So I went ahead and did the 49 question IFA asset allocation survey, thoughts?

I just filled out the 49 Q survey. Now I have to submit it with my name, phone#, etc. to see the results. Which means a salesman will be calling me. Before I hit the button, how persistent and obnoxious are they? I *really* don't need another salesman calling me at home all the time when I'm not there. (Wife hates that)

Best regards, Bob

"zxcvbob" wrote

IIRC, I gave the IFA a phony name, phone number, etc., during the survey, and all worked fine.

International small cap and International emerging markets could possibly have some overlap.

Replacing 33 funds with 15 funds is progress... you can probably do even better.

Isn't large cap divided into two groups, growth or value? So isn't above really about 8% growth, 26% value?

ditto

one more

I've seen various sites suggesting that 6-8 funds will produce enough diversification so that further funds don't add much to return, nor do they reduce your STD. (Standard Deviation, or risk) JOE

It's the same but you still need 2 funds to capture those two segments if you consider Growth/Value versus Blend/Value in isolation. Breaking it into blend + value could possibly let a Total Stock Market fund or Global Market fund cover all the blend classes with just 1 fund leaving only the need for value funds to augment the portfolio.

I've run into these suggestions before and I rarely see backup numbers presented with the argument for me to decide for myself how many funds and what the stddev. Perhaps for the author of the article, 6-8 funds is good enough. And maybe it is good enough for me also. But I'd rather see the ata that show ABC asset classes = ZYX std dev, DEF asset classes = NNN dev, etc, etc, etc and let me decide how much risk/ return I want. And that's why the IFA/DFA numbers catch my attention.

I think what JOE was suggesting that the Large Co Index is 50/50 growth/value and that the Large Cap value is 100% value so really you have 25/75 growth/value. It looks like a valid concern, but I haven't researched the funds thoroughly.

Given that the first 6-8 funds are the proper one's it is entirely likely that adding more funds may not improve STD or average return.

There are various financial planning software's that can accomplish what you ask, but they are expensive. Our office uses "Planning Station". It actually allows me to enter a client's current holdings (qualified and non-qual) and then show where that portfolio lies in relation to the efficient frontier. The efficient frontier is a theory developed by Harry Markowitz (won him a nobel). Wiki it!

The program shows the expected return and the standard deviation for the client's current portfolio. It also shows if there are other portfolios that lie closer to (or on) the efficient frontier. IOW can a different portfolio offer greater or equal return for less risk. The only thing left to do is to choose an appropriate risk/return based on the client's risk adversity.

Obviously if the group contructed a hypothetical portfolio (with symbols and %s) I could plug them in to get an expected return and std dev. We could also test what happens when investments are added or removed. I could also probably show you a set of investments that are all together better (I am a firm believer that ETFs outweigh MFs most of the time and in most categories). The freedom that MF manager's have can often misalign even the most perfect of portfolios.

Yes, that was my point. It just struck me as interesting that those few points of overlap were obvious. When I buy an S&P value fund, it's a conscious decision to overweight toward value. Same if I saw a portfolio that had a Fidelity Select Health (the contents of which appear in other indexes) I'd see that as a purposeful overweighting. JOE

This is the standard "DFA" portfolio based on the Fama/French Three Factor Model. If you believe it, you overweight in value. If you don't you pick a different asset allocation.

I was simply comparing advice that says "6-8 funds is enough for diversification" versus "6-8 funds is enough for diversification and here's the permutations I ran to come to this conclusions". Someone who provides backup data - especially backup data I can copy & paste into an Excel spreadsheet to play around with the numbers - has more resonance with me.

I've been doing roughly the same type of analysis by entering past performance numbers into a spreadsheet, changing % and eyeballing the end results. One of these days, I'll have enough historical data collected where I can then add it to my database to run analysis and simulations against my portfolio.

Wow, my head is still spinning ;) Much more research to do!

For the person who asked if anyone calls you, I just entered a fake phone # and it worked without issue.

Ok so i'm doing my research, but i'm having a tough time finding funds that fall into some of these categories. Some are obviously pretty easy (us large cap, small cap) but others like the 4 at the bottom are a bit tricky. Can anyone recommend some funds that I might want to take a look at?

Thanks, Dan

IFA US Large Company Index IFA US Large Cap Value Index IFA US Micro Cap Index IFA US Small Cap Value Index IFA Real Estate Index IFA International Value Index IFA International Small Company Index IFA International Small Cap Value Index IFA Emerging Markets Index IFA Emerging Markets Value Index IFA Emerging Markets Small Cap Index IFA One-Year Fixed Income Index IFA Two-Year Global Fixed Income Index IFA Five-Year Gov't Income Index IFA Five-Year Global Fixed Income Index

If you want low-cost index funds, some of these categories will be hard to fill up. DFA (IFA) offers the entire rage but they require a big buy-in number. The site fundadvice.com does a decent job of searching for alternatives.

Firsttrade will shortly separate funds into NTF and TF. They'll charge $9.95 for TF funds, including Vanguard.

You could consolidate this quite simply:

30% an international stock index fund (small large cap doesn't matter so much here)

I would rebalance every couple of years back to those percentages-- sell the winners and buy more of the losers. But not more often than that.

Even better would be a 'lifestyle' fund of the type Vanguard operates, that has low total costs, and set the retirement date for as long as you can get. It is virtually certain by the time you are 70 that the normal retirement date will be *at least* 70.

Why?

- costs are your enemy - a 0.5% difference in costs between now and your retirement in 45 years, reduces your final retirement pot by something like 30% (I would have to check the math on that)

- complexity is bad

- the proposed allocation takes plenty of risk (stocks ie 'equities') which you can afford to do at your age. Stocks should give you an

- you'll have exposure to international markets but 70% of your assets will still be in your home currency

- rebalancing too frequently is probably a bad idea (for practical reasons rather than theoretical ones). In particular, if an asset class is doing well, it tends to do well for long periods (but not forever), so this is a version of 'run your winners'.

I'm actually going to keep everything with Fidelity, it's just easier for me to keep everything in one place, even if the cost to purchase the fund is a bit higher. Not sure if I can still buy those funds that I need with Fidelity.

For the person that mentioned lifecycle funds, its seem to me that they are too conservative. Im 26 and have 30+ years to go, I'd prefer to have an extremely high risk portfolio