Portfolio Vivisection

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%
Total 56.5%

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%
Total 27.5%

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.



3 thoughts on “Portfolio Vivisection

  1. Sc says:

    Max out tsp and backdoor Roth some vanguard etfs. You’re nest egg will thank you later. The expense ratios can’t be beat for tsp and vanguard is pretty close.

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