What 1.37% Buys You: Prestige, Tea and Sympathy

First off a shout out to Millennial Revolution who are a great alternative to Dave Ramsey. These hippies have one mil in savings, and retired at 31, and here I am working like a sucker! Fascinating story with sensible investment advice.

This is a completion post to my analysis of what my Morgan Stanley Advisor put my wife’s Roth IRA in for a steep 1.3% fee along with a 7 basis point fee overlay fee from Morgan Stanley. This fee is charged quarterly, and will be about $700 a year, every year, till the money is all spent. I am using these allocations as a way to benchmark to my Roth IRA performance and other investments. This is not the first advisor that I have been approached by. I have had the run of mill bros that cold call me, and I have had the super shady ones too. I went with Morgan Stanley because I wanted the branded AmEx Platinum Card, plus this guy seemed transparent in his selection process and is quick to justify his moves. In the first post I listed 84% of the holdings. Here is what the rest of the holdings are and their equivalents:

Symbol Expenses % Schwab One Source Other ETF TSP Description % of Portfolio
DXJ 0.48% HFXJ EWJ I Fund (Just Japan) Japan Stock 3%
VOE 0.07% SCHM VASVX S Fund Mid-Cap Value 3%
VOT 0.07% MDYG RFG S Fund Mid-Cap Growth 3%
BIL 0.14% SCHO VBISX G Fund (kind of) 1-3 Mth T-Bill 2%
DEVIX 0.99% SLYV VISVX S Fund Small Cap Value 1%
JKK 0.3% SLYG VISGX S Fund Small Cap Growth 1%
IJS 0.25% SLYV VISVX S Fund Small Cap Value 1%
Total 14%

Again we see this overlap of Value and Growth Funds of the same indices. The holding both strategy means we double up on a few companies and leaving a few possible diamonds in the dust. This move I am not entirely convinced that is better than owning the underlying index. I am suggesting the S&P 500 for large, S&P 400 for Mid Caps, and the Russell 2000 for small caps. If we break it down by asset class we can simplify the situation. For US equities we can just do this:

13% VUG US Large Cap Growth
7.5% SDY US Large Cap Value
7% DLN US Large Cap Value
3% VOT US Mid Cap Growth
3% VOE US Mid Cap Value
1% JKK US Small Cap Growth
1% DEVIX US Small Cap Value
1% IJS US Small Cap Value

This could just become 27.5% Large Caps (C Fund), 6% Midcaps and 3% Small Caps as 9% in S Fund. Hell you could just put in 36.5% into VTI as a single ETF to represent your entire US Equity Market exposure. For Foreign Equities they got me spread out all over the place:

4 HLEMX Emerging Markets Equities
4.5 VWO Emerging Markets Equities
22 IEFA International Equities
3 DXJ Japan Equities

International equities can be split up into emerging markets and developed market. Japan is a developed market so we can combine them as 25% into I Fund. China is slowly being included into the MCSI index for developed economies, and shares are cheaper for these Chinese companies trading as H shares in Hong Kong. I suggest buying 4.5% FXI as mentioned by Dr. Sjuggerud to represent and front run this transition. This will be H shares of the same companies that VWO holds. For the developing international equities we can put in 4% in to the good old Schwab’s SCHE for that exposure. For Bonds, its also a mess:

7 AGDYX High Yield Fixed Income
4 STPZ Inflation Linked Secs
4 SCPB Short Term Fixed Income
4 VCSH Short Term Fixed Income
2 BIL Ultra Short Term Fixed Income
3 BND US Taxable Core Bonds
4 TOTL US Taxable Core Bonds

We can break bonds down into Investment Grade and High Yield. Then also in government vs corporate. It’s hard to fit G fund into everything since its an custom Treasury product for TSP. F Fund is also all American bonds that are investment grade. I don’t know too much about bonds so lets just say so we can say lets do 4% TIPS via the Schwab SCHP, 7% G fund, 8% F Fund, 7% into a Junk Bond ETF like JNK. Or even simpler we can just do the classic three fund portfolio and get these allocations:

Cash 2%
Bonds 28%
International 33.50%
US Stocks 36.50%

So there you have it, I hope my $700 goes a long way! You are on your own reading this article, this advice was free advice from a rambling dentist, you are responsible for your own allocations, although it would be difficult to lose all your money with this diversification. I paid my $700 so I could have the prestige to be managed by Morgan Stanley.

Did I mention I have a portfolio with Morgan Stanley? Yes, it is kind of a big deal, you normally need a half million for that, but I am proof you don’t at all. Lets just try to maintain that illusion, so that will be our little secret. Yes, I did it all to have that silly logo on my metal charge card. The other service I bought is “Behavioral Management”, and when the market tanks I got a guy to call and cry to! Maybe he will invite me over to his office for some tea too. Some day I might get invited to his yacht that we all paid for!


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