This is a splinter from the Countdown to Retirement thread in MPSIMS. As I mentioned there, I’ve not had luck finding an investment professional (CFP/CFA) that is willing do to a portfolio review/discussion for a flat/hourly fee; rather, they insist on charging a percentage of my total portfolio value. Fidelity, my broker, has made available to me an investment advisor, and we had an initial online meeting, but they were completely noncommittal about my current portfolio, and instead suggested I consider an annuity (note: annuities can make sense in some circumstances, but given their large commissions, I’d rather not at this time).
I’ve been actively investing and trading for about 25 years, both through retirement accounts and taxable brokerage accounts. I’m far from an expert, but I’m certainly no novice, either. As some suggest, there are indeed many forums on a variety of sites that do public portfolio reviews, and I’m sure they are valuable. My problem with them is twofold: one, I don’t “know” the respondents, certainly not in the way I know the wise uncles and crazy cousins of our family here; two, some (many?) people who post in those kinds of forums have very rigid views (“4 stock portfolio! Anything else is bad” or “60/40 and done” and so forth) and that, to me, gets in the way of a useful discussion.
So this is my introductory post to get the thread started; I expect to post in the next hour or two the basics of my portfolio, along with my goals, and let’s tear it apart. I have traditionally had a very growth-oriented portfolio and it has worked well for me in my accumulation phase, but now that I’ve recently retired, I want income (it is certainly valid to propose staying with a growth portfolio, that history shows I’ll come out better, and that may be true…but being able to sleep well also has its benefits).
Do you live pretty far outside the city limits? Head over to the CFP website and plug your zip code in. Call each of them up and asking if they will prepare a fee-based financial plan, and that you have every intention of managing the portfolio from there.
I ran into the same frustration a couple years ago when I started searching. I got very lucky and found a semi-retired CFA who lives 45 minutes from me whom I am very satisfied with.
My suggestion would be to widen your search. With videoconferencing you are not constricted by geography. My guy gave us the videoconference option (I prefer face-to-face, maybe you do too).
My portfolio goal: at least $36,000 per year of income (before taxes), with some small to moderate growth component as well. I am intentionally giving up some growth potential in order to limit my downside potential; my goal is NOT to equal or beat the S&P 500, but I certainly do compare my choices against the S&P 500 (or other relevant index) as one gauge of suitability.
I use a variety of tools, including those Fidelity gives me, as well as historical comparison tools like Portfolio Visualizer (free version), and Monte Carlo simulations. Again, I am not a professional and don’t have any formal financial education, so I could be doing the right thing for the wrong reasons or vice-versa. But I do know that I have intentionally made these choices for a reason, even if that reason turns out to be stupid.
Note: the majority of that $36,000 per year I expect to get in dividends, with some coming from bond and CD interest.
Symbol - portfolio percentage - rationale/comments (sorry for the formatting, couldn’t figure out how to create a nice table)
SCHD - 18% - a favorite of r/dividends, it does what it says: stable dividend yield of about 3.6% with similar, though not exactly correlated, with the S&P 500; income with some “safe” growth
JEPI - 14% - a theoretically perfect vehicle for retirement income, I would put more into it if it had a longer track record; reduced upside AND downside pricing; at times its total return has beat SPY/VOO but isn’t expected to long-term; dividend yield has been about 9% but over time expected to be about 7%
DIVO - 11% - seems to have less market correlation, and often (anecdotally) goes up when others are down, and in bad times seems to have less max drawdown than others; yields about 4.5%
QQQ - 10% - my straight-up growth investment; exciting and dangerous
JEPQ - 8% - the NASDAQ-focused version of JEPI, with the same caveats: fairly new, some potential price appreciation (I’m up 11% just on price), and yield has been running hot, about 11.2%; I would also expect it to have a corresponding downside, but not as much as QQQ
Cash/MM - 5% - with Fidelity’s sweep money market paying about 5% currently, I am OK with keeping more in cash than I would in lower interest rate times; ideally, I’d like to keep close to an entire year’s worth of expected withdrawals in cash, but if there were a great buying opportunity, I might jump on it
O - 3.5% - Realty Income Corp: monthly income REIT that is rock-solid, they have a very long-term track record and are currently yielding 5.4%; they have very little (if any) office space, mostly long-term triple-net leases
SCHY - 2.7% - my one true international investment; I’m definitely not against international investments, but I have not seen a 10-year period where international reliably beats US; this is basically the international version of SCHD, yields about 3.6%, and it has had decent price growth.
MAIN - 2.7% - a Business Development Company (BDC) with a good record; yields 6.7%
ABR - 2.5% - an mREIT, offering bridge loans for short duration, usually construction loans; yields currently 10%, and I bought a bunch more on their dip in October, and now up 20% on price
ARCC - 2.5% - another BDC, yields 9.8%; along with MAIN, they’ve had a pretty good record
MISCELLANEOUS: SVOL, TLT (glad I took the advice to buy this on the bond dip!), VICI (casino REIT), SCYB: each of these, individually, less than 1.5% of my portfolio
about 20% in bonds and CDs of varying duration; only one “junk” bond (Kohl’s) for a very small amount
So that’s it. Remember, my goal is primarily to generate at least $36,000/year in dividend/interest income, some some small growth component, with matching maximum downside mitigation.
Questions/comments/criticisms solicited.
I wonder, though, if licensing is a limitation (are advisors licensed by states in the same way as insurance agents?)
