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Learning to Invest / Portfolio Management


Subject:  Re: How much to expect Date:  8/27/2018  11:07 AM
Author:  TMFSandman Number:  6961 of 7015

Wow. Yeah, a 1.5% fee is hard to win against. Your advisor would have to outperform the market by a little over 1.5% just for you to match the market.

My YTD return = .005% compared to the S&P 500 return of 1.78%

I imagine this isn't YTD (year to date) return, but the current yield. Stocks can return money two ways: capital appreciation and dividends. If you combine the two together you get something called total return. The total return for the S&P 500 year to date is 8.87%. It will be useful for you to find out the yield on your portfolio as well as the total return for this year, last year, and the average returns for the last five years. Anyone can win or lose to the market any given year. The trick is to on average over time outperform (or at least match) the market. If you can't, you can easily just get the market return for no work by buying an index fund. Wikipedia has a nice list of the total returns of the S&P 500 index going back to 1970:

I'm also assuming here that you have cash set aside in another account and we're just talking stock picking here. I have a portion of my net worth in treasuries and high yield savings accounts where the goal isn't to beat the market, but to preserve cash in case I need it.

Regarding your funds, I had a couple thoughts. First, that's a whole lot of funds. It looks diversified on the surface, but make sure it really is. A problem with large funds is that they're limited in what kind of company they can buy. A $50 billion fund can't buy a micro cap company easily and if it's a domestic fund it won't buy anything overseas, so if you have multiple of these funds many times what you'll see is that the top ten holdings are all very similar. That's one of the reasons I like a broad-based index fund and just call it a day. With an S&P 500 index funs (ex. VFIAX) or a total stock market fund (ex. VTSAX) you get a massive amount of diversification in just one fund.

Regarding the fund choices, the only one I have personal experience with is DODGX. I actually really like the Dodge and Cox guys. DODGX is a great value fund, has a good long term track record, and has low expenses. I can't offer an opinion on the other ones. Dodge and Cox also has a good income fund.

Good to hear your funds are in an IRA. That way you could sell everything in one go if you wanted without incurring a lot of taxes. Even an underperforming collection of funds has probably done okay these last few years.

I'm not sure where to begin in choosing a solid dividend stock(s). I thought about opening a brokerage account and transferring these funds without liquidating just to get away from my "trusted advisor" and his high fee, doing research and selling to buy dividend yielding stocks that have solid balance sheet.

This is a great plan if you know how to pick and value stocks and enjoy the process. If you don't, you could still pick up a 1.5% annual increase in performance and a whole lot of extra yield just by putting everything into an index fund. Without too much work I'm sure you could find a more income-oriented fund that has a higher yield (but which likely also has lower likelihood for as much capital appreciation). For example, the Dodge and Cox Income fund (DODIX) yields 3.21% and has a 0.43% expense ratio. That would give you about $800 a month for very little work. The Vanguard Equity Index Fund (VEIPX) yields 2.76% and has a 0.26% expense ratio.

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