I showed what I had done to my wife’s Roth IRA to Davey and he immediately scoffed at the fact that they split my simple two fund portfolio into 20 separate holdings (including the cash for the 1.3% advisor fee). “Seems complicated” he stated for what is essentially the aggregate of the entire market. “I view this intricate plan as not having a plan at all” is the other comment that I found resounding. For example I hold on to both value and growth subsectors, which account for the entire market. Like betting on all 36 numbers in roulette, what’s the damn point? Why not a total market fund like VTI?
For the international segments he suggested a one fund solution like Meb Faber’s GAA instead of a crap ton of funds. His assertions are that spreading the portfolio out to 20 funds as well as “stress testing” in sophisticated computer models is just a flashy show to justify the sweet $695 management fee as well as the possible commi$$ion$$$$$.
I decided to analyze the top 56.5% of my MS holdings to see what cheaper alternatives are out there:
|Symbol||Expenses %||Schwab OneSource||Other ETF||TSP||Index Tracked||% of Portfolio|
|IEFA||0.08%||SCHF||VEA||N/A||MSCI EAFE IMI & MSCI Emerging Markets index||22%|
|VUG||0.06%||SCHG||IWF||C Fund||CRSP U.S. Large Cap Growth Index||13%|
|SDY||0.35%||SCHD||VIG||C Fund||S&P High Yield Dividend Aristocrats Index||7.5%|
|DNL||0.58%||DBAW||CWI||I Fund (developed Countries only)||MSCI ACWI Ex USA||7%|
|AGDYX||0.58%||PHB||JNK||N/A||Not investment Grade Bonds||7%|
I have been reverse cold calling the good people at Ameriprise in order to get the Ameriprise AmEx Platnium & Gold card. None of them would take me, as they all wanted the keys to the kingdom. They all wanted total portfolio management, or nothing. They said what I was asking for was pretty much like driving to the dealership and asking for an oil change, but with oil, filter, and instructions in hand. They rather just have you do it yourself. because they don’t want to deal with you if you’re going to dictate to them on how to do it. The other quarter of the portfolio are mostly bonds:
|Symbol||Expenses %||Schwab One Source||Other ETF||TSP||Description||% of Portfolio|
|HLEMX||1.42%||SCHE||VEIEX||I Fund (Just Developed)||MSCI ACWI Ex USA NR USD||4%|
|VWO||0.14%||SCHE||EEMV||I Fund (Just Large Developed)||FTSE Emerging All Cap China A Inclusion Index||4.5%|
|BND||0.05%||SCHZ||VBTLX||F Fund||Intermediate-Term Bond||3%|
|SCPB||0.12%||CORP||VCSH||F Fund||Short-Term Bond||4%|
|TOTL||0.55%||SCHZ||BOND||F Fund||Intermediate-Term Bond||4%|
|STPZ||0.2%||SCHP||TDTF||G Fund (kind of)||Inflation-Protected Bond||4%|
|VCSH||0.1%||FLRN||VSCSX||F Fund||Short-Term Corporate Bond||4%|
If this portfolio was your first exposure to investing in the multiverse of investible securities out there, you wouldn’t even bother to do it yourself. It just seems so daunting, but a simple ETF could capture the entire bond market, with JNK and BOND you would have the American bond market. With Meb’s SOVB you would have the developing foreign bonds. These 6 separate funds for bonds seems like just undue complication to make it look like its super complex. Classical mechanical turk stuff right here.
Active management is perfect for the helpless lazy uneducated losers out there, but I find $695 a year a lot of money for something I could just do myself. Next up: the other quarter of the funds that make up this managed portfolio.