Author Topic: Thoughts on my portfolio?  (Read 914 times)

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Thoughts on my portfolio?
« on: August 02, 2018, 05:31:47 PM »
Hello everyone - I am new here.  I wanted to post my portfolio to see if I could get some thoughts.  Specifically, I'm looking for any major red flags with my holdings (mutual funds and stocks) and allocations.  Thank you very much!

Background Info:
Age: 30 Years Old
Total Invested: ~50K
Salary: ~$65,000/year
Debt: None (just finished paying off all my student loans)
Roth IRA: I contribute the max $5,500 per year
403b:  Just recently started this and I'm contributing ~5,400 per year

Equities:
International:
Vanguard Total International Stock (VXUS): 20.52%

US:
Vanguard Total US Stock (VTI): 20.42%
Schwab Mid Cap (SCHM): 6.02%
Schwab Small Cap (SCHA): 3.02%
Apple (AAPL): 5.54%
Amazon (AMZN): 4.05%
Johnson & Johnson (JNJ): 3.55%
Visa (V): 3.09%
Pepsi (PEP): 3.06%
Microsoft (MSFT): 2.87%
United Health Group (UNH): 2.83%
Google (GOOGL): 2.76%
JP Morgan (JPM): 2.57%
Aerospace & Defense ITA): 2.28%
Exxon Mobile (XOM): 2.14%
Disney (DIS): 2.01%
Bank of America (BAC): 1.04%
General Electric (GE): 0.73%
Verizon (VZ): 0.70%
AT&T (T): 0.57%

Bonds:
Vanguard Total Bond Market: 10.23%


Large/Mid/Small Allocations Breakdown:
Large: ~78%
Mid: ~15%
Small: ~7%

Individual US Sector Allocation Breakdown:
Technology: 24.72%
Financials: 16.35%
Healthcare: 14.85%
Consumer Cyclical: 14.59%
Industrials: 10.16%
Consumer Defensive: 6.59%
Energy: 5.27%
Communications: 2.70%
Materials: 2.53%
Utilities: 2.24%

Note #1:  I'm looking to add about 6-8 shares of Waste Management (WM) to my individual equities in the near future.  This will help increase my industrials allocation to a more appropriate market weight.

Note #2:  I'm looking to gradually increase my international percentage (VXUS) closer to 25% over the next year.

Note #3:  All of my retirement savings (Roth and 403b) go into index funds.  My individual stocks are only in a Charles Schwab Brokerage account (I will probably never hold an individual stock in my Roth).

Note #4:  After I add the Waste Management stock later in the year I will not be adding any further individual funds for the foreseeable future.  Right now, I feel my individual equities account for too big of a percentage of my portfolio.  My intention is for future funds to be pumped into VTI/VTSAX, VXUS/VTIAX, and BND/VBTLX to decrease the percentage of individual holdings down to about ~10% of my portfolio.

chasesfish

  • Handlebar Stache
  • *****
  • Posts: 2443
  • Age: 36
  • Location: Texas
    • Years in the making, I created a journal!
Re: Thoughts on my portfolio?
« Reply #1 on: August 03, 2018, 05:50:02 AM »
Happy to provide some thoughts:

You've built a nice portfolio, but it also seems like a LOT of "tinkering" for a $50,000 investment.   Are you with a good platform where you can track your returns against an index over time?

I did this for years and am generally indexing more, almost 85% now and I used to do exactly what you post about below.  I beat the market by a few percent for years then would get pummeled one year and revert back to the averages.   I have a bunch of posts about asset allocation floating around, both on here and on the hobby blog.   

I'm already FI, so as it relates to individual stocks, I'm down to only REITs (because one company is basically already a fund of properties and management) and occasionally I'll follow an activist investor making a compelling case.

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Thoughts on my portfolio?
« Reply #2 on: August 03, 2018, 08:47:55 AM »
Thank you for your thoughts!  I was beginning to think I'd get no replies!

