Does Portfolio Size Matter?

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jaxbmw
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Joined: Sat Aug 16, 2008 6:45 am

Does Portfolio Size Matter?

Post by jaxbmw »

In looking through much of the thread on asset allocation, the one question I have not seen addressed specirfically is whether the absolute size of the portfolio has any bearing on the allocation strategy. I found Vanguard many years ago and have always lived well within my means.

I have achieved "Critical Mass" which to me means that using Financial Engines with a 2% withdrawal rate I achieve a very comfortable life style and leave funds for disposition with my estate.

My portfolio allocation is
DOMESTIC
TSM (VTI) 23%
SCV (VBR) 6%
INTERNATIONAL
Europe (VGK) 9%
Pacific (VPL) 9%
EM (VWO) 6%
REIT VNQ 6%
Commodities PCRIX 5%
Fixed Income
Inflation Protect VAIPX 7%
Total Bond Mkt BND 30%
    All of the REIT + Commodities + Fixed Income is in tax advantaged accounts all of the rest is in taxable.

    So the question is whether I should be doing anything else since the absolute size of several of the funds is getting quite large or if I should just STAY THE COURSE?

    Living The Good Life
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    RaleighStClaire
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    Post by RaleighStClaire »

    Looks like a beautiful portfolio to me. Good work.
    Where's that red one gonna go?
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    SpringMan
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    Post by SpringMan »

    Size for many does have a bearing on asset allocation in that with big portfolios there is no longer the need to take as much risk. Many get more conservative as their portfolio size gets large. They worry more about preserving what they have. When assessing risk tolerance, there is not just willingness to take risk but also need to take risk. A case in point would be Suze Orman, she has virtually 100% tax free municipal bonds with a net worth north of 30M. Welcome to the forum.
    Best wishes.
    Last edited by SpringMan on Sat Aug 16, 2008 11:12 am, edited 1 time in total.
    Best Wishes, SpringMan
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    jeffyscott
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    Post by jeffyscott »

    SpringMan wrote:Size for many does have a bearing on asset allocation in that with big portfolios there is no longer the need to take as much risk. Many get more conservative as their portfolio size gets large.

    To me, keeping the same percentage in stocks as the portfolio grows is taking more risk. Having 50% stocks when you have $1 million is far riskier, imo, than 50% stocks when you have $100,000.
    The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
    SmallHi
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    Post by SmallHi »

    personally, I don't see any need to slice up Europe and Asia market exposure. I'd just use EAFE Value and EAFE Small. Better diversification and higher expected returns.

    Looks good though.

    sh
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    jaxbmw
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    THE NEED TO TAKE RISK

    Post by jaxbmw »

    SpringMan

    Your comments are exactly my thoughts. Once you get to a certain scale you do not have to take the risks. I liked your coment on Suzi.

    BUT, since I do have the scale, I can make a choice to either take the risk or not. Since I am retired, I choose to continue with the portfolio allocation strategy since it has the potential to CHANGE the lives of my children and great grandchildren.

    Thanks for the comments.
    Bally Who
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    Post by Bally Who »

    Why not 24% UDN instead of your VGK, VPL, VMQ combination?

    No disrespect, just curious. :)
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    joe8d
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    Post by joe8d »

    To me it was just having enough money in conservative investments at retirement to cover expected expenses in excess of what my SS/pension would provide for 15 years going forward.The rest would be in broad based stock index funds
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    Easy Rhino
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    Post by Easy Rhino »

    I kind of agree with what springman was getting at.

    Your need to take risk is reduced.

    You ability to take risk is increased.

    So... do whatever feels good?

    Portfolio seems pretty solid and very bogleheadey as is.
    dumbmoney
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    Post by dumbmoney »

    jeffyscott wrote:To me, keeping the same percentage in stocks as the portfolio grows is taking more risk. Having 50% stocks when you have $1 million is far riskier, imo, than 50% stocks when you have $100,000.
    Yes, except maybe if your salary has also grown 10x.
    chicagobear
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    Post by chicagobear »

    Here is my thinking on the topic. I would have a higher percentage of stocks the more money I had since I think bonds are riskier than stocks in the long run.

    http://www.bogleheads.org/forum/viewtop ... light=[url][/url]
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    jeffyscott
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    Post by jeffyscott »

    dumbmoney wrote:
    jeffyscott wrote:To me, keeping the same percentage in stocks as the portfolio grows is taking more risk. Having 50% stocks when you have $1 million is far riskier, imo, than 50% stocks when you have $100,000.
    Yes, except maybe if your salary has also grown 10x.
    Yep, I thought about including some mention of inflation or pay increases in my comment, but decided not to over-complicate the point. If you want to ratio to income, then you could say 50% stocks when your assets are 1X income is less risky than 50% when assets are 10X income.
    The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
    Maxx
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    Post by Maxx »

    One reason size could matter is if the funds are so small you may not be able to buy a given fund. Or be close to the 100k for an admirals club.

    Another reason they request info on Tax rates, future contributions, ect is they are making sure people are getting the 401k match, then iras (if income is low enough) , then maxing 401k before taxable investing.


    Maxx
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