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Could I get an asset allocation opinion?

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  • Avatar DPW 
    Participant
    Status: Dentist
    Posts: 3
    Joined: 07/28/2019
    Splash Refinancing Bonus

    I have been working with an FA for the past few years, and am now working on learning all of this investing stuff myself.  He is charging me an AUM fee of about 0.25% (due to an agreement with a previous employer) and about 0.8% for my wife.  I am working on learning enough so I can manage this myself and switch to more of a 3 or 4 fund Index portfolio.  Right now everything is at Schwab and we have the exact same asset allocation in my 401k and Roth IRA, as well as my wife’s IRA and Roth IRA (we are going to convert her entire IRA to Roth this year, most likely).  I was wondering if I could get any opinions on

    – my current asset allocation from my FA

    – how people would go about switching to an index portfolio

    – who to use as the custodian (I am debating Schwab, Fidelity and Vanguard)

    Thanks!

     

    Symbol Description Expense Ratio % Of Account Security Type
    SCHM CHARLES SCHWAB US MC ETF 0.04% 8.98% ETFs & Closed End Funds
    SCHE SCHWAB EMERGING MARKETS EQUITY ETF 0.13% 7.77% ETFs & Closed End Funds
    SCHG SCHWAB US LARGE CAP GROWTH ETF 0.04% 6.68% ETFs & Closed End Funds
    SCHV SCHWAB US LARGE CAP VALUE ETF 0.04% 9% ETFs & Closed End Funds
    SPTL SPDR LONG TERM TREASURY ETF 0.06% 3.22% ETFs & Closed End Funds
    CWGFX AMERICAN FD CAP WORLD GWTH & INCM F1 0.82% 5.94% Mutual Fund
    GFAFX AMERICAN FD GROWTH FD OF AMERICA CL F1 0.69% 5.18% Mutual Fund
    MCYBX BMO TCH CORE PLUS BD FD CL Y 0.59% 5.46% Mutual Fund
    SICNX SCHWAB INTL CORE EQUITY 0.86% 8.06% Mutual Fund
    SWISX SCHWAB INTL INDEX FUND 0.06% 14.77% Mutual Fund
    SWPPX SCHWAB S&P 500 INDEX FD 0.02% 14.96% Mutual Fund
    SWSSX SCHWAB SMALL CAP INDEX FUND 0.04% 9.02% Mutual Fund
    #234325 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1203
    Joined: 01/26/2017

    I have been working with an FA for the past few years, and am now working on learning all of this investing stuff myself.  He is charging me an AUM fee of about 0.25% (due to an agreement with a previous employer) and about 0.8% for my wife.  I am working on learning enough so I can manage this myself and switch to more of a 3 or 4 fund Index portfolio.  Right now everything is at Schwab and we have the exact same asset allocation in my 401k and Roth IRA, as well as my wife’s IRA and Roth IRA (we are going to convert her entire IRA to Roth this year, most likely).  I was wondering if I could get any opinions on

    – my current asset allocation from my FA

    – how people would go about switching to an index portfolio

    – who to use as the custodian (I am debating Schwab, Fidelity and Vanguard)

    Thanks!

     

    Symbol Description Expense Ratio % Of Account Security Type
    SCHM CHARLES SCHWAB US MC ETF 0.04% 8.98% ETFs & Closed End Funds
    SCHE SCHWAB EMERGING MARKETS EQUITY ETF 0.13% 7.77% ETFs & Closed End Funds
    SCHG SCHWAB US LARGE CAP GROWTH ETF 0.04% 6.68% ETFs & Closed End Funds
    SCHV SCHWAB US LARGE CAP VALUE ETF 0.04% 9% ETFs & Closed End Funds
    SPTL SPDR LONG TERM TREASURY ETF 0.06% 3.22% ETFs & Closed End Funds
    CWGFX AMERICAN FD CAP WORLD GWTH & INCM F1 0.82% 5.94% Mutual Fund
    GFAFX AMERICAN FD GROWTH FD OF AMERICA CL F1 0.69% 5.18% Mutual Fund
    MCYBX BMO TCH CORE PLUS BD FD CL Y 0.59% 5.46% Mutual Fund
    SICNX SCHWAB INTL CORE EQUITY 0.86% 8.06% Mutual Fund
    SWISX SCHWAB INTL INDEX FUND 0.06% 14.77% Mutual Fund
    SWSSX SCHWAB SMALL CAP INDEX FUND 0.04% 9.02% Mutual Fund
    Click to expand…

    FLP took a chainsaw to your bloated and overly-complicated-in-order-to-confuse-you portfolio

    SWPPXSCHWAB S&P 500 INDEX FD 0.02%100%Mutual Fund

     

    Vagabond MD Vagabond MD 
    Participant
    Status: Physician
    Posts: 3478
    Joined: 01/21/2016

    I do not have any problem using Schwab. It is an odd portfolio construction. I would probably simplify it to:

     

    SCHB (Total US Market, ER 0.03%) – 70%

    SCHF (Developed Foreign Markets, ER 0.06%) or SWISX – 30%

    as a starting point.

    If you want to geek out and tilt to small/value or add REIT or Emerging markets, it’s okay to do.

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #234390 Reply
    Avatar dennis 
    Participant
    Status: Retired
    Posts: 52
    Joined: 04/18/2019
    Earnest refinancing bonus

    As FLP and Vagabond have said you should simplify and you could do that in a self directed Schwab account as well as use Schwab for a Roth. I personally use them for my accounts and find them very user friendly. No need to pay for the FA. If they don’t have a particular Vanguard fund you’d like it’s easy to buy the ETF in Schwab.