I am with two solid platforms (Schwab and Vanguard).  I hold all my individual stocks and the Schwab Mid and Small caps (SCHA and SCHM) at the Schwab Brokerage account.  Transactions are only 5 dollars per trade and they are free for the small/mid caps.  At my Vanguard Brokerage Account I only hold VXUS and VTI.  My Roth is at Vanguard as well (I only have VTI/VXUS/BND in there too).  Schwab has some pretty good metric tools that I use.  I also have Personal Capital which I'm able to link all my accounts to and see a good breakdown of how I'm doing in comparison to the S&P 500.

I don't really do much tinkering - my strategy is a to buy and invest in solid, well-known, blue-chip companies and hold for a long period of time.  Most tinkering I do involves determining how much I should allocate to VXUS or VTI in my Roth or Vanguard Brokerage account.  My 403b is automatic and gets put into the 3 fund portfolio as I have it set for.  There's maybe 2 or 3 times per year I go into my Schwab Brokerage and buy a couple of shares of X, Y, or Z equities.  I don't have my dividends set to reinvest on my individual stocks so I'll also go in there to transfer those out and throw into VTI/VXUS at my Vanguard Brokerage account from time to time.  The only other thing I do, on occasion, is buy or sell a couple of shares of the Schwab mid or small caps to ensure I'm around market weight in those areas.  Transactions fees are free for those though since I'm at Schwab.

As I stated earlier, and as you alluded that you have done in the past, I want my passive index funds to eventually take over more of a percentage of my entire portfolio so I'm not looking to add more individual equity money as compared to my passive index investments in the future.  Right now my individual stocks account for 35% of my total portfolio, which I admit is too much for my liking.  If I invest approximately $12,000 per year into VTI/VXUS/BND (which is what I plan to do through my 403b and Roth) that should effectively reduce my individual equity stake by ~3% per year.  5 years from now that would put my individual equities closer to about 20% of my entire portfolio.  If I can continue to do that I think I'll be in an ideal place.  Ultimately, I also want to get out of my Mid Cap and Small Cap (SCHM and SCHA) holdings.  Right now, however, I need them because they help bring me back up to market weights in those categories because of the individual large cap stocks.

nereo

  • Walrus Stache
  • *******
  • Posts: 8480
  • Location: la belle province
    • Here's how you can support science today:
Re: Thoughts on my portfolio?
« Reply #3 on: August 03, 2018, 08:52:38 AM »
A few observations;
1) with your income you would most likely be better served contributing to a tIRA rather than a Roth.

2) You are holding quite a few private companies while at the same time also holding many of those companies in your index funds (e.g. VTI). This is a pretty complicated strategy for the amount invested, and I don't see it as being better than simply owning 2 or 3 index funds.  You are certainly less diverse using this strategy.

3) I do not understand how you arrived at an allocation of 7% small cap, when it appears much smaller than this.  Only ~5% of VTI is small cap stocks, and a full 40% of your holdings seem to be large cap individual stocks.

4) do you have an investor policy statement (IPS)?  If so, what does it  say?  What are your immediate, mid-term and long range goals?  What do you want your AA to be?  How often will you rebalance this and what method will you use to do so? 

5) what is your logic behind holding only index funds in your tax-advantaged accounts, but individual equities in your taxable accounts? Why use multiple brokerages (e.g. Vanguard and Schwab)


RWD

  • Handlebar Stache
  • *****
  • Posts: 2448
  • Location: Mississippi
Re: Thoughts on my portfolio?
« Reply #4 on: August 03, 2018, 09:00:46 AM »
My thoughts? Holy crap that is complicated! You're practically reinventing an index with how many stocks/funds you have. You'd be just as well served with three funds: VTI, VXUS, and BND.