Otherwise, yes, I’d be happy to virtually meet with anyone in the US. And per the suggestion of @Munch I did call/message about a dozen fee-only advisors in our metro area; about half I never heard from, and the other half saying they weren’t interested in an ad hoc arrangement (which I get: they want that dependable income stream that comes from annual agreements).
That’s really weird. I worked with an office full of independent CFPs who all would be perfectly happy putting together a fee-based plan. They prefer it, in fact.
Would those plans be comprised of publicly-available investments, or would they have a large component of custom advisor-access-only type mutual funds and the like? Naturally, I’d only want choices that I can control directly.
I’m not near my financial documents now, but my strategy in the past 10 years or so has been to move into stable dividend funds, like I’m sure people in r/dividends recommend. It did not go up as much as the S&P, nor down as much, but generates tons of income, enough so that I haven’t had to touch capital in ages except for paying off the mortgage. I waited until 70 to collect Social Security, and that made the situation even better.
I converted my larger than expected pension into an annuity, but that was a mistake. I don’t expect ever to take money from it, so it has a nice life insurance benefit. Not that I needed it. I did it because it was kind of an annuity already.
Thanks to buyouts and lots of saving we started off with a good bit of capital, so this strategy might not work in all cases.
I thought I had mentioned that in the OP, but I am recently retired. Let’s say that this particular portfolio invest-able value is $800K.
My only solicitation is: does the portfolio presented have a decent chance at meeting my goal of generating at least $36,000 a year (4.5% of total portfolio) while taking fewer risks that necessary.
Your other questions are valid questions to ask for retirement planning purposes, but I wanted my part of this thread to be rather narrow.
Every fee-based plan I’ve been a part of recommended standard retail products you could get by yourself on Fidelity. We would hand over a binder of the full financial plan, omelets with portfolio recommendations, Monte Carloses, withdrawal projections, etc. and recommend that we could certainly implement the plan if they wanted on-call involvement, but it could just as easily be done by themselves.
Assuming the fee was a one-time charge for one report (based on hourly or flat charge), which could optionally be re-evaluated annually, that sounds just what I am looking for.
Caveat: my bias is to be reasonably diversified without buying 182 different stocks; you’ll note that I have very little of my portfolio % in individual companies. In practice, something like SPY/VOO represents 500 different stocks, the top 7 are the big gorillas and together responsible for most of the index’s gains/losses. SCHD and DIVO are probably more evenly diverse.
I’m retired. I need some income to supplement my Social Security. The portfolio in question is in a tax-deferred account. I used to be 95% in growth equities, but now that I’m retired and no longer contributing to the account, and that the portfolio needs to generate some income AND last me another 25 years, I’ve transitioned to more a more stable, income-oriented portfolio.
Yes, I have used several Monte Carlo simulation tools, including Fidelity’s own. I’m past life expectancy in 90% of them, and even in the rare scenarios where I run low, it’s way out on the timeline. Given the “safety” of what I’ve chosen (except QQQ, which I well know could be subject to a 50% drawdown), when the market goes in the crapper I have a very reasonable expectation that my crapper will be shallower.
So I am not familiar with most of those tickets, but could you breakdown the overall asset allocation (equities vs bonds)? The data I have seen is that allocations that are at least 50% equities have a better chance of lasting 25 to 40 years at your withdrawal rate (which seems reasonable to me as a withdrawal rate).
Also, does the portfolio currently throw off $36k in dividends? If this is a real money account, there’s no reason to guess about the dividends, you’ll know what it generates after the first year or two.
Finally, the holdings that are under 5% of your total may be fun, they might even have great returns, but at that small of an amount of the total they really don’t move the needle much one way or the other.
BTW, a few years ago I was able to get my parents to use an hourly fee FA, and they followed his advice. They were in their mid to late 70s, so it was a bit conservative at 70% bonds 30% equities with 4 bond funds and 2 equity funds.
For the bond portion:
55% corporate bond fund (the were high quality bonds)
15% high yield (junk) bonk fund
15% Inflation protected (TIPS) treasury fund
15% preferred stock fund
For the equity portion:
70% total domestic stock market
30% total international stock market
That portfolio generated reliable dividends (in the form of bond fund returns) and still grew enough that it was rebalanced a few times to keep it at 70/30. I quit tracking performance when they passed away a few years ago, but it was a) simple and b) effective as it provided consistent returns.
Point is to determine an asset allocation that you are comfortable with, and then identify investments that fit that allocation.
A quick look at your top 5 holding (61% of your portfolio) are all equity positions, and a quick look at their holdings shows that they are all holding similar stocks, so it’s not really adding much diversification. But you seem to hold these for dividends, correct? Or do you intend to sell these and rebalance to a more bond heavy allocation? Whatever you do is fine, but holding stocks for dividends is still exposing you to all the risks of stocks. So are you looking to tweaking your current portfolio a bit or selling most everything and investing in an asset allocation that you determine is what you want?
But be aware that with the new tax laws if you get any reasonable amount of Social Security you wind up not paper poor sooner than you’d think. I found that out last year when I took mine at 70. And I’m not quite at the forced withdrawal stage yet, that is next year.
While tax deferred is good, having a post-tax nest egg allows you to withdraw what you need from your IRA to keep your taxes low, and live on some of the post-tax amount as necessary.
It’s more complicated than I ever thought it would be.