    #234397 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    If you are comfortable with 100% equity, either of the above work fine.
    Consider a low cost bond fund if you desire.
    Either total world or total US. This will provide ballast during times of volatility. Long term 10-20% would seem reasonable. Purely preference.

    #234404 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017

    As usual, the advisor has you in overlapping funds with unnecessary complexity. As far as custodian, go with whichever one you are comfortable with. You can find great (and very similar) funds at any of them.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #234406 Reply
    Liked by Vagabond MD, Tim
    Avatar DCdoc 
    Participant
    Status: Physician
    Posts: 562
    Joined: 06/14/2016

    .25% is pretty darn cheap for a FA

    #234412 Reply
    Liked by Vagabond MD
    Avatar FutureDoc 
    Participant
    Status: Resident, Physician
    Posts: 124
    Joined: 04/24/2016

    Yeah I definitely agree with the above.  Oddly complicated, and not seeing how that combo adds much other than the advisor probably got paid to sell some of them.

    Rebalancing is easy since everything is all in tax advantaged accounts, just sell everything and buy what you want.

    Here’s a 3 fund portfolio using just the components from your list

    60% – Schwab S&P 500 Index fund

    20% – Schwab Internal Index fund

    20% – Long Term Bond ETF

    #234422 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017

    .25% is pretty darn cheap for a FA

    Click to expand…

    Yet still overpriced.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #234425 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 707
    Joined: 06/18/2018

    ‘0.25% is pretty darn cheap for a FA’

    Apparently you get what you pay for in this case. Those high cost, underperforming American funds should be the first to go.

    #234427 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1863
    Joined: 02/11/2019

    I agree .25% is cheap but it is buying you a worse and more complicated plan then you could do yourself.

    Also he charges your wife more?

    Time to take over.

    It is hard to give you true AA advice knowing only this account.  It should be across all of yours and you wife’s accounts.

    If you want a 3 fun portfolio you need to figure out your risk tolerance to get your bond allocation.  Most people start with age in bond to age in bonds -20.

    Then figure out if you want international and how much.  You can find an argument for 0-50%.

     

    Good luck.  More info begets more help.

    “Never let your sense of morals prevent you from doing what is right.”

    #234551 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4452
    Joined: 01/08/2016
    – my current asset allocation from my FA

    Click to expand…

    just clarification.

    you listed fund selection. that makes up your AA based on what you have chosen.

    you need to look across all accounts for you and spouse.

    do you know how to evaluate what AA those funds produce?

    #234557 Reply
    Avatar DPW 
    Participant
    Status: Dentist
    Posts: 3
    Joined: 07/28/2019

    Thanks for the clarification.  Yes, I should have labeled this Fund Selection as opposed to Asset Allocation since that is what I am really asking.

    Right now the only accounts I have are my individual 401k, my Roth IRA, my wife’s IRA and her Roth IRA.  All of these accounts have exactly this same fund selection, with roughly the same percentage of each fund in each account.  So (correct me if I am wrong) I should just be able to add up the “% of account” column here for those funds which are stocks and those which are bonds to then determine my actual asset allocation, correct?

    I am actually in the process of writing my financial plan with the WCI “Fire Your Financial Advisor” course, so I haven’t actually chosen my asset allocation yet.  But I am thinking I would want to be somewhere around 60/40 or 70/30 Stock/Bond ratio.  I am 39 y/o but, after a previous career, went back to dental school so am getting a bit of a late start.  However, I have been able to pack away quite a bit into retirement the past few years.

    Thanks for everyones help!  Every time I looked at my fund selection it just didn’t feel right, but I didn’t have enough information to know why or what to do about it.  I am just getting to the point where I am starting to feel ready do this myself.  I’ve heard it said many times that most people, once they do it, realize they were ready to go it on their own sooner than they thought.  I’m just not quite there yet.  However, I feel I know enough now to at least tell my FA that I want him to change the fund selection to align with some of the comments here.  I’ve been happy with Schwab and their user interface, but not sure how I go about firing my FA without leaving Schwab.

     

    #234596 Reply
    Avatar DPW 
    Participant
    Status: Dentist
    Posts: 3
    Joined: 07/28/2019

    I agree .25% is cheap but it is buying you a worse and more complicated plan then you could do yourself.

    Also he charges your wife more?

    Time to take over.

    It is hard to give you true AA advice knowing only this account.  It should be across all of yours and you wife’s accounts.

    If you want a 3 fun portfolio you need to figure out your risk tolerance to get your bond allocation.  Most people start with age in bond to age in bonds -20.

    Then figure out if you want international and how much.  You can find an argument for 0-50%.

     

    Good luck.  More info begets more help.

    Click to expand…

    Yeah, I should have been more clear.  I have four accounts between my wife and myself (401k, IRA, 2 Roth IRAs), all with the same advisor, all with the exact same fund selection and at roughly the same percentages of each fund in each account. I am working on determining my preferred asset allocation right now, but am thinking I would want to be around 60/40 or 70/30 stock/bond ratio.  But still need to determine how much international I want, and not sure how to determine that.

    While my AUM fee is low, I am starting understand that I am probably getting poor advice at a fair price! 😉  Which in actuality is probably a poor price since its poor advice.

     

    #234609 Reply
    Liked by Lordosis
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4452
    Joined: 01/08/2016
    but am thinking I would want to be around 60/40 or 70/30 stock/bond ratio

    Click to expand…

    great. pick one. no one said it was forever or even going to be perfect. for fun, make it 65:35 just do something.

    But still need to determine how much international I want, and not sure how to determine that.

    Click to expand…

    anywhere from 0-50% of your stock allocation is acceptable. you should read the vanguard white paper to start. its so important ill link it here: https://personal.vanguard.com/pdf/icriecr.pdf

     

    #234622 Reply
    Liked by Lordosis

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