Paul | pdgessler

  • 5 O'Clock Shadow
  • *
  • Posts: 87
  • Age: 28
  • Location: Appleton, WI
Re: Thoughts on my portfolio?
« Reply #5 on: August 03, 2018, 09:06:04 AM »
My thoughts? Holy crap that is complicated! You're practically reinventing an index with how many stocks/funds you have. You'd be just as well served with three funds: VTI, VXUS, and BND.

My thoughts as well.

Cycling Stache

  • Bristles
  • ***
  • Posts: 462
  • Age: 42
Re: Thoughts on my portfolio?
« Reply #6 on: August 03, 2018, 09:16:01 AM »
Agree that this is way too complicated both for the amount of money and the idea that you have special information about the companies you've picked.

Go 100% VTI (or VTSAX), or 70% VTI and 30% international index if you want.  Easy and done.  You'll probably do better, but you certainly won't do worse by a margin that matters.

There's a Vanguard white paper on the international indexing that says that you really should be equity weighted (I think it's currently 55% US/45% rest of world?) but most people aren't close because of home bias, and 30% captures most of the benefit without having to be fully balanced.  I switched over a few years ago, but with this sum of money, the difference isn't going to be huge.  Just a question of setting it up in a way that you can continue to invest going forward and never think about it (except maybe to rebalance once a year).

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Thoughts on my portfolio?
« Reply #7 on: August 03, 2018, 09:30:47 AM »
A few observations;
1) with your income you would most likely be better served contributing to a tIRA rather than a Roth.

2) You are holding quite a few private companies while at the same time also holding many of those companies in your index funds (e.g. VTI). This is a pretty complicated strategy for the amount invested, and I don't see it as being better than simply owning 2 or 3 index funds.  You are certainly less diverse using this strategy.

3) I do not understand how you arrived at an allocation of 7% small cap, when it appears much smaller than this.  Only ~5% of VTI is small cap stocks, and a full 40% of your holdings seem to be large cap individual stocks.

4) do you have an investor policy statement (IPS)?  If so, what does it  say?  What are your immediate, mid-term and long range goals?  What do you want your AA to be?  How often will you rebalance this and what method will you use to do so? 

5) what is your logic behind holding only index funds in your tax-advantaged accounts, but individual equities in your taxable accounts? Why use multiple brokerages (e.g. Vanguard and Schwab)

VTI is 8% small cap.... (https://advisors.vanguard.com/web/c1/fas-investmentproducts/VTI/portfolio).  I also have all my accounts linked to Personal Capital and Morningstar which gives me an accurate Large/Mid/Small percentage breakdown.  So I know that's accurate.  You may have missed that I have 9% of my portfolio directly invested in Small and Mid cap with the Schwab funds (SCHA and SCHM) to bring these numbers closer to market weight.

I have multiple brokerages so that when I buy VTI/VXUS/BND they are free at Vanguard and when I buy individual equity shares they are only 5 dollar per transaction at Schwab (Vanguard is 7.95)...


Individual equities are a gamble.  I'd prefer those to not be in my retirement accounts despite the tax benefits... 
« Last Edit: August 03, 2018, 09:39:29 AM by MrMoneyMustache233391 »

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Thoughts on my portfolio?
« Reply #8 on: August 03, 2018, 09:33:44 AM »
To chasesfish's point, that's a lot to manage for a $50,000 portfolio.

The index fund portion of my portfolio looks like this:

Total U.S. Stock Market 50%
International Stock Market 35%
U.S. Real Estate 7.5%
International Real Estate 7.5%

I would look into ways to simplify what you've assembled. Given a 50k portfolio value, you're not realizing enough return to offset the additional management and cost overhead of the individual stocks. I would also increase your international index position.

If you're interested in learning how my portfolio is put together with more detail you can read it here:  https://ron-henry.com/how-to-get-started-investing/

The 20% of my portfolio that's not in index funds is only spread among 6 stocks.

When it comes to investing, simple is usually better.

