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  • Personal Capital advice

    So I had some free time and took the free consultation from PC. He had two main critiques about my portfolio.I was curious about your thoughts about his critiques:

    1) I am 90% equities(new attending). 80% of which is large cap(VTSAX). He says I should be 1/3 large, 1/3med and 1/3small and he showed me some data how there is no pattern regarding which size cap index group does better year by year by being in 80% large cap I'm increasing my risk.

     

    2). He thinks index funds are not good. He says he creates his own "index fund" to avoid any tax distributions and then he tax lost harvest individual stocks (lowes for home depot, Apple for Microsoft). He would have 120 stocks as "data" shows anything above 120-150 stocks is enough diversity(do not need thousands of stocks). This last thought I thought was a bit odd but I'm far from an expert.

     

    And that's all he really offered me. They charge .8% AUM. I subsequently told him I was not interested but just curious about your opinions.

  • #2
    I think it would be really tough to overcome that .8% fee to long term beat your pre-existing strategy of VTSAX.  If you want it's very easy to tax loss harvest VTSAX into VTI.

     

    I like simplicity and am willing to give up some return for simplicity/convenience.  I also am pretty mistrustful of many financial advisers (other than the one I pay hourly for a "check up" yearly around tax time)...so I pretty much do what you do for the most part - most of my taxable account in VTSAX and if the market takes a big dip I'll swap losing shares for VTI...rinse and repeat.

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    • #3
      a few years ago i asked them very nicely if it were possible to use the app without getting the phone calls, and they said OK. I then changed the phone number on my account to a different number i don't use.

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      • #4
        Different risk profile. You are overweighting this betting against in hope of larger return. So no.

        Don't remember the paper but might need more than 100 to mitigate risk.
        But no, full of BS again.

        Not worth losing 0.8% compounded over your lifetime.....

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        • #5
          A couple thoughts on the comments/response by PC:

          a. Regarding PC's comment/response to changing your AA to include more Mid/Small cap index funds.  This approach is called 'factor investing', essentially overweighting your portfolio with a factor, in this case Mid and Small Capitalization index funds.  There is evidence that supports this approach over the long term (20+ years).  FYI VTSAX is not a 'Large' Capitalization index, it is a a Total Capitalization index, meaning it has large, mid, and small capitalization stocks in it.  The amount of factor investing ones does is usually a function of time and risk tolerance.

          b. Though you could play a lot of games with this 'advisor', the short answer here is that if the person was generating market beating returns consistently, they would not be 'advising' you at personal capital, he/she would be running their own hedge fund.  He wants you to allow him to 'practice' running a portfolio.  Unless he is able to demonstrate 10 plus years of actual out-performance (not backtesting, not an example portfolio), there is zero reason to consider this approach.

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          • #6


            tax lost harvest individual stocks (lowes for home depot, Apple for Microsoft
            Click to expand...


            LOL yeah I'm sure those companies are pretty much the same

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            • #7
              I listened to them last year.  Got the same gist.  It is a bunch of crap.

              By increasing your small and mid cap you are increasing your risk as well.  you might get bigger returns.  You might not.

              What they do is not indexing in any way and I do not know why they call it that.

              They could not show me any prior data except 1 time period.  Sounds like cherry picking to me.





              tax lost harvest individual stocks (lowes for home depot, Apple for Microsoft 
              Click to expand…


              LOL yeah I’m sure those companies are pretty much the same
              Click to expand...


              Agree.  This is just stupid.


              I think it would be really tough to overcome that .8% fee to long term beat your pre-existing strategy of VTSAX.  If you want it’s very easy to tax loss harvest VTSAX into VTI.
              Click to expand...


              Are those different enough?  They follow the same index.  Might want to be careful with this.


              Not worth losing 0.8% compounded over your lifetime…..
              Click to expand...


              This is the killer right here.

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              • #8


                He thinks index funds are not good.
                Click to expand...


                Lost me there. He must not be a fan of data.

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                • #9
                  The advisor could be right. But unlikely to overcome the .8% fee. That being said, I do somewhat agree with what he told you and I include smaller cap stocks in my portfolio (knowing that increases the risk).

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