there are only a max of 3 funds to withdraw from and maintain allocation percentages.

SIMPLIFY was the answer for me.
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by psteinx » Tue Aug 13, 2019 4:21 pm

livesoft's order of priorities is reasonable.

To some extent, for small enough positions and/or positions with small enough gains, it can be worth liquidating (and taking a tax hit) just for simplification or something like "portfolio aesthetics" (i.e. reducing the junky bits of one's portfolio that are a hassle to keep up with).

For significant positions, with significant embedded gains, a rough decision guide would be:

% taxes owed X % expected portfolio return.

Compare that to

Extra E.R. and/or other expected performance lag factor versus your preferred alternative.

So, say, you've got a long-term position with a basis of $20K, and a current value of $25K, and your marginal tax rate (combined fed and state/local) on LTCG is 21%. If you sold, 20% of the proceeds would be taxable capital gains, at a 21% rate, for a 5.25% tax hit. Let's say you expect your portfolio to return, in nominal terms, 5.5%. So the ANNUAL cost of that money paid in capital gains taxes, in terms of (expected) foregone investment returns, is about 5.25% X 5.5%, or ~0.29%. Let's say the position in question has an ER of 0.40%, but you think it is effectively equivalent to a fund you could otherwise get for 0.05%. So you'd be saving ~0.35%/year by switching. Netting these two, you'd be ahead by about 0.06% per year (EXPECTED - realized could be quite different) by making the switch. In this case, you'd probably want to go ahead and sell, though the numbers aren't overwhelming.

There are a lot of mitigating factors and special circumstances to the above logic. Among them, one of the more important is if you expect your tax rates to be significantly higher or lower in the foreseeable future. Also, the non-dividend growth of a portfolio (capital gains) is stuck in the same inferior vehicle, so that argues for being slightly more inclined to sell. OTOH, the possibility of various tax-free/tax-reduced future liquidation scenarios may argue for being slightly more inclined to hold.

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Girya
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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Girya » Sat Aug 17, 2019 6:47 pm

riplip wrote:
Mon Aug 12, 2019 6:00 pm
Just following up on this as I am in a very similar situation. Have you decided how you are going to proceed?
Not yet, but it is coming together in my mind. I'm taking this process really slow because, honestly, what's the rush? The reason I haven't done anything yet is that the market has been crazy volatile the past few weeks and I still am not 100% decided on my IPS. I am trying to simplify a bit, but these are really good funds. This portfolio would be the envy of many. It has a slightly higher ER but, now without the drag of AUM fees, I might start to actually realize something with it.

The big question, which may take this conversation off on a tangent but is important, is how much do I (how much do you?) believe in factor tilting. If we believe in it, how much of a factor tilt? This portfolio is really heavily weighted in small and value, including international small and value. If I was going to start to trim it, maybe there? But if I believe in it, maybe not?

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by typical.investor » Sat Aug 17, 2019 7:02 pm

If small value pays a premium, it’s a result of valuations.

Periods of underperformance make small value unattractive and difficult to hold.

I don’t see any wisdom in unwinding a small value tilt after megacap growth has outperformed.

If you do hold and realize a premium, call it compensation for your mental anguish of having to live through the doubt.

And if the multiples of price to earnings of US megacaps continue to grow for several decades, well ... look at that ... go figure ... but their valuations are going to have to justified by their earnings someday.

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by Taylor Larimore » Sat Aug 17, 2019 7:09 pm

zip605 wrote:
Tue Aug 13, 2019 3:37 pm
So I just sold off everything and converted to the 3 fund portfolio, not necessarily with all vanguard funds. A one time hit with commissions but life is so much simpler. I don’t care if the 3-fund doesn’t fare as well as the DFA portfolio. It’s close enough. My heirs will have it easier too. They won’t need a highly compensated advisor to sort out my investments. RMDs are amazingly simple as the stock gains quite nicely make up the bulk of the distribution. If not, there are only a max of 3 funds to withdraw from and maintain allocation percentages.

SIMPLIFY was the answer for me.
zip605:

It took awhile, but I also arrived with the same answer. Thanks for sharing.

The Three-Fund Portfolio

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk." -- "The odds of outpacing an all-market index fund are, well, terrible."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: DFA (Dimensional) Portfolio Keep or Jettison?

Post by abuss368 » Sat Aug 17, 2019 7:59 pm

zip605 wrote:
Tue Aug 13, 2019 3:37 pm
When I retired I took my pension in a lump sum and had an advisor company invest. They would send my several sheets of sold/buy confirmations every month. They advised there was no AUM but I eventually felt that commissions and ERs were taking a bite out of earnings. Plus the large data dump every month made it hard to understand where I was heading.

I moved everything to another advisory company and they put me in 14 different DFA funds, with an AUM of 1%. This was a mostly passive situation, with just a few sells/buys to adjust the portfolio drift. After a while I came to realize that for being so passive, I was paying a lot (1%) for the privilege of DFA funds. The AUM was more than enough to pay for a quite nice yearly vacation.

So then I found an advisor who would handle DFA funds, for a fixed fee much smaller than the 1% I had been paying. He helped me with some withdrawals and Roth conversions. When I started with RMDs, he helped some more. Eventually I decided that since I was not contributing any more to retirement, I could handle the paperwork for distributions on my own. So I quit that advisor and went off on my own.

I didn’t need a DFA approved advisor to sell DFA funds I already owned so I saved that fixed advisor fee. The problem I ran into was what funds should I sell in order to meet my RMD requirements. With 14 different funds at various sums, it became tedious to pick funds and amounts to maintain allocation percentages. Plus who wants to add up all those commissions. Do I sell the high gainers, or sell off the losers? How much of each fund? Maybe a 1% AUM advisor would/should do that work but hey, that’s a vacation that I could be taking.

So I just sold off everything and converted to the 3 fund portfolio, not necessarily with all vanguard funds. A one time hit with commissions but life is so much simpler. I don’t care if the 3-fund doesn’t fare as well as the DFA portfolio. It’s close enough. My heirs will have it easier too. They won’t need a highly compensated advisor to sort out my investments. RMDs are amazingly simple as the stock gains quite nicely make up the bulk of the distribution. If not, there are only a max of 3 funds to withdraw from and maintain allocation percentages.

SIMPLIFY was the answer for me.
Congrats on simplifying your financial life. There is a good reason why Jack Bogle always said “simplicity is the master key to financial success”.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!"

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