Thanks for the feedback.  I understand that Vanguard's target funds recommend 35% or more in International.  I also understand that the International allocation is a personal decision.  I've come to the decision to aim for 25%-30%.  Right now I'm going to work towards increasing it to 25% within the year then try to land somewhere in the middle of 25-30 moving forward.  I don't think 25% is unreasonable for that position.

nereo

  • Walrus Stache
  • *******
  • Posts: 8480
  • Location: la belle province
    • Here's how you can support science today:
Re: Thoughts on my portfolio?
« Reply #9 on: August 03, 2018, 09:39:53 AM »
A few observations;
1) with your income you would most likely be better served contributing to a tIRA rather than a Roth.

2) You are holding quite a few private companies while at the same time also holding many of those companies in your index funds (e.g. VTI). This is a pretty complicated strategy for the amount invested, and I don't see it as being better than simply owning 2 or 3 index funds.  You are certainly less diverse using this strategy.

3) I do not understand how you arrived at an allocation of 7% small cap, when it appears much smaller than this.  Only ~5% of VTI is small cap stocks, and a full 40% of your holdings seem to be large cap individual stocks.

4) do you have an investor policy statement (IPS)?  If so, what does it  say?  What are your immediate, mid-term and long range goals?  What do you want your AA to be?  How often will you rebalance this and what method will you use to do so? 

5) what is your logic behind holding only index funds in your tax-advantaged accounts, but individual equities in your taxable accounts? Why use multiple brokerages (e.g. Vanguard and Schwab)

VTI is 8% small cap.... (https://advisors.vanguard.com/web/c1/fas-investmentproducts/VTI/portfolio)

I have multiple brokerages so that when I buy VTI/VXUS/BND they are free at Vanguard and when I buy individual equity shares they are only 5 dollar per transaction at Schwab (Vanguard is 7.95)...


Individual equities are a gamble.  I'd prefer those to not be in my retirement accounts despite the tax benefits...
Ok - still not understanding how you calculated 7% small cap, but that's largely neither here nor there.

If you consider individual equities "a gamble" why hold them - are you hoping to beat the broader averages, or is this to achieve some pre-determined market allocation?  If it is the latter, what is that allocation?  I also used the terms 'tax-advantaged' and taxable account because most people are planing on needing both for their retirement.  Is your long-term plan different?

You are your overall transaction costs for holding so many individual equities? How frequently do you buy them and how often do you rebalance?

To reiterate other posters and my earlier response, I think your strategy adds complexity and cost while reducing diversity without providing any obvious benefit to you.

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Thoughts on my portfolio?
« Reply #10 on: August 03, 2018, 09:43:03 AM »
My thoughts? Holy crap that is complicated! You're practically reinventing an index with how many stocks/funds you have. You'd be just as well served with three funds: VTI, VXUS, and BND.

50%+ of my portfolio consists of exactly that (VTI/VXUS/BND)
9%+ consists of Small/Mid Cap funds to counter balance the large cap funds
2%+ consists of an Aerospace and Defense ETF mix

That's over 60% of the total portfolio.


As I mentioned moving forward my investments are going into the 3-fund so that will only increase this percentage.  I only have ~16.5K invested in individual stocks in the whole grand scheme of things.
« Last Edit: August 03, 2018, 10:09:43 AM by MrMoneyMustache233391 »

boarder42

  • Walrus Stache
  • *******
  • Posts: 7859
Re: Thoughts on my portfolio?
« Reply #11 on: August 03, 2018, 09:45:02 AM »
Move to a 3-5 fund. Get rid of all that extra garbage that was painful to scroll down.

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Thoughts on my portfolio?
« Reply #12 on: August 03, 2018, 09:48:16 AM »
A few observations;
1) with your income you would most likely be better served contributing to a tIRA rather than a Roth.

2) You are holding quite a few private companies while at the same time also holding many of those companies in your index funds (e.g. VTI). This is a pretty complicated strategy for the amount invested, and I don't see it as being better than simply owning 2 or 3 index funds.  You are certainly less diverse using this strategy.

