Thursday, March 20, 2008

My Investments

I thought I'd take Moom up on his suggestion from the last post-- here's a look at the current state of my portfolios, since it's been quite a while since I shared them. This doesn't show how long I've held anything, but it's where I'm at now, and it's not all pretty.

Here's my main E*Trade account. This is what I've always considered a sort of experimental investing account-- I used to have more money in it, but I sold off some things before I bought my apartment. One thing that is worth explaining is that my shares of ALU resulted from the Lucent/Alcatel merger. I originally bought about $300 worth of Lucent shares, back in 2003.


Here's my E*Trade Roth IRA. Boy does this one really suck! I'd thought about selling off some of these funds when they were just kind of flat, and now I really wish I had!


And here's my 401k. This is where it's at right now-- with all the constant contributions, it's not as simple to show the overall gain and loss as it is with E*Trade-- the change per share shown is just yesterday's. The year-to-date change in market value is shown as being about -$23,000, and they calculate my year-to-date rate of return as -12.1%. They don't give any life-to-date returns number, but I can go 2 years back, and it shows my rate of return for 3/20/06 to 3/19/08 as -0.7%. How depressing.

It's definitely on my to-do list to figure out if my overall portfolio allocation makes sense for someone my age (25 to 30 years away from retiring)... but other than that, what is the best way to decide if you need to dump a mutual fund?? I welcome all opinions!

16 comments:

Anonymous said...

keep everything in low cost index funds and don't worry too much about the asset allocation

www.crazanity.com

Anonymous said...

You should absolutely worry about asset allocation. However, your jumble of stocks and funds makes it very, very difficult to see what your AA even IS.

Many of your funds are at about a 1% expense ratio, which is unnecessarily high.

Why do you have so much overlap between asset classes? Do you really need four international stock funds, five mid-cap funds, etc.? And on top of this, a target retirement fund?

For international, look into Vanguard's fund (VFWIX)--a low-cost, tax-efficient fund that includes emerging markets. For domestic, a total stock market index. And a short- to intermediate-term bond fund for the bond portion. That is all you need for a basic portfolio. Three funds. You can tilt to value, add REIT, add commodities if you wish, but no one needs TWENTY-TWO different funds! (And I would also dump the individual stocks.)

Andrew Stevens said...

I'm only looking at your 401k here, but you definitely have an unusual asset allocation. Ignoring your blended investment fund (since I haven't bothered to look up its allocation and it's not a huge part of your portfolio anyway), I've got you at 23% in large-cap, 30% in mid-cap, 15% in small-cap, 22% in international, and 10% in bonds.

That's a lot of exposure to mid-cap. There's nothing wrong with that and, in the long run, it's probably just fine, but it does mean you probably will have larger swings in your investments than the average investor. Mid-cap and small-cap stocks have not had the best of runs lately, explaining your poor run for the last two years. If you want a return more in line with everybody else's, less mid-cap and more large-cap exposure would probably get you there. Personally, I'd want more international instead (i.e. sell some mid-cap, buy some international along with perhaps a bit more large cap), but I'm not necessarily recommending that. International funds did extremely well before the market downturn (particularly emerging markets). So if you actually made that switch, you would be selling at a relative low for mid-cap and at a relative high for international, which is obviously a bit dangerous (though, of course, it could work out well).

On the bright side, you do have a lot of risk in your portfolio. You're light on bonds and relatively safe large-cap stocks. Because of your long time horizon, this is a good thing, but you have to expect some big swings in your performance. It's going to bounce up and down quite a bit. If you want to settle the swings (and accept slightly lower returns on average in the long run), more bonds and large caps would do the trick.

Anonymous said...

I agree with Anon -- seems like you've got waaaay too many funds. Plus since every fund has a fee of some sort (managing fee, expense ration blah blah blha) -- in the long run it'll start to add up on your bottom line. won't it?

I'm no expert but 12 funds in retirement alone seems like overkill....

Madame X said...

Thanks all-- re. the number of funds: A couple of the funds are closed to new investments, I think, so I'm just carrying them over and not contributing any more to them. Otherwise, I'd just thought I should spread my eggs around to a bunch of different baskets, I guess. I never thought to try to limit the number of different funds... re. the fund expenses, I would think it doesn't matter if it's just a straight percentage-- or do the fees start at a higher percentage on the first x amount of money and then drop on higher amounts of money in a fund???

Andrew Stevens said...

The fees don't add up in any way. A high-fee fund is bad, but having lots of funds doesn't hurt you (in a 401k - in a trading account where you actively trade, things change a bit).

Still, you could get pretty much all of the diversification you need from the Spartan funds. The rest of them are gambles - you're paying a higher fee hoping for a better return, but taking the risk of an even worse one. I probably would have gone purely with Spartan for large-cap, mid-cap, and international and ditched the rest (including the target fund). Your mileage may vary.

Anonymous said...

Agree with index fund and low expense ratios. I would suggest reading "Boglehead's Guide to Investing": very easy and fast read and visit www.diehards.org (the best financial forum on the web I've found)

mOOm said...

I'll look over all this and get back to you with what I think.

mOOm said...

Having "too many" funds isn't a problem except in terms of keeping track of them or if any fees are associated in switching between them. So number of funds would be the least of my worries.

FG Write said...

moom has a good idea (never thought I'd say that about an economist! ;) ) regarding how many funds you have.

So many people are on the "low-cost index" bandwagon that it's nauseating. People also telling you to get rid of the individual stocks as well? The best way to underperform the market is by buying funds; over the long-term, the large majority of them will under-perform because they all charge fees in some way: and that's true whether it's Vanguard or Lord Abbett.

Expect to see returns in the 7-8% range in the future because the fund companies are all making spreads (which they should) on the money that you give them to invest.

I do agree, however, that you have a lot in Mid-Caps, which if I remember correctly, underperform both small and large-cap funds. Also, at least by name, you have about 70% of your large cap in growth. Just as an FYI, growth stocks underperfom value stocks in the long-term, so it may be worth looking at that allocation. Good luck!

Anonymous said...

I have been an occasional reader of your blog and find it interesting. I am no investing guru but my 401k investment approach is very basic
1. Stick to funds with low expense ratios (< 1%)
2. I put 75% of my money into a target retirement fund
3. I put the remaining 25% in a index fund

Anonymous said...

I would invest only in target retirement fund( ex FREEDOM 2030). Ideally, you would pick the higher one(FREEDOM 2040)...

Anonymous said...

fg write:
Ask how individual stocks did for BSC, worldcom, enron etc...

mOOm said...

One conclusion - ETRUX couldn't have been as bad as shown here -so the cost basis must be wrong - likely they didn't include dividends or something? Did you reinvest them in the fund?

Nic said...

Target Funds for someone your age is great. Another thing I would take a look at are the duplicate holdings in your current funds. Do you have one or more mutuals investing in the same stock,etc?
Ask yourself what's your beliefs and passions? Eco friendly,tech.,medical....and place some of your buck$ there. And don't forget,CA$H is still king. Put a bit in money mkt or cd's. Small return,but at least it's something.

David said...

Take some time and do a Google search on Ted Aronson's Lazy Portfolio. I first became aware of this 3 years ago and think it is very sound advice.