Author Topic: Hello - Consider my portfolio  (Read 2014 times)

stein79

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Hello - Consider my portfolio
« on: October 05, 2016, 08:38:52 AM »
Hello everyone, I've been on and off these forums for a few years since my father sent me a link and I decided to invest a little in VTSMX.

I have some questions about my accounts and current stock selections and wanted to get your advice.

I am 29, employed FT living in expensive Maryland, only debt is about 25 years left on my mortgage of approx. $148K (bought the house at the market bottom and expect to sell or rent it in the next 2-5 years) it is in an area that is highly rentable. 
Total portfolio is about $59K (15% in 401K, 76% in Traditional IRA, 9% in ROTH and/or trading account).

I have a traditional IRA that I converted over from a SEP when I was a 1099.  I have the following funds in that:
- VTSMX (bought about 2 years ago ~ 9-10% up (yay!): EXP RATIO .16%
- AWSHX (only up 3.5% as of now) EXP RATIO .58%
- CWGIX (bought some time in last 5 years, up about 6%) EXP RATIO .77%
- Assorted stocks (APPL, UA, etc.)

In my company 401K with 4% match, I have Vanguard funds.  Once I take care of a few house repairs I'll set my contribution level back from 5% to 11%.  As such I expect the 401K to reach the current value of the Traditional IRA in about 2 years:
- VEMAX: .15% Exp ratio (Emerging mkts)
- VIMAX: .08% Exp ratio
- VMMSX: .93% Exp ratio (Emerging mkts)
- VSMAX: .08% Exp ratio

I also have a ROTH IRA with small amount of AWSHX (original fund I bought in high school) and some assorted stocks that are up and down.
- Using Personal Capital my annual fees average out to 0.22% below the "Benchmark" of 0.50% but over time i'm losing 6% of my earnings to fees.

So, my questions are as follows:

I've spoken to financial advisers (several) over the years.  When I first invested in AWSHX, I invested and left it alone.  Then I went to a broker/adviser with Wells Fargo that suggested adding more AWSHX and CWGIX and some others that I've since off loaded.  So, my assumption was that they suggested some of these mutual funds because A) they're good funds and B) they make more money on them than others, is that right? 

Most recently, I spoke to a friend that is a broker and offered free advice (I have my IRA/ROTH through Scottrade), he suggested my current 401K setup since I was very heavy (and still am) in US markets and very limited with Foreign, hence the (2) emerging markets funds from Vanguard. 
He also suggested I unload VTSMX and increase money into AWSHX and CWGIX. 

I am uncertain what to do since VTSMX has performed so well over the years, and the fees are so much lower, also I believe they are both closed to new investors, so if I sell I can't get back in.

Should I unload AWSHX in one or both of my accounts?  Should I wait for it to increase in value and then do so?  If I keep it in my ROTH, should I continue to contribute to it or is there a better alternative?

Should I drop VMMSX with it's much higher expense ratio .93% and double down on VEMAX since it's at .15%?

Since i'm so heavy in US, should I increase the amount of my 401K that is emerging market?  What is a good percentage mix?


Summary: I'm starting to be more frugal, I've always known I should invest when I can but I am still motivated by "stuff" and my girlfriend and I both want to do some traveling.
So, while the idea of FIRE is appealing to me, I am expecting to be working about another 30 years.  But, as I get older I may place less value on things and put away more money.  I don't hate my job but God knows, like most of the members here i'd rather be doing something else, or at least on my terms.

Thank you in advance for the input, sorry for writing a book but I feel relieved to have done it.

Pipboy

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Re: Hello - Consider my portfolio
« Reply #1 on: October 05, 2016, 12:57:57 PM »
So, my assumption was that they suggested some of these mutual funds because A) they're good funds and B) they make more money on them than others, is that right? 


They're good funds for the advisors because of the 5.75% initial sales fee.  "They", meaning the advisors, do make more money on those funds than others.  You don't.  Drop the American Funds immediately, the fees and expense ratios are atrocious.

FLBiker

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Re: Hello - Consider my portfolio
« Reply #2 on: October 05, 2016, 02:14:07 PM »
So, my assumption was that they suggested some of these mutual funds because A) they're good funds and B) they make more money on them than others, is that right? 


They're good funds for the advisors because of the 5.75% initial sales fee.  "They", meaning the advisors, do make more money on those funds than others.  You don't.  Drop the American Funds immediately, the fees and expense ratios are atrocious.

+1

As far as international exposure, my current stock mix is 60/40 US/INT.  The most important thing is picking an asset allocation and sticking with it, though.

stein79

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Re: Hello - Consider my portfolio
« Reply #3 on: October 05, 2016, 02:36:33 PM »
Thanks for the advice.

I am thinking about selling off the AWSHX in my ROTH and buying VBR or possibly VOE.  As far as the larger traditional IRA, I think i'll keep loading up VTSMX.

What kind of funds do you guys buy in a market/taxed account vs. the ROTH/Traditional IRA?

MustacheAndaHalf

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Re: Hello - Consider my portfolio
« Reply #4 on: October 06, 2016, 09:01:03 AM »
VTSMX is 70% large cap US stocks, while AWSHX is over 90% large cap US stocks.
The top 3 holdings of AWSHX are Microsoft 5.2%, Home Depot 4.2%, and Verizon 3.6%.

But the market has about 5.3% in Apple, Amazon and Facebook - all of which did much better than Microsoft.  Each stock held differently from the market is an estimate of the market being wrong about that stock.  It's saying all the 24x7 experts who analyze a stock professionally got it wrong in their profit-driven tug of war.  And that's why actively managed funds have such a big hurdle - they implicitly say the market is wrong each time they drift from the S&P 500 or Total Stock Market.

So I'd say the salesman you talked to are only convinced of their own self-interest.  The company makes a profit when you pick a "co-operating fund" that kicks back (my words, not theirs) some money.  Some of that money goes to the investment company, some to the salesman who convinced you to buy.  They do get paid to recommend certain funds, which is a conflict of interest.  That's probably why you're seeing so many recommendations for funds that cost more of your money up front, and cost more every year.

VTSMX is better diversified than any other US fund - it really has to be, since it holds every US stock you can buy.  But you could also include international mutual funds in your portfolio - but I wouldn't skip developed markets to go right to emerging markets.  Emerging markets may or may not repeat it's past success compared to developed markets.  And emerging markets can involve seizures of your money by poorly regulated governments.  For example, when you were afraid of all the events in Brazil surrounding the Olympics, would you have put 1/10th of your money there?  Well... you did.  VMMSS (Select Emerging Markets) invests 10% in Brazil.  So diversification doesn't just apply to US holdings, it's also good advice to spread your international dollars to both emerging and developed markets.