3) I do not understand how you arrived at an allocation of 7% small cap, when it appears much smaller than this.  Only ~5% of VTI is small cap stocks, and a full 40% of your holdings seem to be large cap individual stocks.

4) do you have an investor policy statement (IPS)?  If so, what does it  say?  What are your immediate, mid-term and long range goals?  What do you want your AA to be?  How often will you rebalance this and what method will you use to do so? 

5) what is your logic behind holding only index funds in your tax-advantaged accounts, but individual equities in your taxable accounts? Why use multiple brokerages (e.g. Vanguard and Schwab)

VTI is 8% small cap.... (https://advisors.vanguard.com/web/c1/fas-investmentproducts/VTI/portfolio)

I have multiple brokerages so that when I buy VTI/VXUS/BND they are free at Vanguard and when I buy individual equity shares they are only 5 dollar per transaction at Schwab (Vanguard is 7.95)...


Individual equities are a gamble.  I'd prefer those to not be in my retirement accounts despite the tax benefits...
Ok - still not understanding how you calculated 7% small cap, but that's largely neither here nor there.

If you consider individual equities "a gamble" why hold them - are you hoping to beat the broader averages, or is this to achieve some pre-determined market allocation?  If it is the latter, what is that allocation?  I also used the terms 'tax-advantaged' and taxable account because most people are planing on needing both for their retirement.  Is your long-term plan different?

You are your overall transaction costs for holding so many individual equities? How frequently do you buy them and how often do you rebalance?

To reiterate other posters and my earlier response, I think your strategy adds complexity and cost while reducing diversity without providing any obvious benefit to you.

As I mentioned in my earlier post I probably make trades 2-4 times per year.  I probably spend 20-40 dollars a year on individual stock transactions.  It's a buy and hold strategy for the long term.  Especially with the companies I'm in.  The companies I'm in aren't penny or speculative stocks.  They're stocks to hold.  I re-balance twice per year.

As far as the long-term, I do have a pension which is different than most people.  Should be approx 45K per year, but you can't necessarily bank on pensions until you're retired and everything is locked in.

« Last Edit: August 03, 2018, 09:53:15 AM by MrMoneyMustache233391 »

MrMoneyMustache233391

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Thoughts on my portfolio?
« Reply #13 on: August 03, 2018, 09:49:51 AM »
Move to a 3-5 fund. Get rid of all that extra garbage that was painful to scroll down.

Sorry for causing you pain.

People really freak out when they see individual stocks.  Wowzers.  I regret posting my portfolio.  I thought this place was a little more open to the idea of individual stocks.  I would have never posted a portfolio like this on Bogleheads, but I thought this place was a little more open to diverse opinions and strategies.  I apologize.
« Last Edit: August 03, 2018, 09:58:50 AM by MrMoneyMustache233391 »

Cycling Stache

  • Bristles
  • ***
  • Posts: 462
  • Age: 42
Re: Thoughts on my portfolio?
« Reply #14 on: August 03, 2018, 10:21:45 AM »
Move to a 3-5 fund. Get rid of all that extra garbage that was painful to scroll down.

Sorry for causing you pain.

People really freak out when they see individual stocks.  Wowzers.  I regret posting my portfolio.  I thought this place was a little more open to the idea of individual stocks.  I would have never posted a portfolio like this on Bogleheads, but I thought this place was a little more open to diverse opinions and strategies.  I apologize.

You don't need to apologize.  The problem with the portfolio is (1) it implies that you know more than the market about quite a few stocks, and (2) the degree of complication makes it more likely that you won't stick to just investing and forgetting about it (the best kind of investing).

For the first point, the general consensus is that statistical you is unlikely to know more than the market.  So, yes, stock picking is generally frowned upon here.  But beyond that, let's say you outperform on one of those stocks.  So what?  Maybe a couple hundred bucks difference?  The upside isn't worth the likelihood that you're going to be wrong with your stock picking.

