About a year ago I hired a financial planner to manage assets in my retirement accounts but am starting to think about doing it myself.
I don’t disagree with the general approach they’re taking, but it seems like it should be simple enough for me to do myself every 6 months or whatever.
The gist of the strategy is a balance across large/mid/small cap and sectors at certain percents along with some % of bond funds and some real estate funds.
I think my main questions are how do I identify and compare various funds that fall into these broad categories to try and pick the ones I want to actually invest in.
The boglehead wiki is a good place to start and reference and the lazy portfolio article has some good details.
OP, unless you have a very large amount of money you can absolutely manage your own retirement. And it’s even easier than you think. Check out the three fund portfolio and other Boglehead articles for answers to your questions.
I’ll go with the others and say use a simple three fund portfolio.
The general idea is, if you are comparing your performance against an index, why not just buy the index? Most investors fail to beat the S&P 500, so if you buy an S&P 500 fund, you’ll be doing better than most over the long term.
Here’s my personal target portfolio:
- US stocks - 70%
- International stocks 30%
- cash and bonds - 0%
Instead of going for an index like the S&P 500 that targets the top 500 companies, I want to buy all the companies at market weight. So here’s my ideal portfolio with US Vanguard funds:
- VTSAX - 70%
- VTIAX - 30%
- BND - 0%
My actual portfolio is a bit messier because of fund availability, but it’s pretty close to the above. For example, my workplace doesn’t have a cheap total US market fund, so I split between an S&P 500 fund and a small cap fund in an 85/15 split.
I’m considering adding bonds now that yields are more interesting and I’m almost close enough to retirement to start ramping in to them, but for now I only own a handful of short term treasuries as part of my efund. But if I did own bonds as part of my retirement portfolio, I’d either own or approximate BND.
Just out of curiosity, since I’m also considering bonds, what is “close to retirement” enough to consider non insignificant bod allocation?
That’s totally up to you. My personal number is about 5-10 years from retirement, though I’m pretty risk tolerant.
My plan is a rising equity glidepath. Basically, I’m going to load up on bonds (20-40% bond tent) a few years before retirement, and then ramp back down to no bonds in the first 10-20 years of retirement. I’m planning to retire early, and this plan seems to have a higher chance of success vs a consistent bond portfolio given a >30 year retirement.
The same strategy works for a shorter retirement, and you can keep your bond allocation constant as well. This strategy makes sense if you have a high risk tolerance, but recognize the need for portfolio stability in retirement. If you have a lower risk tolerance, do the “normal” strategy that target date funds use: 10% starting out, and increase as you get older.
This doesn’t answer your question.
It’s simple but not easy. When you’re building a portfolio for someone else, emotion plays a much smaller role. When you do it for yourself, it’s easy to get caught up in greed or fear and to make mistakes (like putting most of your funds in Tesla, like one DIYer I met).
Make sure that you will actually review your portfolio every six months and not every two weeks or two years. Set clear parameters and objective measures. Decide how long something can lag (or lead) before you make changes. Then stick to your rules. The hardest part of portfolio management is discipline.
Thanks for the input! I’ve been thinking that’d I’d probably just stick to index funds and avoid (for now) individual companies. My financial advisor does do individual companies (to fit the allocation targets), and does do tax loss harvesting, but I think that might be a bit complicated for my initial attempts.
I had thought about doing something like S&P 500 fund + some set of small and medium cap index funds, rather than trying to identify individual companies that fit into “large/mid/small cap & industry spread”, but even in those broad realms there’s lots of “index 500” funds and lots of “medium/small cap” index funds, how do I figure out which ones to buy and how to compare them?
Sort of a TLDR of Intelligent Investing is a solid route.
Allocate across low-fee index funds. The book goes in depth on the reasoning and percentages, etc.
I always recommend JL Collins Stock Series blog posts as a good starting point for learning how to manage your portfolio.
