Author Topic: Help - At An Investing Crossroads  (Read 1579 times)

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5368
  • Age: 32
  • Location: Earth
  • K Thnx Bye
Help - At An Investing Crossroads
« on: June 21, 2016, 12:18:48 PM »
Hello fellow MMMers,

I am a 29 year old investor who has been taking a DIY approach over the past 3 years. I have made some bad investment mistakes over the years and slowly have been taking a more Boglehead approach for my portfolio. While it isn't quite where I want it to be I am getting closer and closer.

I use Personal Capital to track all of my accounts and have a holistic view of my assets. A few months ago Personal Capital reach out to me offering me a free consultation and portfolio analysis. I was aware at the time that they are likely going to try to sell me their management service. I decided to hear what they had to say anyway.

Today I had the meeting, where the advisor brought up some valid points about my portfolios shortcomings.

I am extremely overweight in Large Cap stocks in my equities portion, very underexposed to Small Caps.

I am extremely overweight in Financial, Technology, and Healthcare sectors.

Apparently this is because I own by and large Vanguard Total Stock Index, International Stock Index, and Total Bond Index.

PC uses Modern Portfolio Theory in order to do an even distribution across all sectors, as well as larger exposure to Small Caps.

I am curious to hear what Bogleheads think about this service. The cost is .89% of AUM which is significantly higher than my current .13% using Vanguard ETF's.

Could it be worth the AUM fee to enroll in their service? Once a client you have access to two advisors assigned to you, who according to them have no self serving interests in getting you to invest/buy specific financial products, and abide by the fiduciary standard. They apparently advise you on ANY financial/life decisions not just the funds they directly control. (work 401k, house purchases, estate planning, etc etc).

I am scared of my own ability to stick to a strategy and find myself tinkering with my portfolio very frequently. The idea of letting someone else worry about it is slightly appealing to me. As well as having someone there to talk me off a ledge if I decide to do something irrational with my money.

I know this is a sales pitch, I work in sales and am successful so I want some genuine feedback.

Mother Fussbudget

  • Pencil Stache
  • ****
  • Posts: 828
  • Age: 57
  • Location: Indianapolis, IN
Re: Help - At An Investing Crossroads
« Reply #1 on: June 21, 2016, 02:24:55 PM »
Do not fall for the sales pitch.  YOU are your best financial analyst.  You're on the right track - only time will make your current strategy work.  If you're WORRIED about being overweight to large-cap stocks, and having no exposure to small caps, then consider selling a small percentage of VTSAX, and rebalance by investing in a low-cost Vanguard Small-Cap ETF.  That's probably a better move long-term than paying someone to do that for you as more of your capital will be out-there-working as little 'worker dollars' earning returns for YOU. (IMHO)

ZiziPB

  • Magnum Stache
  • ******
  • Posts: 3268
  • Location: The Other Side
Re: Help - At An Investing Crossroads
« Reply #2 on: June 21, 2016, 02:27:57 PM »
Do not fall for the sales pitch.  YOU are your best financial analyst.  You're on the right track - only time will make your current strategy work.  If you're WORRIED about being overweight to large-cap stocks, and having no exposure to small caps, then consider selling a small percentage of VTSAX, and rebalance by investing in a low-cost Vanguard Small-Cap ETF.  That's probably a better move long-term than paying someone to do that for you as more of your capital will be out-there-working as little 'worker dollars' earning returns for YOU. (IMHO)
+1^

If you are tinkering with your portfolio all the time that indicates that you have no set investment policy.  Spend some time developing one and then just stick to it.  Automate your investments as much as you can, rebalance once or twice a year and you will be all set.

Cycling Stache

  • Bristles
  • ***
  • Posts: 471
  • Age: 43
Re: Help - At An Investing Crossroads
« Reply #3 on: June 21, 2016, 02:43:49 PM »
I'm 100% VTSAX and equivalent in all my accounts (retirement and non-retirement).  Investing is not hard.  Resisting the temptation to tinker, screw around, market time, listen to a bunch of crap from various talking heads, etc. helps way more than a slightly better balance.  And fees paid to someone else just makes it worse.

If you want to add some international, fine.  If you want a little small cap, fine.  But 100% VTSAX (or ETF equivalent) is easy, has the lowest fees, and it's going to get you 95% of where you ultimately want to be (assuming you want to add a little extra diversity).  Move the money, set up auto transfers for whatever else you can put in, then forget it.  You're 29--time in the market is your friend.

Good luck!

jjcamembert

  • Stubble
  • **
  • Posts: 152
Re: Help - At An Investing Crossroads
« Reply #4 on: June 21, 2016, 03:10:46 PM »
Well of course you are heavy on those sectors: those are the biggest companies, and that's how an index fund works ;) Just look at VTSAX top holdings: http://portfolios.morningstar.com/fund/holdings?t=VTSAX

In general, if you have an informed opinion about whether you want small cap in your portfolio or not, then do it. Different sectors and market caps will perform differently in different economic conditions, but this adviser isn't going to be able to determine what's best for you, or what will happen, any better than you can. I personally don't worry about it, but you can find lots of studies showing how small caps performed vs large, etc.

And if you don't care about small cap vs large cap, after such a long time you probably won't even see much difference between those strategies, so why worry about it? It's not the type of decision that will "beat the market" or not.

I'm not sure what "tinkering with my portfolio" means, but if you do want to tinker, do it with a small portion or virtual account. There are also a lot of free tools out now where you can backtest various strategies and see how they would have performed.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5368
  • Age: 32
  • Location: Earth
  • K Thnx Bye
Re: Help - At An Investing Crossroads
« Reply #5 on: June 21, 2016, 05:56:57 PM »
I very much appreciate the feedback folks, I will be passing on PC's asset management service.

Choices

  • Pencil Stache
  • ****
  • Posts: 516
    • ChooseBetterLife
Re: Help - At An Investing Crossroads
« Reply #6 on: June 21, 2016, 07:27:45 PM »
Stay strong. You're doing great. Index funds are low-cost and you have a good mix. Figure out the percentage of total market/international/bonds you want and hold the course. When you have new money to invest, figure out which type is below your goal percent the most and invest there.
If the market goes down, it's only temporary, so we consider this a "sale" on stocks!

Try not to check the markets often unless you have new money to invest and need to see your allocation. Otherwise, it just doesn't matter because you're in it for the long haul.