For the second point, you'll do best if you can set up your investing automatically and without thinking.  That makes it more likely that you'll continue to invest, and you won't try to time the market (a corollary to stock picking).   With a simple portfolio of 1-2 index funds and auto investing, you don't need to do anything else.  You can rebalance once a year if you're feeling ambitious, but otherwise, you can completely focus your attention on other things.

Thus the unanimous feedback.  It's an easy switch, and an easy win over your current approach.

bacchi

  • Magnum Stache
  • ******
  • Posts: 3075
Re: Thoughts on my portfolio?
« Reply #15 on: August 03, 2018, 01:34:56 PM »
Yes, simplify.

If picking stocks is fun, consider only using 5% of your investments for it. No more.

And I hope you bought GE (and XOM) after they took a beating (especially GE -- ouch).

js82

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: Thoughts on my portfolio?
« Reply #16 on: August 03, 2018, 06:23:11 PM »

it also seems like a LOT of "tinkering" for a $50,000 investment. 


Agree with this.  There's a lot of what I would term "fake diversification" here.   Buying up individual large cap stocks(versus an index fund) is a great way to add risk without adding much in the way of expected return.   It's not clear to me what you gain(other than complexity) from buying the set of large-cap stocks you've accumulated over a pretty basic S&P index fund.

In my non-professional opinion, there's little to be gained(other than by luck) from stock picking in the large-cap space.  EVERYONE (especially the quants whose job it is to know these things) knows everything there is to know about these companies already, and you're not going to beat the market by making superior decisions with superior information, because so many people already have that information.  If you beat the market this way, it's almost certainly due lucky outcomes on risk taking, not the probable success of a superior strategy.

If you want to stock pick, look to the small-cap space, do your research, and find companies that are legitimately undervalued(but too small to be on the radar of the big institutional investors).  The information isn't as easy to come across, but your odds of beating the market there are better, provided you're willing to put in the time and effort.  You're (mostly) not dealing with household names here, you're dealing with smaller publicly traded companies with(if you do a good job assessing/selecting them) growth potential.

Short version: You're not going to outsmart the market on Apple, Microsoft, JP Morgan, GE, or any other of the "household names".  However, you just might pull it off with smaller-cap companies that the average investor hasn't heard of, and are too small for the big stock funds to exploit effectively - *if* you're willing to put in the time and effort to do your research, and keep your decision-making process as objective and rational a possible.
« Last Edit: August 04, 2018, 06:13:59 AM by js82 »

chasesfish

  • Handlebar Stache
  • *****
  • Posts: 2443
  • Age: 36
  • Location: Texas
    • Years in the making, I created a journal!
Re: Thoughts on my portfolio?
« Reply #17 on: August 03, 2018, 08:32:39 PM »
@MrMoneyMustache233391 - I'm sorry my first comments caused you to get jumped all over.

My experience has been that most of the large cap companies owned individually underperform the index.  I learned this the hard way over time.  You just can't predict long-term changes accurately every time.

I owned GPC, a long, long time large cap S&P 500 dividend aristocrat blah blah blah.  Office was three miles from my office, great management.  It did okay, but the solid leaders retired, new ones came in, and they couldn't execute on acquisitions and blew a bunch of shareholder money.  Their business also got amazon-d.  If I had owned the index, I would have participated in the companies beating them.

Same argument goes for long-time Disney shareholders.  Its a great company, but it seems to move in opposite directions with Netflix.  Own the index, get both.

I get the appeal, I was above 10% concentrated in Costco at one point in 2015, was buying it in 2012 and it doubled in 3.5 years.  Then I kept holding it, the returns reverted back to the mean or to index +/- a couple of percent.   I have another big position in a mid-cap restaurant stock, great company but the sector is being pummeled. 

It can be a fun game, but understand most of the people around here are more about life philosophy.  Reducing the number of decisions you have to make in a day is a positive, especially when those decisions are statistically shown to underperform over long periods of time.